Birges v Itaukei Land Trust Board [2011] FJHC 803; HBC172.2004L (15 December 2011)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

Civil Action No: HBC 172 of 2004L

BETWEEN:

SHAHNAZ BEGUM BIRGES as executrix and trustee of JAFAR ALI (deceased)
Plaintiff

AND:

iTAUKEI LAND TRUST BOARD
First Defendant

AND:

ELO RAUGA
Second Defendant

JUDGMENT AFTER TRIAL

Judgment of: Inoke J.

Counsel Appearing: Mr R Chaudhary (Plaintiff)
Mr I Lutumailagi (1st Defendant)
Mr K Qoro (2nd Defendant)

Solicitors: Chaudhary & Assocs (Plaintiff)
In-house solicitors (1st Defendant)
Qoro Legal (2nd Defendant)

Dates of Hearing: 20 October 2011; written submissions filed 18 November, 6 December 2011.

Date of Judgment: 15 December 2011

INTRODUCTION

[1] The plaintiff is the executrix and trustee of her late father’s estate which included the land comprised in Crown Lease No 57464. When the lease expired the land became iTaukei land which became the responsibility of the first defendant. On the land was a home built by her father. Her family migrated to Australia and the home was rented to the second defendant and others. She claims that the lease should have been re-issued by the first defendant (the Board) to her father but instead the Board issued the lease to the second defendant who became the registered proprietor. She claims that the issue and registration was fraudulent and asks the Court to cancel the registration and have the lease issued to her or, alternatively, award her damages equivalent to the market value of the home.

[2] This is the Court’s judgment after a one day trial.

CASE HISTORY

[3] The Writ of Summons and Statement of Claim was filed on 21 June 2004. On 14 July 2004, the first defendant filed an application to strike out the claim. Six mentions followed and on 19 May 2005, the application was struck out for non appearance by the first defendant with costs. The plaintiff filed her Reply to the first defendant’s Defence on 26 May 2005. The summons for directions was filed on 20 September 2005 and the order made on 5 October 2005. The first defendant’s Defence was filed on 15 October 2004. The action then lay dormant for about a year. The parties filed their lists of documents in early 2007 and on 14 May 2007, the plaintiff filed an application for the first defendant to provide her with copies of certain documents which the first defendant later complied with and the file was transferred to the Master for pretrial directions on 7 August 2007. Nine more mentions before the Master followed. The Pre Trial Conference took place on 26 February 2009 and the minutes filed on 3 March 2009. Up to now the second defendant had not been involved at all in the proceedings so despite the plaintiff having filed her trial papers the matter could not be set down for trial. The matter then stalled because of the closure of the Courts until 14 September 2009. The second defendant appointed his current solicitors on 10 November 2009 who filed his defence on 10 December 2009. The plaintiff’s Reply was filed on 13 January 2010. A second PTC tool place on 26 April 2010 and the minutes were filed on 28 April 2010. The matter was then called eleven more times before the Master who transferred the file to me and on 3 February 2011 I set the matter down for hearing on 20 and 21 October 2011. The hearing took only one day on 20 October 2011 after which counsels requested time to file written submission which was granted, the last of the submissions was filed on 6 December 2011. Only counsels for the plaintiff and the second defendant filed submissions.

THE STATEMENT OF CLAIM

[4] The plaintiff’s statement of claim states that the first executrix of her late father, Jafar Ali, was her mother. Her mother later retired and signed a deed appointing her (the plaintiff) as the executrix and trustee of her late father’s estate on 11 August 2004. Her father was the lessee of Crown Lease No 57464 being lot 3, section 42, Drasa Avenue, Waiyavi Stage 1, Lautoka comprising 1 rood 8 perches. The lease was for a term of 44 years 2 months and 30 days commencing on 1 October 1954 and expiring on 31 December 1998. He father built a substantial concrete house of 4 bedrooms, kitchen, sitting room, toilets and the usual amenities. On 24 August 1998, the Board offered a new lease to the plaintiff’s mother over the Crown lease for a period of 99 years upon payment of $22,212.20. There were other tenants in the Waiyavi subdivision in the same position as the plaintiff so they, including the plaintiff, formed the Waiyavi Stage 1 Leaseholders Association to negotiate with the Board with regards to the terms of the new leases. The plaintiff’s mother joined the Association on 8 September 1998 on payment of her subscription fee of $5 and on 23 September 1998, $250 towards her share of the fees of legal counsel to represent the Association. The said counsel negotiated with the Board which agreed to reduce the premium payable on the said lease. The first defendant breached the agreement by offering the lease to the second defendant who became registered lessee on 27 May 1999. The alleged breach was that the Board failed to advise the plaintiff that the lease was being offered to the second defendant. The plaintiff further alleged that the registration of the second defendant as lessee was fraudulent. The particulars of fraud were that the Board deliberately failed to send a new offer to the plaintiff or her solicitors; the Board knew that the second defendant was a tenant of the plaintiff and failed to advise the plaintiff that the lease was being offered to the second defendant; the Board knew or ought to have known that the house on the land was built by the plaintiff’s father and not the second defendant; the second defendant deliberately failed to advise the plaintiff that the Board was offering a new lease to him; the Board and the second defendant conspired to have a new lease to the second defendant; and the Board discriminated against the plaintiff. The second defendant did not contribute to the construction of the improvements on the land and as a result of the lease being issued to the second defendant, the plaintiff has suffered loss and damage. The plaintiff claims a declaration that the Board breached the agreement with the plaintiff, a declaration that the issuance of the lease to the second defendant is fraudulent, an order that the registration of the lease be cancelled, or alternatively, the defendants pay to the plaintiff a sum equivalent to the current market value of the property, injunctions restraining the transfer and mortgaging of the lease, damages for loss of use and rental income, general damages, interest and costs.

THE DEFENCE

[5] The Defence of the Board was that the land and lease ceased to be part of the estate of the plaintiff’s father when the lease expired on 31 December 1998. It says the plaintiff failed to accept the offer of 24 August 1998 within the six weeks which the plaintiff was required to do. The Board denies breach of agreement and fraud. It says that it has discretion under ss 8 and 9 of the iTaukei Land Trust Act to issue leases to anyone and the issue of the lease to the second defendant was an exercise of that discretion which was not fraudulent. The Board denies that there was an agreement between the plaintiff and the Board and further says that the second defendant has indefeasible title.

[6] The second defendant admits that there was a concrete dwelling house on the land as alleged by the plaintiff any compensation for it was to be paid by the Crown. But he denies that there was any breach or fraud and says the he has an indefeasible title to the land.

THE ADMITTED FACTS

[7] The facts as admitted in the pleadings and the PTC minutes were: The plaintiff’s father was the lessee of Crown Lease No 57464 which expired on 31 December 1998. He had built a concrete building consisting of 4 bedrooms, kitchen, sitting room, toilets and the usual amenities. The plaintiff’s father died on 12 July 1989. His widow became his executrix and trustee on 24 January 1990. She transferred the administration and trusteeship rights to the plaintiff by deed on 11 August 2004. After expiration of the lease the same reverted to iTaukei land under the control of the Board. By letter dated 24 August 1998, the Board wrote to the plaintiff’s mother offering a new lease of the land for a period of 99 years on payment of certain sums, including a premium of $20,500. In about September 1998, the tenants in Waiyavi Stage I formed the Waiyavi Stage 1 Leaseholders Association to negotiate the new terms and conditions for the new leases with the Board. Mr Rabo Matebalavu was engaged as counsel for the Association. The Board reached an agreement with the Association on behalf of its members. The Board gave a lease of the land to the second defendant in iTaukei Lease No 24797 who became the registered lessee on 27 May 1999.

THE BUNDLE OF DOCUMENTS

[8] The plaintiff and the Board filed individual bundles of documents. The second defendant did not file any documents. As usual, these documents were tendered under the hearsay provisions of the Civil Evidence Act 2002 and were subject to the parties’ right to challenge their authenticity and to the Judge’s discretion as to what weight he was to attach to their contents.

THE EVIDENCE AT THE HEARING

[9] The plaintiff called three witnesses including herself. The other two were the barrister Mr Matebalavu and Mr Naidu, who was the treasurer of the tenant’s Association. The Board called one of its estate officers. The second defendant gave evidence on his own behalf.

[10] I do not think I need to go into the evidence in detail because in my view there is only one issue to decide, and that is, whether the Board should pay compensation to the plaintiff and how much.

ANALYSIS OF THE EVIDENCE AND FINDINGS

[11] The Court of Appeal decision in Prasad v Wati [2001] FJCA 50; [2001] 1 FLR 430 (22 November 2001) summarised what is meant by fraud in a case such as the present:

Perhaps the best known statement of what will, and what will not amount to fraud is to be found in the judgment of Salmond J., a member of the New Zealand Court of Appeal, which determined the case of Waimiha Sawmilling Co. Ltd. v Waione Timber Co. Ltd. [1923] NZGazLawRp 32; [1923] NZLR 1137. In the course of his judgment Salmond J. said (at 11 74-5):

"Where a purchaser actually knows for certain of the existence of an adverse right which will be destroyed by his purchase he is, as already indicated, guilty of fraud. Where, on the contrary, he has no knowledge that such a right exists or is even claimed he is a purchaser in good faith. In between these two extremes there lie those intermediate cases in which, although there is no certain knowledge of the existence of an adverse right, there is knowledge of a claim and of the possibility of that claim being well founded. The purchaser does not actually know that the right exists, but he knows that it may exist, but he knows that it may exist, or fears or suspects that it exists, or doubts whether it exists or not. If in such circumstances and in such a state of mind he acquires the property intending to hold it for an unencumbered title and to destroy the right in question if it does exist, is the case one of fraud or one of bona fides within the meaning of the Act? An extreme view, which cannot be supported, would all cases of this kind within the sphere of fraud. According to this view, knowledge of the existence of an adverse claim, coupled with an intent to defeat that claim by a purchase of the property, is always inconsistent with good faith, even though the claim is not known or believed to be well founded. This view, however, is not in conformity either with the spirit and purpose of the Land Transfer Act or with any reasonable standard of good honest dealing. One of the main objects of the Land Transfer Act is to facilitate the alienation of land by eliminating the encumbering influence of unregistered interests, and by relieving purchasers from the necessity of inquiring into the existence and validity of adverse equitable claims and interests. Moreover, a proper standard of honesty and good faith regards the interests of the owner no less than those of the adverse claimants. An owner of land is not necessarily bound to abstain from alienating his property of the existence of some adverse claim which he does not know or believe to be well founded, and because he knows that the effect of such alienation under the Land Transfer Act will be to destroy that claim. Nor is a purchaser necessarily bound to abstain from acquiring the property for the same reason. Good faith requires that due consideration be given to the conflicting interests both of the owner and of the claimant in such a case, and not that exclusive consideration be given to the interests of one of them only. Knowledge, therefore, that an adverse claim exists, that it may possibly be founded, and that it will be destroyed by an alienation of the property, is not in itself sufficient to stamp the transaction as fraudulent within the of the meaning Land Transfer Act."

The decision of the New Zealand Court of Appeal in the Waimiha case was upheld by the Privy Council, 1926 AC 101. What Salmond J. said has been cited many times by Judges in Australia and New Zealand and also by the Privy Council when dealing with appeals from the courts of those countries.

What Salmond J. said towards the end of the passage quoted from his judgment was echoed by Kitto J. of the Australian High Court in Mills v Stokman [1967] HCA 15; (1967) 116 CLR 61 where his Honour said (at 78) that merely to take a transfer with notice or even knowledge that its registration will defeat an existing unregistered interest is not fraud.

In Frazer v Walker [1967] AC 569 the Privy Council said (at 580) that "fraud", where used in a similar provision, meant actual fraud; in other words dishonesty.

In Bahr v Nicolay [No. 2] [1988] HCA 16; (1988) 164 CLR 604 the question of what would amount to fraud was considered by the Australian High Court. There Wilson and Toohey JJ. said that the fraud referred to was actual fraud, involving some act of dishonesty on the part of the person whose title was sought to be impeached. They continued (at 630):

"It is equally clear to acquire land with notice of an unregistered interest such as a lease to become the registered proprietor and then to refuse to acknowledge the existence of the interest is not of itself fraud: Oertel v Hordern [1902] NSWStRp 21; (1902) 2 S.R. (N.S.W.) (Eq.) 37; Wicks v Bennett; Friedman v Barrett; Ex parte Friedman [1962] Qld. R. 498); R. M Hosking Properties v Barnes [1971] S.A.S.R. 100; Achatz v De Reuver ([1971] S.A.S.R. 240. The point is made by Kitto J. in Mills v Stokman [1967] HCA 15; (1967) 116 CLR 61, at p.78, where his Honour said "but merely to take a transfer with notice or even knowledge that its registration will defeat an existing unregistered interest is not fraud."

[12] I am not satisfied that there was dishonesty or fraud on the part of the defendants of the type referred to in Prasad (supra) or that there was a binding agreement by the Board to issue a lease to the plaintiff's father. I accept the second defendant's evidence that it was only after the plaintiff or her mother did not respond to the offer letters that the Board offered him the lease. At worst, the Board may have been negligent in not contacting the plaintiff's mother but, equally as culpable, either of them should have followed up with the Association and the Board as to the status of their lease.

[13] Having so found, there is therefore no case for specific performance or "cancellation" of the registration of the second defendant as lessee.

[14] I accept the evidence of the estate officer for the Board that in cases such as the present where the sitting tenant is not given the lease, the Board inspects and pays compensation for improvements that were built on the land by the sitting tenant. I do not accept the defence that the building was not constructed with the necessary approvals and consent. In the course of the hearing I did not allow counsel for the second defendant to raise the issue because if that was in fact the case, and that could not have possibly been the case because neither the Crown nor the Board subsequently raised it, his client would be required to demolish the building as it stands. I also do not accept that the second defendant's defence that it is the Crown now the State that should be paying compensation. That is a matter between the State and the Board and not one for determination in these proceedings.

[15] I take the plaintiff's claim as pleaded in paragraph 14 of the Statement of Claim as one for damages based on a quantum meruit or unjust enrichment against both the Board and the second defendant. The estate officer of the Board clearly conceded in his evidence that this was such a case and the second defendant's defence impliedly concedes that in paragraph 15 of his defence. He simply denies liability on the basis that the State rather than the Board should pay the compensation, a point which I do not accept as explained above.

[16] This is not a case for loss of rental income because the plaintiff has failed to prove that there was a binding agreement by the Board to issue a lease or that there was fraud or conspiracy by the defendants. In other words, there is no evidence that the Board did not properly exercise its discretion under ss 8 and 9 of the iTaukei Land Trust Act.

[17] This case then simply becomes one of compensation for the value of the improvements left on the land as at the date the lease expired, namely, 31 December 1998. The plaintiff did not call a registered valuer to give evidence in this regard. However, the evidence of Mr Naidu in cross examination by counsel for the second defendant was that in his opinion having seen the house from the outside during those years, around 1998, the value of the house was $50,000. The second defendant also gave evidence that the house was in a bad condition; the roof leaked during heavy rains and he changed some of the roofing irons and timber. He obtained a loan from the bank for $12,000 to pay the premium and other fees to the Board for the lease. No one from the bank or NLTB came and inspected or valued the house. Counsel for the plaintiff submitted that I should award $50,000 as general damages. I accept the submission.

LIABILITY

[18] It is the responsibility of the Board to pay compensation. The second defendant was a mere tenant and not the owner of the land or the improvements on it at the time he took the lease. Regulations 21, 22 and 23 of the Crown Lands (Leases and Licences) Regulations provide for the removal of the improvements or compensation in the case of the lease expiring or being surrendered. That did not arise here so they do not apply. The question then falls to be decided on general principles under the common law. Clearly in this case, the Board would be unjustly enriched if it is not required to pay compensation. It has been able to charge a higher premium and rental for the property. The sitting tenant had not been given an opportunity to remove the improvements if he wanted to.

[19] I therefore hold that the Board shall pay to the plaintiff compensation in the sum of $50,000.

[20] The plaintiff claims interest at 3% pa which I accept as reasonable. That interest is to be calculated from the date of expiration of the lease, namely, 31 December 1998, to the date of this judgment, a period of approximately, 13 years. The interest component is therefore $50,000 x 3% x 13 = $19,500.

COSTS

[21] The first defendant shall pay the plaintiff's costs as well as the second defendant's costs which I summarily set at $2,000 each.

ORDERS

[22] I therefore order that:

• (a) The first defendant shall pay to the plaintiff the sum of $50,000 as compensation together with interest thereon of $19,500.
  
• (b) The first defendant shall pay to each of the plaintiff and the second defendant their costs of this action of $2,000 within 21 days.
  

Sosefo Inoke
Judge