Suva Forklift Hire Ltd v Sun Insurance Company Ltd [2011] FJHC 72; HBC146.2010 (17 February 2011)

IN THE HIGH COURT OF FIJI AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC 146 OF 2010

BETWEEN:

SUVA FORKLIFT HIRE LIMITED
a limited liability company having its registered office at 77 Fulaga Street, Samabula,
Suva in the Republic of Fiji Islands.
Plaintiff

AND:

SUN INSURANCE COMPANY LIMITED
a limited liability company having its registered office at 1st Floor, Harbour Front Building,
Rodwell Road, Suva in the Republic of Fiji Islands.
Defendant

Before: Master Anare Tuilevuka
Counsels: Messrs Jamnadas & Associates for the Plaintiff
Messrs Sherani & Company for the Defendant

Date of Ruling: 17th February 2011.

RULING

INTRODUCTION

[1]. On 07th May 2010, Messrs Jamnadas & Associates filed an application under section 110(3) of the Land Transfer Act (Cap 131) and under Order 29 Rule 2 of the High Court Rules 1988 seeking the following:

(i) an Order extending the time for removal of the said caveat No. 723272 now numbered 724631 until the hearing and determination of this action

(ii) an Order restraining the Defendant whether by themselves and/or through their servants, agents or otherwise howsoever from selling, transferring, assigning or in any manner whatsoever disposing of the said property comprised in CL 2955 being Lot 20 in section 20 with an area for 36.3 perches and located at 61 Moala Street, Samabula (“CL 2955”) until hearing and determination of this matter.

[2]. Messrs Jamnadas & Associates had intended to be heard ex-parte on this application. But seeing that the caveat in question had long expired by the time the application was filed, I directed Ms Rakai to serve the application on the defendant - Sun Insurance Company Limited (“SICL”).

[3]. In fact, the plaintiff Suva Forklift Hire Limited (“SFHL”) filed this application 21 days after the section 110 notice period had lapsed.

AFFIDAVITS

[4]. The affidavit of Mohammed Sareem sworn on 9th day of April 2010 filed in support of the application might be summarized as follows:

• (i) Sareem is a director of SFHL and is authorized to swear the affidavit.
  
• (ii) Sareem, after several discussions, entered into a tenancy agreement with SICL on 7th May 2009. He received a letter from SICL confirming SICL’s willingness to lease out CL 2955.
  
• (iii) pursuant to the offer letter, Sareem paid the relevant bond. He also complied with other terms specified in the letter.
  
• (iv) Sareem then proceeded to make renovations to CL 2955 – after having informed SICL. And SFHL then moved onto the property.
  
• (v) it appears that – shortly thereafter – SICL asked Sareem to quit CL 2955 as SICL desired to put the property up for sale via tender.
  
• (vi) Sareem did tender for CL 2955. His tender was accepted. And his tender-cheque of $5,000 (Five Thousand Dollars) was successfully banked.
  
• (vii) then – on 28th July 2009 – SICL and Sareem entered into what he calls a “valid Sale & Purchase Agreement” .
  
• (viii) Sareem says that both parties signed the said agreement – a copy of which he annexes to his affidavit.
  
• (ix) however - shortly thereafter, the defendant proceeded to rescind the Agreement. There is in fact an action between the same parties currently pending in the High Court pertaining to the said Agreement (HBC 354 of 2009).
  
• (x) SFHL – according to Sareem – has a caveatable interest over CL 2955 based on (a) the sale and purchase agreement and (b) on the extensive renovations carried out on the property. Sareem annexes to his affidavit copies of invoices showing the extensive materials used for renovating the subject property. The total of this comes to about $35,605.62 (Thirty five thousand, six hundred and five dollars and sixty two cents).
  
• (xi) SFHL was to learn shortly thereafter that SICL was negotiating with a third party about the sale and purchase of CL 2955. This prompted SFHL to instruct its solicitors to lodge a caveat against CL 2955.
  
• (xii) SICL reacted by causing a section 110 Notice of Removal of Caveat to be served on SFHL on 3rd March 2010.
  
• (xiii) then, on 11th March 2010, SFHL’s solicitors wrote to the Registrar of Titles advising that:
  

“.......the said Notice would lapse 21 days after receipt. By this letter the Registrar of Titles Office was also put on notice that after the expiry of the said Notice a formal application would be made to Court to extend the caveat. I annex hereto and mark with the letters “MS 7” copies of the letter dated 11th of March, 2010”.

(xiv) Sareem says that SFHL has a right to CL 2955 and if denied this right – SFHL risks financial ruin because of the extensive renovations that it has already made thereon. SFHL wants the status quo preserved until its caveated claim is properly tested.

(xv) by way of giving an undertaking as to damages, Sareem deposes as follows:

The Plaintiff gives it undertaking as to damages. I am the legal owner of property contained in Crown Lease No. 1566 being Lot 18 in section 21 with an area of 37.1 perches. This house is free of any encumbrances and its estimated value is $250,000.00 (Two hundred fifty thousand dollars).

[5]. The affidavit of Vikash Sharma sworn on 21st May 2010 is filed in opposition to the application. Sharma is an Accountant at SICL’s head office in Suva. His version of events is slightly different in the following ways:

• (i) SFHL first approached SICL to lease CL 2955.
  
• (ii) SICL then wrote a letter on 2nd May 2009 advising SFHL of its terms and conditions. Also, SICL advised that Messrs Sherani & Co. would be preparing a formal lease agreement.
  
• (iii) SFHL did not respond to that letter but proceeded to pay a bond of $4,000-00 to SICL. Meanwhile – attempts to formalize a lease agreement were futile as the parties could not agree on certain things.
  
• (iv) SFHL just took over possession of CL 2955 until SICL – through its solicitors – gave Notice to Vacate on 12th August 2009. There was no valid lease to occupy and the Director of Lands’ consent had not been sought let alone obtained. The parties could not agree to the terms of the lease. SFHL was to pay occupational charge of $2,000.00 per month until June, 2009 but continued to occupy the premises until August, 2009. The bond of $4,000.00 that SFHL paid was then used up to cover occupational charges for July and August, 2009.
  
• (v) Harcourts did advertise CL 2955 for sale pursuant to SICL’s instructions. SFHL did tender for the property in the sum of $272,000.00. SFHL also did pay a tender deposit of $5,000.00 to Harcourts. This was not a payment towards the deposit sum. SFHL did not pay the balance deposit required by Harcourts.
  
• (vi) Harcourts did prepare a sale and purchase agreement. This was signed by SICL. However - SFHL did not agree to the terms of the agreement.
  
• (vii) it was only then – that SICL’s solicitors wrote to SFHL on 20th August, 2009 advising that there was no valid sale and purchase agreement.
  
• (viii) this prompted SFHL to lodge a caveat on CL 2955 and institute Civil Action No. 354 of 2009 seeking specific performance. That case is still pending.
  
• (ix) since there is no valid sale and purchase agreement – and since no director of lands’ consent has been obtained - how then can a caveatable interest arise?
  
• (x) Sharma refuses the allegation that SFHL did carry out substantial renovations/improvement on CL 2955.
  
• (xi) in any event – how can a valid interest in favour of SFHL arise out of the renovations/improvements it allegedly carried out on CL 2955 if the prior consent of the director of lands on these alleged renovations/improvement had not been obtained. SFHL accordingly must bear its own losses (if at all).
  

[6]. According to Mr. Sharma – Mr. Sareem lodged a caveat personally on 3rd September 2009 claiming an interest as purchaser by virtue of a sale and purchase agreement dated 28th July, 2009. This caveat was lodged by Mr. Sareem personally. SFHL then lodged another caveat on 6th November, 2009 claiming an equitable interest as purchaser by virtue of the same sale and purchase agreement. SICL then applied to remove the caveat because SICL had a prospective buyer for CL 2955.

[7]. Mr. Sharma believes that SFHL has no substantive claim and that damages would be an adequate remedy for the company. There is no need for any interlocutory injunction. He deposes further that SFHL owns no substantial assets and is not able to meet any award of damages. Crown Lease No. 1566 – he says - is not registered in the name of SFHL but in Sareem’s name. Sharma says that – on the other hand – SICL is able to pay any award of damages as it is a duly licensed Insurance Company with assets worth several million dollars.

[8]. On advice, Mr. Sharma deposes that the balance of convenience favours SICL. Apparently – third party that SICL is committed to selling CL 2955 to has already signed a Sale and Purchase Agreement, a copy of which is annexed to Sharma’s affidavit.

[9]. Can this Court extend the caveat? The principles involved in extension of caveat are usy summed up in Catchpole v. Burke – (1974) 1 NZLR 620 at page 625 as follows:

"when it is plain to the cthat aveator cannot possibly succeed in establishing hing his clis claim against the registered proprietor it is proper to refuse to extend the caveat ..... But where there are doubts surrounding the rights of the caveator ..... the proper course is to extend the caveat until the conflicting claims of the different parties are determined in action brought for that purpose."

(see also NBF Asset Management Bank v Taveuni Estates Ltd [2009] FJHC 1; HBC245.2008 (13 January 2009) as per Singh J).

[10]. In my view, the above is an appropriate starting point. Where there are doubts surrounding the rights of the caveator, the principles applicable in an application to remove a caveat must also be applied i.e. the same principles analogous to those applied in interlocutory injunction (as in Bahadur Ali v Fiji Development Bank [2005] FJCA 9; ABU0057.2004S (18 March 2005); Privy Council authority Eng Mee Yong v. Letchumanan [1980] AC 331).

[11]. Hence, in an application for extension of caveat - the onus is still on the caveator to convince the Court that his caveat should be extended until full trial. To do this, he must establish three things: firstly, he must show that there is a serious question to be tried. A factor to be considered in this first heading is what interest he has in the land. Secondly, he must show that the balance of convenience favours maintenance of the caveat until trial and thirdly, he must show that the overall justice of the case favours keeping the caveat until trial.

[12]. At the end of the day, the Court must stand back and look at the overall justice of the case and ask whether justice favours an extension of the caveat (as per 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).

SERIOUS ISSUE TO BE TRIED?

[13]. The caveator must satisfy the court that on the evidence presented, its claim to an interest in the property does raise a serious question to be tried. In this action, SFHL bases its request for extension on the renovations it had caused on the land and also on the sale and purchase agreement where monies has passed for the deposit and tender of the same property.

[14]. But it appears that the director of lands had never ever consented to either the purported agreement (if any) or to the plaintiff improving the land.

[15]. There is some support for the proposition that - absent such regulatory consent, an interest in equity cannot thereby arise (see Re CM Group Pty Ltd’s Caveat [1986] 1 Qd R 381, where 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).

[16]. I adopt the same principle. How can the remedy of specific performance arise even – in the absence of any director of land's consent? At best – the plaintiff should recover his losses either through breach of contract (but still questionable given lack of director of lands' consent) or – perhaps- through a cause of action based on quantum meruit.

BALANCE OF CONVENIENCE

[17]. The guiding principle under this head appears to be this: given that the refusal of extension of the caveat will inevitably result in the sacrifice of the security provided by the caveat – is it more convenient to refuse an extension anyway in proportion to what is stake for the registered proprietor if an extension was granted? Which of the two will suffer the greater prejudice?

[18]. The plaintiff says the balance of convenience favours his position because - once extension is removed – it cannot lodge another. Also - because the protection of its interest will be compromised.

[19]. The defendants highlight the following about the said caveat:

• (i) there was no prior consent of the director of lands to register the caveat.
  
• (ii) the said caveat - although lodged with the registrar of titles - was never signed by the registrar of titles.
  
• (iii) Mohammed Sareem does not have any caveatable interest over the defendant's property because there was no valid sales and purchase agreement between the parties.
  

[20]. The defendant further submits that the balance of convenience favours it because the plaintiff is already seeking damages in High Court Civil Action No. 354 of 2009, which is an adequate remedy to the plaintiff.

[21]. I agree with the defendant's position. In doing so – I also take into account that the caveat has long lapsed anyway. There is nothing for me to extend. The proper course for the plaintiff – in my view – was to make an application for interim injunction against the Registrar of Titles in the other pending action.

OVERALL JUSTICE OF THE CASE

[22]. I am convinced the overall justice of the case favours a refusal of extension. In doing so – I was persuaded by the submission of the defendant's counsel that: the undertaking as to damages of Mohammed Sareem on behalf of the plaintiff without any supporting documents to show what the plaintiffs assets are and whether or not they are encumbered - is worthless.

[23]. In Natural Waters of Viti Limited v Crystal Clear Mineral Water (Fiji) Limited Fiji Court of Appeal Civil Appeal No. 11 of 2004 the Court of Appeal had stated that applicants for interim injunction who offer undertaking as to damages should always proffer sufficient evidence of their financial position.

[24]. The plaintiff company does not own the crown lease that Mr. Sareem has put up for security for that purpose. That property is owned by Sareem personally. Furthermore – in my view – the prior consent of the director of lands should be first had and obtained before any such crown protected lease as the one Mr. Sareem wants to commit in his undertaking as to damages - can be put up as security as such.

[25]. In my view – at best – SFHL (plaintiff) can recover in damages (or possibly on the basis of quantum meruit) – but that is not enough to justify extending a caveat which has already long expired anyway before this application was even filed.

[26]. In any event – in my view – if the caveat has expired – there is nothing for me to extend. The proper course for the plaintiff is to seek an interim injunction against the Registrar of Titles to restrain him from registering any further dealing on the land in question pending determination of the action between the plaintiff and the defendant. Application dismissed. Costs to the defendant which I summarily assess at $500-00 (five hundred dollars to be paid in 21 days).

Anare Tuilevuka
Master

At Suva
17th of February 2011.