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Pratap Investments Ltd v Deo Investments Ltd [2010] FJHC 148; HBC033.2007 (3 May 2010)

IN THE HIGH COURT OF FIJI AT ALUTOKA
CIVIL JURISDICTION


Civil Action No. HBC 33 of 2007


BETWEEN


PRATAP INVESTMENTS LIMITED
a limited liability company having its registered office at
PriceWaterhouseCoopers, 52 Narara Parade, Lautoka.
Plaintiff


AND


DEO INVESTMENTS LIMITED
a limited liability company previously having its registered office at
52 Narara Parade, Lautoka now having its registered office at
Lot 1 Balabala Crescent, Waqadra, Nadi.
1st Defendant


AND


THE REGISTRAR OF TITLES
of Suvavou House, Victoria Parade, Suva.
2nd Defendant


Before: Master Anare Tuilevuka


Counsels:
For the Plaintiff: Samusamuvodre & Sharma Law
For the Defendant: Mr. BC Patel
Date of Hearing: 31st March 2010.
Date of Extempore Ruling: 29th April 2010
Date of Perfected Ruling: 03rd May 2010


RULING


BACKGROUND


[1]. This is the perfected version of the 27-page extempore ruling I delivered on Thursday 29th April 2010. The 1st defendant (“DIL”) is the registered lessee of a piece of land and building situated at Market Road, Nadi. The legal description of that land is Naitavo (part of) Lot 1 on Plan SO 000559 comprised and described in Native Lease No. 18240 (hereinafter referred to as “Lot 1”).

[2]. Lot 1 is mortgaged to Westpac Banking Corporation Limited (“Westpac”).

[3]. On 12th of May 2004, DIL and Pratap Investments Limited (“PIL” – the plaintiff) entered into a Deed of Lease to sublease Lot 1 to PIL. The term of the sub-lease was 5 years as provided under clauses 1.2 and 5.1:

1.2 Term (clause 5.1)

Five (5) years commencing on 1 June 2004 and expiring on 31 May 2009.


5.1 Term of Lease

The term shall commence on the commencement date and shall expire on the expiration date.


[4]. PIL was up to date with its rental payments to DIL. However, as it emerged, DIL could not keep up with its mortgage payments to Westpac. When it started to default is not clear.

[5]. In 2009, Westpac began to put its foot down and decided to put Lot 1 up on mortgagee sale.

[6]. According to an Affidavit of Pranit Chand sworn on 12th February 2010 at paragraph 11, Westpac advertised Lot 1 for mortgagee sale on 9th November 2009 in the Fiji Times. In paragraph 12, Chand deposes that “in accordance with the advertisement”, PIL responded with a tender. Chand then deposes also in paragraph 12 that, in the event, Westpac was to offer Lot 1 to PIL based on the PIL tender.

[7]. However, that chronology is slightly out of line. The offer from Westpac to PIL (annexure “E” in Chand’s Affidavit) is dated 23rd October 2009. I see from a letter dated 26th November 2009 by PIL’s lawyers to DIL’s lawyers (annexure “G” in Chand’s affidavit) that Lot 1 was first advertised for mortgagee sale in the Fiji Times issue of 9th of May 2009.

[8]. It appears then that the 9th of May advertisement was the one that PIL had responded to. Curiously, the date of that advertisement was three days before the term of the sub-lease agreement was to end.

[9]. In any event, and as noted above, Westpac did offer Lot 1 to PIL. Amongst the many conditions attached to that offer, was the one which gave Westpac an unreserved right to cancel the sale or withdraw from it at any time before the date of settlement.

[10]. As far as I can tell, at the time PIL tendered for Lot 1 and at the time Westpac offered Lot 1 to PIL, PIL’s sub-lease on Lot 1 would have only just expired. And so, for a short while immediately after the expiry of the sub-lease, it looked as if PIL would end up acquiring Lot 1.

[11]. However, Westpac recanted soon after it made its offer.

[12]. From a letter dated 22nd March 2010 by Munro Leys (Westpac’s Solicitors) to Mr. BC Patel (DIL’s New Zealand-based lawyer), and from a letter dated 25th November 2009 by Champa Punja (DIL’s Fiji-based lawyer) to PIL’s lawyers, it is obvious that DIL had all along been arranging with an “R. Prasad Limited” for the sale and purchase of Lot 1. I am to understand that this was why Westpac recanted on its offer to PIL.

[13]. Below is the relevant extract from Munro Leys’ letter:
  1. Since our 8 December letter, we have noted the following:
    • (a) DIL has failed to complete the sale of the Supermarket Property to R Prasad Limited (“RPL”) despite your letters of 16 October 2009 and 12 November 2009 to Westpac and Young & Associates’ letter of 17 November 2009 to Westpac suggesting that the sale of RPL could be completed by late November 2009, before 15 December 2009, on 14 December 2009 finally by 28 February 2010. We have received no indication from DIL on whether it is able to or not complete the sale to RPL and repay Westpac.
    • (b) we understand that on 17 February 2010, Pratap Investments Limited (“PIL”) obtained an ex parte court order from the Lautoka High Court extending its caveat over the Supermarket property. To our knowledge, this order has yet to be set aside. DIL has not informed Westpac on what steps, if any, it proposes to take in respect of this situation.
    • (c) neither RK and RK Investiments Limited (“RK”), DIL nor any of the individual guarantors of RK’s loan have made any payment to Westpac to settle RK’s debt or offered to make any arrangements to do so.
    • (d) Based on the above, Westpac does not see any prospect of RK, DIL or any other guarantor repaying RK’s indebtedness to Westpac as demanded. .............

Next steps


  1. Accordingly, Westpac now intends to:
[14]. I am aware of a third set of advertisements of Westpac that appeared in the Fiji Times issue of Saturday 24th April 2010 putting various properties of DIL, including Lot 1, on mortgagee sale.

[15]. Meanwhile, an absolute caveat that PIL had put on Lot 1 on the 15th of October 2007 now stands in the way of DIL’s deal with R. Prasad Limited. That caveat is based on the Deed of Lease between DIL and PIL. The interest claimed is described as follows:

“....an estate or interest as Lessee by virtue of Deed of Lease dated 12 May 2004 in respect of the land described as follows:-


Title
Number
Description
Province or Island
District
or Tikina
Area
A
R
P
N.L
18240
Lot 1 on Plan S.O 000559 Naitavo (Part)
Ba
Nadi
420 m²
Whole

[16]. I observe that the copy of the caveat that was put before me in evidence contains nothing to indicate that NLTB had ever consented to it.

[17]. On 25th November 2009, DIL by its solicitor, Champa Punja, served on PIL a notice demanding vacant possession by 31st December 2009 on the following basis:

........................For your information, the agreement for sale and purchase provides for R Prasad Limited to take legal action against you for possession following settlement on the basis, inter alia, of the facts stated herein and in reliance of this notice to quit. Therefore the transfer of the property to them is not to be taken as recognizing you as lessee or tenant of the shop.


[18]. On 26th November 2009, PIL responded vide a letter by its lawyers to DIL’s lawyers.

“.... your client .... entered into an agreement with our client on the 12th day of May 2004 and it was agreed that your client will sub lease the property to our client for a period of fifteen (15) years. ..........the period of fifteen (15) years of sub lease was mutually agreed even prior to the execution of the agreement.


On 9th day of February 2004 a meeting between Mr. Pratap Chand Director of Pratap Investments Limited and Mr. Deo Chand, Mr. Prem Chand and Mr. Bir Chand, as the Directors of Deo Investment Limited in the presence of an independent invited guest namely Mr. Ajesh Chandra of Price Water House Coopers resolved many issues among others the issue of sub leasing the property to Pratap Investment Limited for the period of fifteen (15) years. The minutes of the said meeting was duly signed by the Directors of the two (2) companies (my emphasis)


The meaning and the effect of the outcome of the meeting of 9th February, 2004 was effected in the agreement ........ Under clause 5.2 of the said agreement further rights of our clients is protected (clause 5.2(b) at this stage is applicable. Clause 5.2 states that our client has a right of extension of lease and our client to inform your client by way of a three (3) months prior notice for intention of extension of sublease.


Accordingly our client instructed our office to write and serve your client with the notice for further extension of sub lease and on instructions our office prepared the Notice and dispatched to a registered bailiff for service of the Notice on the registered office of your client. Your office must be aware that service on a company as in the current case scenario must be effected to the registered office of the company and in compliance with this rule Keshwa Nand s/o Wadiwell, a registered bailiff duly appointed by the Magistrate Court under the provision of the Distress for Rent Act (Cap 36) served a copy of the Notice at 52, Pricewaterhouse Coopers which is the registered office of your client (Enclosed herewith is a copy of the Notice marked as “PIL 1”. Affidavit of Keshwa Nand marked as “PIL 2” and License of the registered bailiff “FIL3”).


.......It is also noticeable in your letter that your office is acting for R Prasad Limited and your notice further states that R Prasad Limited has entered into an Agreement for purchase of the above mentioned property. On this issue clause 12.4 clearly sets out the guidelines which are self-explanatory. Clause 12.4 (2) specifically states that during the term of the sub lease, if your client wishes to sell the premises the first offer to purchase shall remain with our client. Also attached to this clause is the two (2) months requisite period your client is required to inform or notify our client for an offer for sale of the property which has not been complied with by Deo Investment Limited.


.........Clause 12 sets out the specific requirements and compliance by your client and we have been instructed by our client that your client have failed to comply with each and every aspect of sub clauses of clause 12 of this said agreement. ............... The meaning and effect of clause 1.3 and 5.2 of the agreement was included in the said agreement as part of the resolutions of the meeting conducted between our client and your client on 9th day of February 2004.


Secondly, your client is in clear breach of clause 12 for not giving first offer to our client to purchase the property as it is your client who was under substantial default to the mortgagee and our client was not aware of the vital fact that the said property has been on Mortgagee Sale until 9th day of May, 2009 when it was advertised in the Fiji Times. .................................


.............. Your client could have enforced clause 12 of the agreement and offered our client to purchase the property if your client could not make necessary repayments towards the mortgaged sum to Westpac Banking Corporation Limited. It is complete failure on the part of your client which led to causes of damages, costs, loss of earnings tour client. Pratap Investment Limited was caught by surprise when the advertisement appeared for mortgagee sale on 9th November, 2009 in the Fiji Times. ...............................


....................Our client Pratap Investment Limited will not vacate the premises as our client has complied and observed each and every clause of the said agreement and further our client has accepted to purchase the said property through Mortgagee Sale offered to by Westpac Banking Corporation Limited and shortly our client will liaise with mortgagee for completion of the mortgagee sale process.


[19]. On the same day, 26th November 2009, Champa Punja responded to the above letter as follows:

Since writing to you yesterday, I have now received a copy of Samusamuvodre Sharma Law’s letter dated 19 January 2009 purporting to be the notice of extension of the lease.


.....my client denies receipt and prior knowledge of the same. They have caused inquiries to be made with PricewaterhouseCoopers (“PwC”) Lautoka who occupy 52 Narara Parade Lautoka and PwC has confirmed, following thorough search of their records and system (including their inward and outward mail registers) and enquiry with personnel that they have no record or knowledge of receipt of that letter or of any envelope addressed to Deo Investments Limited c/-52 Narara Parade Lautoka of any facsimile of the letter.


Can you advise by return e-mail:


(i) How the letter of 19 January 2009 was sent to Deo Investment Ltd;
(ii) If it was sent by registered mail, provide copy of registered slip or other evidence of such posting;
(iii) If it was delivered, provide date, place and time of delivery, and the name of person to whom it was delivered. If receipt was obtained, copy of such receipt.
(iv) If service was by any other mode, how.

Clause 13.4 of the Deed of Lease required the notice of extension, inter alia, to be sent by registered post or be delivered at the principal place of business of the lessor.


You have known all along that Deo Investments Limited changed their accountants and registered office in 2005 and that PwC was no longer acting in either capacity. Further, PwC Lautoka was neither the registered office nor the principal place of business of Deo Investments Limited in January 2009 or at any time since 2005. Therefore, even if service at 52 Narara Parade was effected (which is not admitted) such service was not in compliance with clause 13.4. Accordingly, no proper or effective notice of extension has been given to the lessor in terms of clauses 5.2 ands 13.4 of the Deed of Lease. Consequently, the Deed of Lease was not extended and it expired on 31 May 2009.


Your caveat no. 694592 claims an interest as lessee by virtue of Deed of Lease dated 12 May 2004. The NLTB consent which was applied for and granted was for a lease term of 5 years from 1 June 2004. That term expired on 31 May 2009 and no new consent has been applied for or granted for a period beyond 31 May 2009. Accordingly, Caveat no 694592 has run its full course and is now untenable. Any new caveat registered by you claiming an interest beyond 31 May 2009 would also be untenable for non extension of the lease term and for no consent of NLTB to the extended term.


[20]. The letter of 19th January that PIL alleges it served on DIL, and which DIL vehemently denies it ever received, is reproduced in part below.

We act on instructions from Pratap Investment........


Our client entered into an agreement with your company whereby it was agreed under clause 1.2 of the said agreement that the term of lease shall be not less than 15 years and after expiry of every 5 years the lease shall be renewed and the right for extension or renewal of the lease is provided under clause 5.1 & 5.2 of the said agreement respectively.


Our client intends to exercise their rights provided under clause 5.1 & 5.2 and hereby notifies your company that are our clients warrants an extensions of another 5 years of lease in accordance with agreement executed between the parties on the 12th day of May, 2004.


Please be advised under clause 5.2(b) this notice shall be irrevocable and therefore we request your office to act diligently and without any further delay make necessary arrangements with Native Lands Trust Board for issuance of Consent to sublease as per the agreement dated 12th day of Mary, 2009.


[21]. Meanwhile, as all this was going on, DIL by its solicitor Champa Punja, wrote to the Registrar of Titles to remove PIL’s caveat. On 26th January 2010, the Registrar sent out a section 110(1)[1] Notice of Removal of Caveat to PIL.

[22]. The Registrar’s section 110 Notice caused PIL to file a writ of summons and statement of claim on the 15th of February 2010 naming DIL as first defendant and the Registrar as second defendant. PIL was later to amend this writ on the 16th of April 2010. The Registrar’s section 110 Notice also caused PIL to seek an ex-parte Order in February 2010 to extend the caveat, which extension I granted until further orders.

[23]. PIL’s claim regurgitates its stand on the subject of the service of its notice of extension as shown in its letters above (i.e. that PIL had served a four (4) - month notice to DIL on the 19th of January 2009 in exercise of its right under clauses 1.3 and 5.2, and that PIL intends to sublease Lot 1 for the entire 15 years stipulated in the sublease agreement).

[24]. What is now before me is DIL’s application to remove the caveat.

APPLICATION BEFORE THE COURT


[25]. By its summons, DIL poses the following questions for this court to consider:

[26]. The question whether or not PIL did serve a notice of extension extend to DIL is the central issue on which all others depend. If no such notice was in fact served, then there is no extension of the sub-lease on foot. That will mean that PIL’s current status on Lot 1 is merely that of a monthly tenant holding over as per Clause 5.3 (see below). It must mean that PIL’s caveat is, ultimately, not sustainable.

5.3 Monthly tenancy

Should the lessee with the consent of the lessor continue to occupy the premises beyond the expiration date (otherwise than pursuant to an extended term) the lessee shall do so as a monthly tenant at the rental being paid for the expired period


[27]. Hence, all of PIL’s interests under the Deed of Lease came to an end when the term of the lease expired without extension.

[28]. When the matter came before me on 29th March 2010, both Mr. Patel and Mr. Sharma had all their witnesses ready for trial on the issue of whether PIL did serve a notice of extension.

SERVICE


[29]. By clauses 1.3 and 5.2, the sub-lease agreement gives PIL a right to extend the sub-lease for two terms of five years but must give due notice.

1.3 Right of extension (clause 5.2)


Two (2) rights to extend the term of this lease. Each extension shall be for (5) years. The total period, during which the premises are leased, inclusive of the initial term, is no more than fifteen (15) years.


5.2 Right of extension


Where clause 1.4 provides for a right of extension and the lessee has:-


(a) duly observed the terms and conditions of this lease; and


(b) given to the lessor not less than three months notice in writing prior to the expiration date (which notice shall be irrevocable) of intention to extend the term of this lease;


the lessor shall extend the term of this lease:-


(i) for the next relevant further term of years fixed in clause 1.4 commencing from the day after the expiration date of the preceding term; and

(ii) at the rental being paid for the preceding term;

[30]. Clause 13.4.1(b) of the sublease agreement lays down the manner in which PIL as lessee will serve any notice to DIL.

13.4 Notices


13.4.1 Any notice or other document required to be given or served under this lease may (in addition to any other method permitted by law):-


(a) ...............................................


(b) in the case of the lessor, be given or served by registered post or by delivery to the lessor’s principal place of business or such address as may be notified to the lessee from time to time.


[31]. Did PIL serve a notice to DIL of its intension to extend the sublease?

[32]. After having examined the evidence of all the witnesses at trial, I find that no service was effected on PIL on the 19th, 20th or 21st of January 2009. There were a lot of inconsistencies in what the witnesses said for PIL – especially the bailiff – when his evidence is tested against the evidence of those who gave evidence for DIL and the evidence was overwhelmingly against service.

Search at Office of the Registrar of Companies


[33]. The evidence clearly shows that PIL’s lawyers did not carry out a proper search at the Office of the Registrar of Companies. PIL’s witness, Adi Kelera, a clerk of SS Lawyers, said she conducted a proper company search on 19th January 2009. However, in chief, when asked by Mr. Sharma to tender her search results, she pulled out DIL’s Memorandum of Association that was lodged way back in 1992.

[34]. She admitted in Court that she did not look at the Annual Returns for 2005, 2006 and 2007 and appeared to be confused about why these documents were being mentioned. Nor did she consider the Notice of Situation of Registered Office that was filed in the Registrar of Companies’ DIL-files.

Bailiff – Service at 52 Narara Parade


[35]. I have to consider whether to believe the evidence of SS Lawyers’ Bailiff who said he served the letter of 19th January 2009 at PwC’s 25 Narara Parade Office. Or whether I should believe the evidence of the following people who all testified that neither of them did receive the notice: Nitin Ghandi (Chartered Accountant and partner of PwC); Hanisi Veitakavesi, receptionist at PwC; Angelita Kumar secretary of PwC; Vokili Ali filing clerk of PwC.

[36]. The Bailiff in chief said he personally hand-delivered the letter on 19th of January 2009 to a Rotuman-looking girl thereabouts 2.30 p.m. Later, he said it was on the 21st of January that he delivered his letter. In his Affidavit, he swore that it was on the 20th of January.

[37]. I do not believe the bailiff told the truth. My reasons follow. Firstly, the evidence of Veitakavesi, Kumar and Ali all confirm that at that time the Bailiff purportedly served the letter (that is on the 21st of January 2009), only Kumar was manning the reception area. Veitakavesi, who is Rotuman descent had been away from the office for a few days on leave at her husband’s village. She would resume duties a few days later. But she was away from the office from 19th January 2009 to 1st February 2009. She resumed duties on 2nd February. Secondly, Vokili Ali, who is of fair complexion and could be mistaken for a Rotuman by the unaccustomed eye (I would say she is of European descent with a dash of Fijian just by looking at her – even if she had a different name), had manned the reception desk in the morning but had taken the afternoon off. So at the time the Bailiff said he delivered the letter, the only person at the reception desk was Kumar. Both Ali and Kumar produced in Court their respective Time Summary Sheets which confirm that they worked the respective shifts.

[38]. With that observation, the credibility of the Bailiff is thrown completely out of the window in my assessment.

[39]. Interestingly, Mr. Sharma seemed to have forgotten what his case theory was. In cross-examination, he put to Angelita Kumar that “the Bailiff said he gave to you at the counter on 21.01.09”. Kumar of course denied this. Mr. Sharma seems to have totally forgotten that the Bailiff had said in evidence, that he gave the letter to a “Rotuman looking girl”.

PwC Register


[40]. The PwC Register does not contain any entry to confirm that the Notice was ever received at PwC from 19th to 22nd January 2009. The Bailiff’s explanation that he just left the letter at the reception area because “the Rotuman-looking girl kept talking on the phone” is a convenient excuse.

[41]. Ghandi’s evidence speaks highly of his receptionists. His office has a register which records all incoming and outgoing deliveries. Registry staff will record items or letters at the time of delivery to them. He does not handle that part. In 2009, he had a full time receptionist, Hanisi who is of Rotuman descent. She is still the full time receptionist at PwC. If she is not available to man the Registry, others will assume her role.

[42]. Ghandi completely dismisses the Bailiff’s suggestion as something not likely to happen at PwC.

[43]. Mr. Sharma suggests that if what the Bailiff said was true, Ghandi would not have known. But I cannot even begin to consider the possibility of the truth of “what the Bailiff said”. There was no Rotuman looking girl at the reception area in the first place at all relevant times. I see no reason not to believe Mr. Ghandi. The cross-examination on that point was all wishy washy.

November Inquiry at PwC


[44]. Gandhi said that in November 2009 an inquiry was made at PwC office in Lautoka if they had received a certain letter dated the 19th of January 2009.

[45]. Ghandi said he first came upon the letter dated 19th of January 2009 in November 2009. After he got the letter, he then caused an inquiry as to who had received it. He asked staff members at the reception as to who may have received it. The Register was produced in Court and various DIL witnesses including Ghandi were referred to it.

[46]. Ghandi said he then wrote the following letter.

To: Abshishek Abbimanu

Company: R Prasad Limited

3390476


From: Nitin Gandhi

Fax No: 661798


Date: 25 November 2009


Re: letter dated 19 January 2009 from S.S. Law addressed to Deo Investment Limited relating to Intention of Extension of Lease Period of 5 years


We refer to the above facsimile copy of the letter provided by you today and advise that no such letter has been previously received by our office on behalf of Deo Investment Limited.


We maintain a register for all incoming and outgoing mail and there is no record of the above mentioned mail being received at this office.


For your information we no longer act for Deo Investment Ltd since 11 March 2005.


Should you have any queries, please contact us.


Kind regards


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

Nitin Gandhi

Partner


[47]. Ghandi stands by the content of the above letter. I find no reason not to believe Ghandi.

Registered Office of DIL


[48]. In January 2009, DIL’s registered office was at Lot 1 Balabala Crescent, Waqadra, Nadi.

[49]. Shanil Nandan, Accountant for Ernst & Young, said in Court that his firm had filed DIL’s Annual Returns for 2005, 2006 and 2007. Since the 2007 Annual Return, DIL’s registered office has been at Lot 1 Balabala Crescent.

[50]. Ghandi says PwC has never been DIL’s principal place of business, even when it was DIL’s registered office in 2004. PwC filed Annual Returns when they acted for DIL. PwC did not file Annual Returns after 2005. After 2005, the Annual Returns were filed by the new Accountants. He was referred to the Annual Returns for 2004, 2005, 2006 and 2007 for DIL. He confirmed that PwC only filed the Annual Returns for 2004. Thereafter, the Returns were prepared and filed by Ernst & Young. He also confirmed that PwC ceased to be registered office after 2005.

[51]. Hence, even if the bailiff was to be believed (which I do not), the evidence is strongly that at the time when the bailiff served the Notice at PwC, PwC had long ceased to be the registered office of DIL. Nor was PwC ever at any stage the principal place of business of DIL.

Alleged service on DIL’s Accounts clerk


[52]. Pranit Chand is a Director of PIL. He said he had given a copy of the letter to one of his employees to give to DIL’s Accountant. He does not name the employee concerned nor does he name the date. He said he does not know if the employee gave the letter. But he had asked his employee who said he did give the letter. Interestingly, PwC are his Accountants who have denied service. I refuse to believe him.

Conclusion on Service


[53]. The letter of 19th January 2009 was not served at Lot 1 Balabala Crescent in Waqadra. That is the registered office of DIL in January 2009. It was not even served at PwC – but that is beside the point.

[54]. If I might just add, it was evident from the way Mr. Sharma cross-examined DIL’s witnesses that his case theory had sort of “crumbled” all around him. Even if he believed in his own case theory, I cannot share the same view.

REMOVAL OF CAVEAT


[55]. The power to remove a caveat is discretionary. Generally, the principles to be applied are analogous to those that apply in an interlocutory injunction application. These principles reflect the thinking that the scheme of caveats in our land tenure system is to enable equitable estates to be temporarily protected in anticipation of legal proceedings or until the determination of substantive legal proceedings which are already afoot.

[56]. Hence, when an order for the removal of a caveat is sought, the onus is on the caveator to convince the Court that her caveat should be extended until full trial.

[57]. To do this, she must establish three things: firstly, she must show that there is a serious question to be tried. A factor to be considered in this first heading is what interest she has in the land. Secondly, she must show that the balance of convenience favours maintenance of the caveat until trial and thirdly, she must show that the overall justice of the case favours keeping the caveat until trial.

[58]. The Fiji Court of Appeal’s judgment in Bahadur Ali v Fiji Development Bank[2] confirms the above:

The Law as to Removal of Caveats


[21] Counsel for the appellant cited the leading Privy Council authority Eng Mee Yong v. Letchumanan [1980] AC 331. The essential holdings in that case, (by way of analogy with interlocutory injunctions) regarding serious issue to be tried and balance of convenience are well known and require no repetition here. We would add, however, that when those two matters have been addressed, the discretion vested in the Court requires the tribunal to stand back and look at the overall justice of the case. Cooke J. (as he than was) in Klissers v. Harvest Bakeries [1985] 2 NZLR at 142 line 25 delivering the judgment of the Court of Appeal put it this way.


“In any event the two heads (serious issue and balance of convenience) are not exhaustive. Marshalling considerations under them is an aid to determining, as regards the grant or refusal of an interim injunction, where overall justice lies. In every case the Judge has finally to stand back and ask himself that question.“


[22] In Eng Mee Yong (Supra) the Privy Council also recognised that disputed issues of the fact can in an appropriate case be resolved on affidavit evidence. Again Cooke P. in Barrett v. IBC International Limited [1995] 3 NZLR 170 at 175 line 30 dealing with what was described in that case as a 180 degree change of direction said:


“Evidently the learned Master was inclined not to rule out the possibility that this new allegation might be credible. I am afraid I am unable to take so generous a view. On the contrary, the case seems transparently to be one for the application of Lord Diplock’s well-known statement in Eng Mee Yong v. Letchumanan [1980] AC 331, 341:


“Although in the normal way it is not appropriate for a judge to attempt to resolve conflicts of evidence on affidavit, this does not mean that he is bound to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement in an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be.”


That proposition has been acted on in this Court more than once. It is sufficient to refer to Bilbie Dymock Corporation v. Patel [1987] NZCA 193; [1989] 1 PRNZ 84, 86, where encouragement was found in Lord Diplock’s words for adopting a robust and realistic judicial attitude.........”


We consider that aspects of this case call for a similar approach.


[59]. At this point, I say again that the caveat before me bears no mark to indicate that the NLTB had ever consented to it. This was something that neither Mr. Sharma nor Mr. Patel picked up. Perhaps they have different reasons for either ignoring that point or overlooking it!

[60]. In the case of Roxy Motorparts Ltd v Habib Bank Ltd [2005] FJCA 49; ABU0060J.2004S (15 July 2005), the Fiji Court of Appeal held that “any caveat against dealing in (such) property without the prior consent of the Director of Lands is prohibited”. There is no reason why the same principle should not apply to a native lease such as Lot 1.

SERIOUS ISSUE TO BE TRIED?


[61]. Mr. Sharma submitted at the outset that the trial of the issue of service should be postponed to the hearing of the substantive matter to be considered together with other issues. I ruled however that I would proceed with hearing the evidence but will consider his submissions as I deliberate on the evidence and the issues.

[62]. I now rule on that application. As I stated in Court orally when delivering my extempore ruling, the evidence is overwhelming that PIL did not serve any notice on DIL. Having found that, the direction for this Court to follow on how PIL’s and DIL’s competing interests are to be balanced is all the more clearer.

[63]. The issue of service may have been a serious issue to be tried at one stage, but I have since tried it. It is hard to see how, in the absence of service, any other interest of a proprietary nature vesting in PIL might subsist. I daresay that in the circumstances of this case, the same could be said of any contractual interest or interest in personam that might be claimed by PIL.

[64]. The approach of the Privy Council in Eng Mee Yong v. Letchumanan (see reference to this case in Bahadur Ali paragraph 31 above) was to put the onus on the caveator to satisfy the court that on the evidence presented, her claim to an interest in the property does raise a serious question to be tried.

[65]. Admittedly, an option to purchase and to renew a lease are both caveatable interests as they are considered to be proprietary in nature and not merely contractual.

[66]. However, in the circumstances of this case, these interests would only subsist if there is a valid extension of the sublease on foot.

[67]. Furthermore, and in any event, in this case, what the sub-lease conferred to PIL by clauses 12.4.1 and 12.4.2 was a right of first refusal rather than an option to purchase.

12.4.1 In consideration of the sum of $1.00 (One dollar) paid to the lessor by the lessee (the receipt of which sum the lessor hereby acknowledges) the lessor agrees and undertakes that if at any time during the term of this lease or any renewal thereof the lessor shall decide to sell the premises then the said premises shall be first offered in writing to the lessee.


12.4.2 The said offer shall be at a price upon the terms and conditions as the lessor shall advise and the offer shall remain open for acceptance by the lessee for such period as shall be stipulated being not less than two months from the date of the service of the offer upon the lessee.


(my emphasis)


[68]. That distinction needs to be clarified because an option to purchase creates a proprietary type interest whereas a right of first refusal only confers a mere personal right.

[69]. In Re Rutherford 1 NZLR [1977] 504 at page 506 to 507, a case which Mr. Patel referred to, the New Zealand Supreme Court clearly distinguished the two interests as such :

“Both types of agreement are common and it was open to the parties to have entered into either provided that apt words were used. It was argued that there was a clear distinction between them in regard to the results which follow from the adoption of one or the other. Speaking generally, the giving of an option to purchase land prima facie implies that the giver of the option is to be taken as making a continuing offer to sell the land, which may at any moment be converted into a contract by the optionee notifying his acceptance of that offer. The agreement to give the option imposes a positive obligation on the prospective vendor to keep the offer open during the agreed period. There is ample authority for the proposition that, generally speaking, the grant of an option has more than a mere contractual operation and confers upon the optionee an equitable interest in the land which will support a caveat.


A right of pre-emption on the other hand confers no immediate right upon the prospective purchaser. It imposes a negative obligation on the possible vendor requiring him to refrain from selling the land to any other person without giving to the holder of the right of first refusal the opportunity of purchasing in preference to any other buyer. It certainly confers a contractual right, but the argument before me was directed to the issue of whether it creates an interest in land capable of supporting a caveat.


[70]. The Court in the above case then went on to conclude that as a matter of principle, the right of first refusal is a mere personal right and is not such as will support a caveat under section 137 of the New Zealand Land Transfer Act.

[71]. In Walker Corporation Pty Ltd v W R Pateman Pty Ltd (1990) 20 NSWLR 624,

“It is common ground that the grant of an option creates an equitable interest in land, in that the grantor is bound to sell the land to the grantee, if and when the option is exercised: the grantee has the right to call for a conveyance of the legal estate.......The defendant also accepted that a right of first refusal, or a right of pre-emption, does not create an interest in the land...”


[72]. Mr. Sharma relies on the Fiji Supreme Court (as the High Court was then called) case of Lee v Mitlal [1965] FJSC 1; 12 FLR 4 (28 May 1965). That case concerned the interpretation of a clause (clause 7) which was worded in language whereby the vendor, whilst undertaking not to sell the land in question to anyone else, also gave the purchaser a right to first refusal. Mills-Owens CJ expressed the view that clause 7 might operate both in personam and in rem.

[73]. I cannot agree with Mr. Sharma’s suggestion that the above case therefore is authority that every right of first refusal should operate both in personam and in rem because the wording of clause 7 in Lee v Mitlal was peculiar.

[74]. In any event, if a right of first refusal does confer a personal interest only, then an agreement which confers a right of first refusal but which has not been consented to by the relevant statutory regulatory authority (i.e. NLTB) can only, at best, generate a much more weaker personal right (if at all). This takes us to the next point.

[75]. Assuming I had found that PIL had in fact served a Notice of Extension to DIL, what eventuates from that position is a yet-inchoate sub-lease.

[76]. In Re CM Group Pty Ltd’s Caveat [1986] 1 Qd R 381, it was held that property did not pass in equity until the required municipal council approval was obtained. In Brown v Heffer (1967) 110 CLR 344, an interest in equity did not pass because the required consent of the Minister had not been obtained. In the Fiji Supreme Court decision in Guiseppe Reggiero –v- Nabuyoski Kashiwa Civil Appeal No. CBV0005 of 1997S), the case of Chalmers v Pardoe was discussed at length as authority that without the necessary regulatory consent, such an agreement was as yet inchoate.

[77]. The "Application for Consent to Sub-Lease" on which NLTB had endorsed its consent states the term of the sublease at paragraph (v) in Schedule B as follows:

"5 years from 01 day of June 2004"


[78]. Also, clauses 1.2 and 5.2 of the Deed of Lease clearly say that the term of the sublease is five (5) years only and not fifteen (15) years as Mr. Sharma would have the Court believe. But even if the term was to be taken as fifteen years, then clearly, NLTB had not consented to it.

[79]. Mr. Sharma did try to call evidence of what transpired at the meetings prior to the signing of the Agreement to prove that the parties understood the term to be a 15 year sub-lease. But this is extrinsic evidence. Its effect is to contradict the clear terms of clauses 1.2 and 5.1 which offends the parol evidence rule. In Ammar v Deoki [1969] 15 FLR 29, the Fiji Court of Appeal said as follows:

[80].

"......extrinsic evidence is generally inadmissible when it would, if accepted, have the effect of varying or contradicting the terms of a deed or a document constituting a valid and effective contract or transaction: and he quoted in support of his argument the well known decision in Goss v. Lord Nugent [1833] EngR 618; (1833) 5 B. & Ad. 58.


This general rule is of course subject to exceptions as the learned authors in Halsbury's Laws of England 3rd Edn. Vol. 11 at p.402 state:


"Parol evidence is also admissible to show that the transaction is affected by fraud, immorality, illegality, duress or mistake; to show the true consideration or the existence of consideration or of consideration in addition to that stated; to show the nature of the transaction or the true relationship of the parties."


[81]. There is no suggestion in the evidence before me that whoever signed the Deed of Lease for PIL might have done so by the fraud, immorality, illegality, duress or mistake on the part of anyone representing DIL. I therefore disregard the evidence of what transpired at the meeting including any reference to it in any of the above letters. Hence, by clauses 1.2 and 5.1, the Deed of Lease stipulates a 5 year term only with two rights of extension.

[82]. To conclude, the only serious issue to be tried in this case was whether or not a notice of extension was ever served by PIL on DIL. All other matters of contention between the parties

BALANCE OF CONVENIENCE


[83]. The removal of a caveat would be warranted, on the balance of convenience, in circumstances which do not sacrifice the security provided by the caveat.

[84]. In other words, I must still strike a balance between what interest the caveat seeks to protect and that of the registered proprietor.

[85]. As I have stated above in paragraph 72, an option to purchase and a right to renew a lease are both caveatable interests. In this case however, the Deed of Lease only conferred a right of first refusal which is not a caveatable interest. Anyhow, as I have discussed above, the Deed of Lease which generated these interests is no more. I agree with Mr. Patel that these rights cannot subsist without a validly extended sub-lease agreement in place.
[86]. Hence, if the caveat was intended as security for these interests at some stage, then with the extinguishment of those interests, the caveat is no longer sustainable (cf. section 116 of the Land Transfer Act (Cap 131).

[87]. To take it a step further, the caveat itself has always been in a shaky position as security for those interests because it was not consented to by the NLTB (see Roxy Motorparts case, paragraph 67 above).

[88]. I have balanced PIL’s shaky position against the interests of DIL as a registered proprietor and mortgagor of Lot 1. The latter is desperately trying to organize a sale to R. Prasad Limited to redeem its Westpac-mortgage-debt. Meanwhile, Westpac, yet again, has advertised Lot 1 on mortgagee sale and appears determined to proceed with a sale if DIL does not redeem. The former, on the other hand, builds its case on a caveat and a proprietary interest which, at best, are extremely shaky.

[89]. Having considered all, it is my view that the removal of PIL’s caveat would be warranted, on the balance of convenience, in light of the very shaky position of both the caveat and the interest for which it was security.

[90]. There is every indication that if the caveat is removed, DIL will be able to proceed with the sale of Lot 1 to R. Prasad Limited and thereby redeem its position with Westpac. In my view, the balance of convenience favours removal of the caveat.

OVERALL JUSTICE OF THE CASE


[91]. I am convinced the overall justice of the case favours removal of the caveat.

[92]. PIL could be compensated in damages. It would appear that DIL is in a shaky financial position. In such a situation, perhaps, the caveat could be removed on DIL’s directors providing security such as the payment into court of a specified sum or the provision of a bank guarantee, or a personal undertaking to protect PIL’s alleged interest.

[93]. Had Mr. Sharma requested such conditions as an alternative to his submissions, I would have seriously considered them.

CAN THE CAVEAT BE MODIFIED FROM A CAVEAT ABSOLUTE TO A CONDITIONAL CAVEAT TO PROTECT ONLY PIL’S CLAIMED ESTATE OR INTEREST AS LESSEE?


[94]. Mr. Patel had urged the Court as an alternative submission to modify the caveat from an absolute to a conditional caveat to protect only PIL’s claimed estate or interest as lessee. In other words, to permit registration of instruments expressed to be subject to PIL’s stated claim.

[95]. At the outset, I note that section 106 of the Land Transfer Act (Cap 131) makes a distinction between an absolute caveat and a conditional caveat. The former forbids the registration of any person as transferee or proprietor of, and of any instrument affecting, such estate of interest absolutely. The latter will allow these but only if expressed to be subject to the claim of the caveator.

[96]. Section 168 of the Act gives the Court power to direct the Registrar of Titles to "cancel, correct, substitute or issue any instrument of title or make any memorial or entry in the register or any endorsement or otherwise to do such acts as may be necessary to give effect to the judgement or decree or order of such court".

[97]. It appears that the court’s power to amend a caveat does not extend to an amendment which would result in the substitution of an estate or interest inconsistent with the estate or interest claimed in the caveat. In other words, the power to amend may extend to the prohibitory provisions of a caveat that has been worded too wide but not to the definition of the interest claimed by the caveator.

[98]. If Mr. Sharma had asked for such a modifying order as an alternative to his main submission, I would have granted it, though I would not expect the caveat to survive for too long.

ORDERS


[99]. Caveat No. 694592 on Native Lease No. 18240 is to be removed forthwith by the Registrar of Titles. Costs against the Plaintiff which I summarily assess at $2,000 (two thousand dollars) to be paid in 14 days.

Anare Tuilevuka
Master


At Lautoka
03rd May 2010.

[1] Land Transfer Act (Cap 131).

[2] [2005] FJCA 9; ABU 0057. 2004S (18th March 2005).

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