Narayan v Sigamani [2008] FJHC 204; HBC059.2004 (5 September 2008)

IN THE HIGH COURT OF FIJI
AT LABASA
CIVIL JURISDICTION

CIVIL ACTION NO.: 059 OF 2004

BETWEEN:

DEO NARAYAN f/n Ram Chandar & DHANBAGIAM
NARAYAN f/n Warda Raju
Plaintiffs

AND:

SIGAMANI, DORSAMI & MANIKAM all sons of Govind
Sami
Defendants

Mr. Raman Singh for Plaintiffs
Mr. A. Sen for Defendants

Date of Hearing: 21st July 2008
Date of Judgment: 5th September 2008

JUDGMENT

Background:

[1] The facts of this case are somewhat lengthy but most of them are not in dispute. The names cause a bit of difficulty. The dispute concerns land covered by Crown Lease 15227. It is situated at Wailevu, Labasa about four kilometers from Labasa town. Crown Lease 15227 consists of five separate lots. The lot which is subject of these proceedings is Lot 24 on Plan M 2967 having an area of 5311 square meters which is roughly one and one third acres. The defendants live on the land. They got their residences on the land. There are three houses on the land now. These belong to Sigamani, Dorsami and Manikam all brothers. Dorsami is now deceased but his wife and children occupy his house. Their father Govind Sami who is 90 years old lives with one of his sons.

[2] This land originally belonged to one Warda Raju. He died on 21st November 1983. He had made a Will. His wife Latchmi daughter of Rangasami and one of his sons Lok Raju are the executors and trustees of his estate.

[3] For sake of clarity I mention here that there is another Latchmi mentioned in Warda Raju’s Will. She is Latchmi daughter of Yenkta and sister of Warda Raju. This latter Latchmi is the mother of Sigamani, Dorsami and Manikam, and wife of Govind Sami. She is now deceased. Warda Raju in his Will dated 29th July 1980 had given his Lot 293 Rara which is same as Lot 24 on Plan M 2967 on which the defendants reside to his sister Latchmi. Lachmi died intestate so her husband and her children which include the defendants became beneficiaries and therefore entitled to her share in the estate of Warda Raju.

[4] The plaintiffs are husband and wife. Govind Sami is Dhanbagiam’s (second plaintiff’s) maternal uncle. The other defendants are her cousins, hence these parties are closely related.

Plaintiff’s claim:

[5] The plaintiffs became registered proprietors of Crown Lease 15227 on 24th February 2004. The transfer is signed by Lok Raju the sole surviving executor and trustee in the estate of Warda Raju. After being registered as proprietors, the plaintiffs served a notice to quit on the defendants asking them to vacate the property – see page 42 of agreed bundle. The defendants responded to the notice alleging that they were on the land lawfully as they were beneficiaries in the estate of Lachmi and that the plaintiffs’ were aware of their occupation at the time of transfer of the land to them. The defendants refused to deliver vacant possession which resulted in the present proceedings for vacant possession.

Defence:

[6] In their defence the defendants state that the transfer from the estate of Warda Raju to the plaintiffs was fraudulent as the estate of Warda Raju had no right to transfer Lot 24 as Lot 24 belonged to the estate of Lachmi. They also allege the plaintiffs were aware of the presence of the defendants on the land. The defendants have additionally counterclaimed seeking declaration that transfer of Lot 24 to the plaintiffs’ was unlawful and that the plaintiffs are holding the land in trust for the defendants.

The issues for resolution by the court are:

Whether the provisions of Section 13(1) of the State Lands Act Cap 132 apply?

[7] Crown Lease 15227 is a protected lease under the provisions of the above Act. This section renders illegal any alienation or dealing with such land without the prior consent of the Director of Lands. The defendants I find did come to the land. They built their houses on the land. They occupied those houses. This was clearly an alienation and section 13 would apply: Chalmers v. Pardoe (1963) 3 ALL ER 552; Phalad v. Sukh Raj (1978) 24 FLR 170. Further equity in such cases would not grant relief.

[8] However certain subsequent events have intervened between the initial illegal acts and the present proceedings. These are the death of Warda Raju and the provisions of his Will. The defendants are relying on the provisions of the Will for their claim and not on the illegal dealing. Therefore I need to consider other issues as well.

Were the plaintiffs aware of occupation of the land by the defendants?

[9] The plaintiffs and the defendants are related as stated earlier. The second plaintiff lived in Suva after 1974. She was married in 1978. However she also told the court that she visited Labasa as per parents lived there. She stated that prior to 1983 she would visit Labasa every now and then but she was not aware that the defendants lived on the land.

[10] Opposed to her is the testimony of the defendants who said that Dhanbagiam visited them many times. Manikam was very specific. He mentioned that when Dhanbagiam came for her father’s funeral, she visited their house and had a meal with them.

[11] I find it indeed very odd that given the close family ties, Dhanbagiam and her husband would not visit the defendants. It would be the logical thing to do when they came to Labasa. The defendants did not live far away. They were close by. I find that the plaintiffs were aware of the presence of the defendants on Lot 24 prior to them purchasing this property. They were also aware of the size of their premises.

What is the effect of this knowledge?

[12] According to Sigamani he with his parents and brothers moved from Savusavu to this property at Wailevu, Labasa on 15th December 1976. He told the court that Warda Raju his uncle was becoming bankrupt so he paid Warda Raju $6,000.00. After he came on the land he said paid rent being his share of rent for the land. The receipts for payment are in the agreed bundle. It is reasonable that he would pay the rent to Warda Raju the registered lessee who would then pay to the Lands Department. However I do not believe that the defendants or any one of them paid $6,000.00 initially to Warda Raju. Firstly, they kept receipts for small payments of rent so it is all the more probable that they would have kept the receipt for a much larger sum. Secondly, there is no mention of the payment of $6,000.00 in the defence.

[13] But the payment or non payment of $6,000.00 has no consequences to the outcome of this action. It is more to deal with knowledge of the presence of the defendants on the land and its effect.

Fraud and its effect under Land Transfer Act:

[14] The normal principle of law is that a bona fide purchaser for value of a legal estate or interest in land takes it free of all equitable estates or interests. Hence unless purchasers have notice of prior equitable interest or estate, their interest is not affected. The Land Transfer Act altered this position. The relevant Sections are Sections 39 and 40 of the Act. The effect of these sections is the registered proprietor holds his interest subject only to those interests which are notified on the register, but except in case of fraud, absolutely free of all other interests. Section 40 makes fraud a vitiating factor. Section 40 of the Act provides:

"Except in the case of fraud, no person contracting or dealing with or taking or proposing to take a transfer from the proprietor of any estate or interest in land subject to the provisions of this Act shall be required or in any manner concerned to inquire or ascertain the circumstances in or the consideration for which such proprietor or in any previous proprietor of such estate or interest is or was registered, or to see to the application of the purchase money or any part thereof, or shall be affected by notice, direct or constructive, of any trust or unregistered interest, any rule of law or equity to the contrary notwithstanding, and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud."

[15] Fraud is not defined in the Act itself except in a rather negative way as shown by the underlined words above. Absent a statutory definition of fraud, the concept of fraud is left to the courts to explain and develop.

[16] Despite what the section says, knowledge still remains an essential ingredient of fraud because without being aware of an interest or estate, how can one be fraudulent. However, cases suggest that in addition to knowledge, there must be dishonesty that is dishonest intent to defeat an equitable estate or interest in land. The words "moral turpitude" also have been used. Thirdly fraud must be brought home to the registered proprietor whose interest it is sought to be impeached. The onus therefore on the defendants was to show knowledge, dishonest intent and thirdly that it was the plaintiffs who were fraudulent.

[17] One of the first leading judgments which discusses the meaning of fraud is Assets Co. Ltd. v. Mere Roihi [1905] UKLawRpAC 11; 1905 AC 176. There the Privy Council stated that "by fraud is meant actual fraud, i.e. dishonesty of some sort not what is called constructive fraud or equitable fraud". Further the Privy Council stated for fraud to invalidate the title of a registered proprietor for value, it must be brought home to the person whose title is impeached or to his agents.

[18] In Waimiha Sawmilling Co. Ltd. v. Waione Timber Milling Co. Ltd. (1926) AC 101 Privy council stated that fraud implies some act of dishonesty. It stated at p. 106 that "if the designed object of a transfer is to cheat a man of a known existing right, that is fraudulent". However it cautioned that dishonesty must not be assessed solely by reason of knowledge of an unregistered interest which really echoes what is stated in our Section 40 of the Act and which I have underlined.

Wilful blindness as an aspect of fraud:

[19] What section 40 means is that knowledge is only one ingredient of fraud. It is not the be all and the end all of fraud. There are cases which when referring to actual notice also refer to "wilful blindness". This term covers situations where a person who has knowledge of facts which should put him/her on further enquiry but they do not conduct that enquiry. In the Assets Co. case Lord Lindley stated:

"The mere fact that he might have found out fraud if he had been more vigilant, and had made further inquiries which he omitted to make, does not of itself prove fraud on his part. But if it be shewn that his suspicions were aroused, and that he abstained from making inquiries for fear of learning the truth, the case is very different, and fraud may properly be ascribed to him."

[20] Further in Waimiha in the Court of Appeal Salmond J. stated:

"The true test of fraud is not whether the purchaser actually knew for a certainty of the existence of the adverse right, but whether he knew enough to make it his duty as an honest man to hold his hand, and either to make further inquiries before purchasing, or to abstain from the purchase, or to purchase subject to the claimant’s rights rather than in defiance of them. If, knowing as much as this, he proceeds without further inquiry or delay to purchase an unencumbered title with intent to disregard the claimant’s rights, if they exist, he is guilty of that willful blindness or voluntary ignorance which, according to the authorities, is equivalent to actual knowledge, and therefore amounts to fraud."

This comment of Salmond J. was adopted by the Fiji Court of Appeal in the unreported judgment Gajadhar v. Jai Pal & Another ABU 49 of 1981 (judgment 30th July 1982).

[21] Some Australian cases also have adopted ‘wilful blindness’ as an aspect of fraud. In Macquarie Bank Limited v. Sixty Fourth Throne Pty Ltd. (1998) 3 VR 133 this concept of "willful blindness" was explained as follows:

"to abstain deliberately from reasonable enquiry for fear of what the inquiry will reveal, to choose to shut one’s eyes to the obvious – to assume a state of ‘wilful blindness’ – or otherwise to generate a state of contrived ignorance, may of course be dishonest. It has been well said that willful blindness – deliberately turning a blind eye to obvious or obviously ascertainable facts is akin to fraud e.g. Lego Australia Pty Ltd v. Paraggio (1993) 44 FLR 151 at 171."

Analysis of facts:

[22] The plaintiff knew that the defendants had lived on the land for thirty years. She knew as I have found that they had their residences on the property. These residences are not shacks but substantial premises. There is a valuation report in the agreed bundle. It places the value of improvements alone at $65,000.00 and of the land at $45,000.00 making a total value of $110,000.00. These figures need some readjusting as the valuer had proceeded on the presumed basis of subdivision of the land into three lots. Further valuation is always subjective. Even if I gave a highly unreasonable discount of 50%, the value of these properties is way above what the plaintiff paid for the land. The plaintiff must have realized that she stood to make a huge profit and therefore turning a blind eye and desisting from making enquiries suited her.

[23] It would not have taken great effort on her part to ask the defendants on what basis they were on the land. She should have tried to find whether the defendants were trespasses, licensees or were on the land on some other basis for so many years. Equally she could easily have enquired from Lok Raju the transferor the basis of their occupation. The plaintiffs took no steps to inform the defendants about their desire to buy the land. They only told the defendants to vacate after they had bought the land.

[24] The defendants are claiming the right to stay on the land as their mother now deceased was given this lot by plaintiff’s father who died in 1983. The transfer was done in 2004 that is 21 years after the father’s death. The plaintiff’s version is that even though 21 years had passed she did not know of the Will, a somewhat far fetched assertion to make.

[25] This is a case of the plaintiff deliberately shutting the eyes to the obvious or to facts which could have been ascertained. This case fits the definition of fraud as explained in cases discussed above. I refuse to order vacant possession so the plaintiffs’ claim is dismissed.

[26] I further declare that the defendants are entitled to Lot 24 on Crown Lease 15227 pursuant to the will of Warda Raju and the plaintiff is holding the same in trust for them.

[27] The defendants had sought a declaration that the defendants are entitled to have Lot 24 transferred to them. However that has implications for the mortgagee ANZ Bank to whom the plaintiffs said that they had mortgaged the land. Secondly there is also the issue of consent of the Director of Lands to transfer. I cannot simply ignore these interests.

Final Orders:

[28] The plaintiffs claim for vacant possession is dismissed. I declare that the defendants are entitled to Lot 24 on Crown Lease 15227 and the plaintiff is holding the same in trust for them. I order the plaintiff to pay costs summarily fixed in the sum of $3,000.00.

[Jiten Singh]
JUDGE

At Suva
5th September 2008