Peng Yu v Krishna [2017] FJHC 535; HBC125.2011 (14 July 2017)

IN THE HIGH COURT OF FIJI AT SUVA

CIVIL JURISDICTION

Civil Action No. HBC 125 of 2011

BETWEEN

PENG YU of Lot 7 Rifle Range Road, Vatuwaqa, Businessman.

PLAINTIFF

AND

BAL KRISHNA (f/n Venkat Swamy) of Lot 01 Caubati Road, Caubati,

Businessman.

1^ST DEFENDANT

AND

VENKAT SWAMY (f/n Venkat Subaiya) of Ba, Retired.

2^ND DEFENDANT

Counsel : Mr. I. Fa for the plaintiff.

Mr. S. Nandan with Ms. M. Pillai for the Defendants.

Date of Hearing : 27^th April, 2017

Date of Submissions : 26^th May, 2017

Date of Judgment : 14^th July, 2017

JUDGMENT

[1] The plaintiff and the 1^st and 2^nd defendants entered into a sale and purchase agreement in respect of the property at Lot 1 Caubati Road, Caubati, DP 5099, Lease No. 361841, Naitasiri whereby the plaintiff agreed to buy the said property from the defendants for a consideration of $300,000.00. At the time the matter was taken up for trial the 2^nd defendant was deceased. The only remaining defendant will, in this judgment, be referred to as the defendant.

[2] The plaintiff averred in the statement of claim that it was an implied or essential term of the agreement that the defendants would disclose to the plaintiff whether the property was legally constructed and whether it contained any legal defects at the time of signing the agreement.

[3] The basis of the plaintiff’s claim is that the basement floor of the building has been constructed without approval of the Town Council and the defendants were unable or unwilling to reconstruct the building in accordance with the approval of the council.

[4] The plaintiff filed this action claiming the following reliefs;

(a) A declaration that the plaintiff is discharged from further performance of the agreement;
(b) General damages for breach of agreement in the sum of $150,000.00;
(c) Special damages in the sum of 65.072.94; and
(d) Costs.

[5] It is the position of the defendant that there was no legal obligation under the sale and purchase agreement to make any disclosures of the nature alleged by the plaintiff and that he did attempt to get approval from the Nasinu Council. The defendant also averred that he became aware that the basement floor was constructed without approval upon being informed by the plaintiff and as per the sale and purchase agreement the property was sold on an “as is where is basis”.

[6] The defendant sought the following reliefs against the plaintiff by way of a counter-claim;

1. A declaration that the plaintiff has breached the sale and purchase agreement and therefore repudiated the same.
2. $100,000.00 as general damages for breach of the agreement.
3. $25,943.00 as special damages for breach of the agreement.

[7] The plaintiff testified at the trial that he was interested in purchasing the property which is the subject matter of this action and entered into a sale and purchase agreement (P1) with the defendants wherein he had agreed to purchase it for $300,000.00. To purchase the property the plaintiff had arranged a loan from ANZ Bank (P2). The transfer (P3) was executed between the parties but later the plaintiff found that the ground floor of the building was not in conformity with the approved plan (P5) and when the defendant offered the building for sale he did not tell him about this defect. When the plaintiff’s lawyers wrote to the defendants’ lawyers they wrote back informing the plaintiff’s lawyers that the defendants were prepared to reduce the price of the property by $20,000.00 but the plaintiff was not agreeable to that suggestion. Thereafter many correspondences were exchanged between the lawyers of the parties and on 31^st March 2011 the plaintiff’s lawyers wrote to the defendants’ lawyers requesting to give the property for $220,000.00 (P19) and in reply to the said request the defendants’ lawyers served the notice to quit (P20) on the plaintiff. It is the evidence of the plaintiff that in this process he incurred the following expenses which he claims from the defendants;

Stamp duty - $6000.00

Legal fees paid to Lateef & Lateef - $1258.00 (P22)

Legal fees to Mehboob & Associates - $75.00 (P23)

Land rent - $337.50 (P24)

Ultimate Debt Recovery Agency - $600.00 (P25)

Legal fees to Fa & Co - $2600.00 (P26)

Cost of repairs to the property - $334.00 (P27)

Cost of material purchased from Vinod Patel - $213.69 (P28)

Payments to labourers - $1000.00 (P29)

Payment made to R.C. Manubhai (No receipt) - $978.00

[8] The plaintiff testified further that he moved into the building with the intention of carrying on business and since he was not able to complete the transaction he suffered a loss of $50,000.00.

[9] The defendant testified that he agreed to sell the property to the plaintiff and handed over the premises with all the groceries. According the defendant he had lodged a new plan with the Nasinu Town Council for approval and taken carpenters to the property but the plaintiff had chased them out. It is his evidence that he was the third or the fourth owner of the property and he did not know that the bottom flat did not have the approval of the Town Council. He also said that he had a licence to carry out business in the bottom flat. When the plan was shown to him the defendant said that it was familiar to him. In the plan (P5) there is no provision for a bottom flat. The defendant also said that he had to sell the property for a lower price and claimed the difference in prices from the plaintiff.

[10] It appears from the evidence adduced by both parties that the plaintiff intended to purchase this property not only as his residence but also to conduct a business. The defendant was aware of it and that may be the reason, as he says in his evidence, why he gave all the groceries that were there in his shop to the plaintiff. The shop was in the bottom flat which was constructed without approval of the Town Council. The defendant said in his evidence that he wanted to demolish the unauthorised part of the building but the plaintiff did not allow it. The sale and purchase agreement was in respect of the entire building and not only for the top flat. Once the agreement is entered into the defendant cannot demolish part of the building and sell the remaining portion.

[11] The defendant also relied on paragraph 2.1 of the sale and purchase agreement which reads as follows;

The vendor will sell and the purchaser will purchase the said property on an “as is where is” basis for the price and upon and subject to the terms and conditions hereafter appearing.

[12] It is important at this stage to consider what is meant by “as is where is” basis. When a buyer agrees to an “as is where is” statement in the contract, they effectively lose their right to sue the seller later for misrepresentation. This statement implies that the buyer is purchasing a property that is not in perfect condition and cannot rely on the seller to disclose any or all defects. When the buyer accepts the property on “as is where is” basis the seller makes no warranties, expressed or implied.

[13] It was submitted by the learned counsel for the 1^st defendant that the relationship between the plaintiff and the defendant is a contractual one and their rights and obligations are determined within the four corners of the agreement. He also submitted that the kind of disclosure that the plaintiff is alleging as an obligation of the defendant is not provided for in the agreement; neither is there any requirement that the building has to have the town council approval and such a requirement is very specific and cannot be implied.

[14] In clause 6.1 of the agreement it is stated as follows:

The purchaser acknowledges that he has inspected the property and the premises immediately prior to the date hereof and that he has agreed to purchase the same in reliance upon such inspection and not in reliance upon the representations made by the vendors provided however that this clause shall not operate to relieve the vendors any negligent or fraudulent misrepresentations.

[15] The question is whether an illegality can be cured by including an “as is Where is” clause in a sale and purchase agreement. It is a requirement in law that every construction must be approved by the relevant local authority. Any construction without such approval is illegal. If the subject matter of a sale and purchase agreement is illegal the agreement is void ab initio.

[16] A distinction which has an important bearing upon the consequences of illegality is that the disregard of a statutory prohibition may render the contract either illegal as formed or illegal as performed. A contract is illegal as formed if its very creation is prohibited, as for example where one of the parties has neglected to take out a licence as required by statute. In such a case it is void ab initio. It is a complete nullity under which neither party can acquire rights whether there is an intention to break the law or not. (Cheshire, Fifoot and Furmston’s Law of Contract, 16^th Edition, 2012 at page 454).

[17] Section 7(1) of the Town Planning Act 1979 provides as follows;

Subject to the provisions of this section, the permission of the local authority shall be required in respect of any development of land carried out within a town planning area during the period before a scheme affecting such area has been finally approved.

[18] The learned counsel for the defendant submitted that it is common that the properties are sold without approvals and if this was to be a condition of sale then it had to be specifically included in the agreement. People may sell and buy buildings constructed without approval but it does not mean that such transactions have the effect of making an illegal construction legal. This is a term implied by the statue and it need not be included in the agreement specifically.

[19] If the defendant had licence to carry on business in the bottom flat he could have easily tendered a copy to the court at the trial or called a witness from the relevant authority to testify in that regard which he failed to do. There is no reason for the licensing authority to grant licence to one person and refuse licence to another person in respect of the same premises. Therefore, the evidence of the defendant that he had licence to carry on business in these premises and also that he came to know that the bottom flat of the building did not have approval of the Town Council only when the plaintiff informed him about it, cannot be true.

[20] For these reasons the court holds that the sale and purchase agreement entered into between the plaintiff and the defendant has no force or avail in law and unenforceable. It is to be noted that the plaintiff also had the responsibility to inquire into the plaintiff’s title to the land and the legality of the construction before entering into the sale and purchase agreement. However, in my view the plaintiff is entitled to recover the expenses incurred by him in making arrangements to purchase this property.

[21] In the statement of claim the plaintiff has claimed $65,000.00 as special damages. The special damages must be pleaded and proved. The plaintiff has established that he has incurred the expenses stated in paragraph 7 above totalling $13.396.19 out of which the defendant has already refunded $6000.00 (Stamp Duty). Although the plaintiff in his evidence said that he spent $1500.00 as travelling expenses etc. he has failed to substantiate that claim. Therefore, the plaintiff is entitled to recover as special damages $7396.19 only.

[22] The plaintiff also claimed $50,000.00 as general damages for loss of income for not being able to carry on his business in the building because the construction illegal. The learned counsel for the plaintiff submitted that although the plaintiff has failed to prove general damages he is entitled to recover same. The property was handed over to the plaintiff before the transfer was completed. The defendant cannot be held responsible for the damage if any, caused to the plaintiff for not being able to conduct his business before the day on which the property was due to be handed over to him. It is also pertinent to note that he had in fact been carrying on business in these premises until he was served with notice to quit. On the other hand the plaintiff must establish how this damage was caused and the extent of the damages alleged to have been caused by the defendant for the court to assess damages. Except for the bare testimony of the plaintiff that he had to close his business because the Town Council refused to grant licence there is no other evidence adduced by the plaintiff on damages. In view of the above it is my view that the plaintiff is not entitled to general damages as claimed in the statement of claim.

[23] The sale and purchase agreement could not be satisfied for no fault of the plaintiff but for the fault of the defendant. The defendant is therefore, not entitled any of the reliefs prayed for in the statement of defence.

[24] For the reasons aforementioned the court makes the following orders.

ORDERS

1. The defendant is ordered to pay the plaintiff $7396.19.
2. The claim of the defendant is dismissed.
3. The defendant is also ordered to pay the plaintiff $2500.00 as costs of the action.
   

Lyone Seneviratne

JUDGE

14^th July, 2017