Namena Ltd v iTaukei Land Trust Board [2015] FJHC 800; HBC192.2015 (23 October 2015)

IN THE HIGH COURT OF FIJI AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. 192 OF 2015

BETWEEN:

NAMENA LIMITED a limited liability company of having its Registered office at 7 Waimanu Road, Suva.
PLAINTIFF

AND:

ITAUKEI LAND TRUST BOARD a body corporate duly constituted under the iTaukei Land Trust Act (Cap 134) whose registered office is at 431 Victoria Parade, Suva
DEFENDANT

COUNSELS : Ms Choo N for the Plaintiff
: Ms Komaitai L for the Defendant

Date of Hearing : 2nd September, 2015
Date of Judgment : 23rd October, 2015

JUDGMENT

Introduction

[1] The Plaintiff filed Originating Summons seeking certain declarations against the Defendant for its decision for reassessment of the lease rentals for Namenalala Island. The Defendant did not file an affidavit in opposition; hence the facts relating to the matter were not disputed. The Defendant had informed the intended re-assessment of rent in terms of the Native Land Trust (Lease and Licenses) Regulations (Cap 134 of Revised, Subsidiary Legislation),(hereinafter referred to as The Regulations) but the Defendant had failed to name an arbitrator. If the Plaintiff was not satisfied with the reassessment of lease rentals it could have acted in terms of the Regulations and refer the matter for arbitration within the time stipulated. The Plaintiff had failed to appoint a suitable arbitrator for nearly one year. The time allowed for reference for arbitration was one month from the service of 'counter notice ' in terms of the Regulation 13(3) and since this was not complied for more than 11 months, the reassessed rent was made applicable and the Plaintiff had already paid the enhanced sum. The Plaintiff now seeks declaratory orders and also referral of the issue of reassessed rent for arbitration, by the court.

Facts

[2] The Facts of this Originating Summons were not disputed; hence there was no affidavit in opposition.

[3] The Plaintiff is the lessee of the Defendant for a 99 year period of the island more fully described in the said instrument of lease which was annexed to the affidavit in support as NSL 2. It was leased to the Plaintiff by the Defendant in terms of Native Lands Trust Act and the Regulations. The area under lease is approximately 43 hectares.

[4] It was admitted at the hearing that apart from this instrument of lease, the Regulations applied to the said 99 year lease.

[5] In or around 1st October, 2013 the Defendant had notified the Plaintiff in terms of Regulation 13(1), of its intention to increase the annual lease rentals to $30,000. The learned counsel for the Plaintiff admitted at the hearing that said notice had conformed to the requirements of the Regulation.

[6] The Defendant was also informed in the said communication that if it intended to oppose the re-assessment of lease rentals that it had to serve a 'counter notice'. It also indicated the requirement to name an arbitrator so that reference for arbitration could be made within 1 month time period.

[7] The Plaintiff's solicitors served the Defendant 'counter notice' in terms of Regulation 13(2) of The Regulations but failed to appoint an arbitrator for nearly one year, and the Defendant by its letter dated 6th October, 2014 relied on Regulation 13(3) and informed that failure to refer the matter within the stipulated time period was 'now deemed to have been accepted' the reassessed rental.

[8] The Plaintiff on 4th December, 2014 had paid the increased rental to the Defendant by receipt number 949539.

[9] The solicitors for the Plaintiff wrote a letter on 27th November, 2014 and requested the matter to be referred for arbitration. For the first time the solicitors for the Plaintiff were informing in writing that they desired themselves to be appointed as sole arbitrator. This was directly contrary to letter of 26th November,2013 where the solicitors of the Plaintiff informed the Defendants in writing that they were searching for a 'suitable person ' who would 'propose to be appointed ' as arbitrator.(see Annexed NS4 of the affidavit in support). The said position was reiterated by subsequent letter and also stated that the solicitors had already spoken to few persons to act as an arbitrator and awaited confirmation to act as an arbitrator. (See Annexed NS 6 to affidavit in support)

(10) In the Originating summons following orders are sought:

" 1. AN ORDER that Defendant or its agents or servants refrain from imposing and/or enforcing the new rent increase of $30,000.00 on Native Lease No. 17642 from the beginning of 1st January, 2015 until further order of the Court;

2. A DECLARATION that the Notice dated 6th October 2014, be declared unlawful, null and void;

3. AN ORDER THAT THE DISPUTE OVER RENTAL INCREASE ON THE Native Lease No. 17642 be referred to an Arbitrator pursuant to Clause 8 of the Native Lease No. 17642;

4. A DECLARATION that any previous payment of $30,000 by Plaintiff not be regarded as an acceptance of the new rent as allegedly assessed by the Defendant under the Native Lease No. 17642; and

5. Cost of this Application.

6. Such further and/or other reliefs this Honourable Court may deem fit and just and expedient."

Analysis

[11] The Plaintiff is the lessor of 99 year lease of the Native Lease 17642. The said lease involved an island, and the Plaintiff operates a resort on the said island. The Native Lease 17642 commenced in 1984 and the annual lease rental was $2,000 for first three years and there after $4,000.

[12] It was admitted at the hearing that Native Lease 1742 does not expressly exclude the application of the Regulations relating to the reassessment of lease rentals. It was an admitted fact that the Regulations apply for the reassessment of the lease rentals.

[13] The learned counsel for the Plaintiff said that lease rental in 2013 was $15,000 and she was unable to state how it was determined .There were two methods for determination of the lease rentals.

[14] The Native Lease 1742 is annexed to the affidavit in support as NS2. According to the said lease the annual lease rental could be determined by 3.5% of the gross receipts or by open market rent.

[15] The applicable law relating to reassessment is contained in the Regulation 13, states as follows:

"Re-assessment of rent:

13 – (1) Subject to paragraph (8), the Board or a lessee of any native land may, by notice in writing served on the other party not earlier than one year and not later than three months before the appointed date, propose that the rent payable under the lease of that land from the appointed date shall be at such yearly rate as shall be specified in the notice (hereinafter referred to as a "notice of re-assessment").

(2) The party on whom a notice of re-assessment has been served in accordance with paragraph (1) may, by notice in writing (hereinafter referred to as a "counter-notice") served on the other party not later than the two months commencing on the date of the service of the notice of re-assessment, signify his intention to refer the question of the re-assessment of the rent for determination by arbitration in pursuance of regulation 21.

(3) If a counter-notice is not served in accordance with paragraph (2) or if a counter-notice is so served but no reference for determination by arbitration in pursuance of regulation 21 has been made within one month commencing on the date of the service of the counter-notice, the rent payable under the lease shall, as from the appointed date, be payable at the rate specified in the related notice of re-assessment, but without prejudice to a further re-assessment of the rent in accordance with this regulation.

(4) If a counter-notice is served in accordance with paragraph (2) and a reference for determination by arbitration in pursuance of regulation 21 as mentioned in paragraph (3) is made, then the parties shall, for the purposes of such arbitration, be taken to be in dispute as to the rent properly payable under the lease as from the appointed date:

Provided that this paragraph shall cease to have effect upon the parties agreeing the said rent.

(5) For the purpose of this regulation, the rent properly payable under a lease of native land shall be the annual rent at which the land might reasonably be expected to be let in the open market by a willing lessor to a willing lessee if the full covenants contained in the lease (other than those relating to rent) and assuming that the environment of the demised land is in all respects as it is or may reasonably be expected to be, at the appointed date, but disregarding –

a) any effect on rent of the fact that the lessee is in occupation of the land; and,

b) the current value of any unexhausted improvements on the land, other than those which have a value in relation to the purpose for which the land is demised and which-

(i) were executed during the term of a previous lease of the land at the expense of the lessee where the lessee, or the lessee under any subsequent lease, was not granted a new lease upon the expiration of that term; or

(ii) were executed by the Board; or

(iii) were in existence at the time the land was first leased.

(6) Where a notice of re-assessment (hereinafter referred to as "the first notice") is served on any party to a lease, any notice of re-assessment served by that party on the other party subsequently to the date on which the first notice was served and before the appointed date specified in the first notice shall be of no effect for the purposes of this regulation; and if notices of re-assessment are served by both parties on each other on the same date, only the notice of re-assessment served by the Board shall have effect for those purposes.

(7) In this regulation "the appointed date" means, in relation to any notice of re-assessment in respect of the rent payable under any lease, the date specified in the notice as the appointed date, being a date not earlier than five years from the later of-

(a) the date of the commencement of the term of the lease;

(b) the date as from which there last took effect a re-assessment made in pursuance of this regulation; and

© the date as from which there last took effects a previous direction of an arbitrator, that the rent should continue unchanged.

(8) This regulation shall not apply in relation to a lease in which it is specifically provided that this regulation shall not do so".(emphasis added)

[16] There was no exclusion of Regulation 13 in the clauses of the Native Lease 1742 hence the Regulation 13 applies to the said lease (see Regulation 13(8)).

[17] At the hearing the counsel for the Plaintiff admitted that the Defendant had notified them in terms of Regulation 13(1). There was no dispute as to conformity of said notice to the Regulation 13 and this fact was admitted in the Plaintiff's letter dated 26th October, 2013. (Annexed as NS 4 to the affidavit in support)

[18] Once the "notice of re-assessment" was received by the Plaintiff, if the proposed re- assessment was not accepted they needed to act in accordance with Regulation 13(2).

[19] The Regulation 13(2) states that if the re-assessment is not acceptable the Plaintiff should by notice in writing serve the Defendant within 2 months of the receipt the 'counter notice'. Such notice should also specify the intention of reference of the issue relating to annual rental for arbitration in terms of Regulation 21.

[20] If the Plaintiff complied with the requirements in terms of Regulation 13 and the 'counter notice ' was served in terms of Regulation 13(2) and the reference to arbitration was made in terms of Regulation 21 as mentioned in Regulation 13(3), the reassessed rent can be considered 'to be in dispute'. (See the Regulation 13(4)). Converse is, that if there is no reference to arbitration the reassessment of the lease rental, cannot be considered as 'in dispute'. This is an additional ground for rejecting the Plaintiff's contention that they sought the matter to be referred for arbitration even after 11 months from the 'counter notice'. Even if I am wrong on that issue the consequences from non referral to arbitration is stipulated in the Regulation 13(3).

[21] In the paragraph 11 of the affidavit in support the Plaintiff averred that Defendant did not elaborate as to how it had arrived to the re-assessed lease rental. There was no requirement to elaborate reasons in terms of the Regulation 13(1), but it is noteworthy that Defendant had justified its reassessment on "the prevailing rent from similar tourism leases in the maritime areas". (See Annexed NS 5 to the affidavit in support). So, the basis of the reassessment was market value, and if this was not acceptable the Plaintiff was required to act promptly in terms of Regulation 13(2).

[22] The reason for the reassessment of the lease rental was a subject matter of the arbitrator in terms of Regulation 21 once the rent stated in the Notice of Reassessment, was "in dispute", in terms of the Regulation 13(4) and also with Regulation 21. For that referral to arbitration needed to be done within the stipulated time and failure to do so was fatal in terms of Regulation 13(3).

[23] The Regulation 21 states as follows:

"21.-(1) Any matter referred for determination by arbitration under and in accordance with these Regulations, and any difference arising between the Board and any person touching anything contained in these Regulations, in the operation or construction of these Regulations, of any lease, agreement for a lease of license, or the rights, duties and liabilities of the parties under or in connection with a lease, agreement for a lease or license, shall be determined by a single arbitrator in accordance with the Arbitration Act;

Provided that nothing in this regulation shall be taken to authorize the reference for determination by arbitration of any difference arising out of the refusal of the Board to grant a lease of native land to any person otherwise than by way of renewal.

(2) In determining any rent, compensation or other payment referred to him under these Regulations, the arbitrator-

(a) shall disregard any proposal made by any party as to such rent, compensation or other payment; and

(b) shall have regard solely to the provisions of these Regulations with respect to any such matter so referred to him.

(3) The arbitrator may, if he so desires, sit with two assessors, one appointed by each party, but all decisions and any award shall be made by him and shall be his alone". (emphasis added)

[24] In terms of Regulation 21 the arbitrator should be an independent person and he could sit with two assessors appointed by each party, but the decision and the award should be his alone. The Regulation 21(3) was clear enough to emphasis that arbitrator should be an independent person and not the solicitors of the Plaintiff. The solicitors of the Plaintiff cannot be considered as sole arbitrator in terms of the said Regulations as there would be a clear conflict of interest of its client to sit as an independent sole arbitrator. The Plaintiff's solicitors had written to the Defendant indicating that they were searching for a suitable person to act as an arbitrator and there was no communication to the contrary for more than 11 months. So the statement that 'we had indicated to iTLTB that we intended to appoint ourselves' was an afterthought in the analysis of the facts before me.(see paragraph 7 of Annexed NS 9 and NS 10)

[25] The Regulations does not specifically state as to who should appoint the arbitrator, but Regulation 13(3) states that if a reference to arbitration is not made within one month from the 'Counter Notice' the rent stated in the 'notice of re-assessment' should be payable by the lessee. When the Regulation 13(2) and 13(3) are considered it is safe to deduce that the obligation of the appointment of an independent arbitrator was with the Defendant and the time period for such an act was one month. The Plaintiff is estopped from taking a different view considering their letter dated 26th November, 2013 (Annexed NS 4) where it stated as follows:

'....our client intends to refer this matter to Arbitration for determination as to the amount of the reassessment rent.

We are currently in the process of finding a suitable person who we will propose to be appointed Arbitrator and will provide you with full details as soon as this is finalized.'

[26] Even in a subsequent communication the Plaintiff had reiterated said position and stated that they had already approached few people to act as an arbitrator. (See Annexed NS6).

[27] No sooner than the 'counter notice' was served the Defendant should indicate a suitable independent arbitrator. The conduct of the Plaintiff was to delay that process by informing the Defendant that it was searching for an arbitrator for 11 months, when they ought to know the time period was only for one month.

[28] The Plaintiff had engaged a firm of solicitors early, and they had sent the 'counter notice' on behalf of their client. So the non appointment of arbitrator within the stipulated time period and its consequences would have been known to them. By the same token it would have been clear that solicitors who represent lessee could not be 'the sole arbitrator' in terms of Regulation 21. The solicitors for the Plaintiff failed to appoint an arbitrator within the stipulated time; hence they cannot now seek the intervention of the court for the reference of the matter for arbitration.

[29] In the circumstances the notice dated 6th October, 2014 was issued in accordance with the law and there was no illegality on the part of the Defendant's action. The counsel for the Plaintiff had failed to point out any ground for such a declaration sought in the affidavit in support or at the hearing.

Conclusion

[30] The clause 8 contained in the lease annexed as NS2 cannot be considered in isolation. The Regulations specifically state that they are applicable to all leases issued by the Defendant. There was no specific exclusion of the Regulation and the parties agree on the application of the same to the said lease annexed as NS2. The Rent re-assessment notice issued on 1st October, 2013 briefly stated requirements under the Regulations. The Plaintiff has not named an arbitrator and reference to arbitration in terms of Regulation 21 was not done. The Regulation 13(3) applied when there was no reference to arbitration within one month from the service of 'counter notice'. The originating summons is struck off and the cost is summarily assessed at $3,000.00 payable by the Plaintiff to the Defendant within 21 days.

Final Orders

1. The Originating Summons is stuck off.
2. The cost is summarily assessed at $3,000.00.
   

Justice Deepthi Amaratunga
High Court, Suva

Dated this 23rd day of October, 2015.