Ramdin v Singh [1977] FJLawRp 15; [1977] 23 FLR 127 (22 July 1977)

[1977] 23 FLR 127

IN THE COURT OF APPEAL OF FIJI

RAMDIN

v

PYARA SINGH

[COURT OF APPEAL, 1977 (Gould V. P., Marsack J.A., Henry J. A.)

14^th, 22^nd July]

[Civil Jurisdiction]

Cct - validity -ity - transfer of possession of Crown land without consent of Director of La whether loan agreement made in consideration of such transtransfer tainted with illegality - whether lender able to recover repayment of loan on a promissory note - Crown Lands Ordinance (Cap. 113) ss.13 (l), 32.

Crown land - tran transfer of possession without consent of Director of Lands - whether loan agreement made in consideration of such transfer tainted withgality - whether monies lent recoverable - Crown Lands Ordi Ordinance (Cap. 113) ss. 13(1), 32.

After a written contwast was signed by the parties, but prior to the consent being obtained of the Director of Lands to the transfer, the appellant d the respondent $1,000.00 in consideration of his being allowed into possession. At a late later date the appellant paid off the respondent's mortgage to the Bank and received the Crown Lease.

Held: 1. Delive y of possession of land without the consent of the Director of Lands rendered the agreement for sale null and void, and the purchase null and void and illegal.an transaction supporting such delivery was tainted with ilth illegality and could not, therefore, be enforced.

2. Diffeconsiderations ions applied to the second payment which was made 12 months after the first. There was no evidence that this paymas to be applied towards the purchase price of the land, and, therefore, it was recoverablerable.

Cases referred to:
;#160;

Hemns. v. Wheeler [1948] 2 K.B. 61; 64 T.L.R. 236..

Harman Singh v. Bawa Singh [1958/9] F.L.R. 31

Chalmers v. Pardoe&#1963] 3 All E.R. 552; [1963]1963] 1 W.L.R. 677.

Alexander v. Rayson [1936] 1 K.B. 169;&#a href=href="http://www.pacrg.vu/cgi-bin/LawCite?cit=%5b1935%5d%20All%20ER%20185" titl title="View LawCiteRecord">[1935] All E.R. 185.

Jai Kissun v. Sumintra 16 F.L.R. 165.

Edli>Edler v. Aue. Auerback [1949] 2 All E.R. 692; [ 1950] 1 K.B.359.

Appeal fre judgment of t of the Supreme Court allowing an appeal from a decision of the Magistrate's Court holding that two loans wet taiwith illegality.

Ramrakamrakha for the lant.

<

H. A. Marquardt - Gray for the resnt.
The following jntsments were read (22nd July 1977)-

MARSACK J.A.#160
Thian apfrom a judgment oent of the Supreme Court sitting at Suva, delivered on the 12th January 19ry 1977, allowing an appeal, from a decision ofMagis's Court at Labasa dated 30th June 1976. Under ther the provisions of Section 12 (i) (d) ofd) of the Court of Appeal Ordinance, the present appeal is limited to questions of law only.

elevant facts may be shbe shortly stated. The appellant was the lessee, under Crown Lease No. 92059, of approximately 40 acres of land at Dreketi, Macuata. On the 28th July, 1971, the appellan the respondent entered intd into a written agreement for sale and purchase whereby the appellant agreed to sell and the respondent to purchase the whole of the appellant's interest under Crown Lease No. 92059, together with all improvements thereon, for the sum of $4,400. The agreement was made subject to the consent of the Lands Department, and, provided that of the purchase money, $2,000, should be paid upon receipt of the consent of the Director of Lands to the transfer, and the balance secured by promissory note payable 12 months “from the date of the implementation of the transfer transaction.” One clause of the agreement provided that the purchaser - the respondent - would allow the vendor - the appellant - to reside on the lands concerned without payment of rent until the 31st December 1971. The consent of the Director of Lands to the transfer was never obtained.

Two sums of money were paid by the respondent: $1,000 on the 22nd January 1972 to the appellant personally, and $997 to the Bank of New Zealand for the credit of the appellant on the 9th February 1973. The finding of the magistrate as to the payment of the $1,000, was referred to in the Supreme Court judgment in these terms:

&;The respondent want was in financial difficulties at the time and anxious for the sale to be expedited. In January 1972 the respondent told the appellant he nemoney and wanted to vacate the land. The magistrate found aund as a fact that the appellant then advised the respondent he could not proceed with the sale until consent had been obtained but that he would lend the respondent $1,000 free of interest repayable on demand. The $1,000 was advanced and the respondent gave the appellant the promissory note dated 22nd January 1972. The magistrate was of the view that at the same time as the loan was made the parties agreed that the respondent would vacate the land and the appellant would go into possession. He went into possession about 10 days later.”

With regard to the payment of $997, this sum was owing to the Bank of New Zealand by the appellant and was secured by a mortgage in favour of the Bank orown Lease No. 92059. The Bank was pressing for payment; and at the request of the appellanellant the respondent paid this money to the Bank, whereupon the Bank Manager handed over the Crown lease to the respondent.

the respondent enteredtered into possession, in late January 1972, he cultivated the crops on the land, received the proceeds from the sale of the crops, builtuse on the land and planted a number of pine trees. He rema remained in possession until the month of April 1974.

This pt appeal concernscerns the two sums of $1,000 and $997. In the Magistrate's Court, the respondent sued the appellant for repayme these two sums; the learned magistrate held that the respondent could not recover, on the the grounds that his claim was based on an illegal transaction. On the appeal to the Supreme Court the learned judge held that the two payments in issue were not tainted by illegality; that they were loans and entirely separate transactions from the land dealing. His finding was expressed in these words:

&#8220y view neitheeither of the two sums were tainted by illegality. As the magistrate stated in his judgment the appellant when making the loan of $1,000 to the respondent specifically stated he could not proceed with the sale until consent was obtained but he would lend the respondent $1,000 on agreed terms. The loan was an entirely separate transaction from the land dealing.”

It is against that judgment of the Supreme Court that this present appeal is brought.

There was only one ground put forward in the notice of appeal. This reads:

&#82e learned trialtrial jought not to have disturbedurbed the findings of the learned trial magistrate that the transaction between the parties was illegal.”#160;
Counsel clearly recognised that this Court cannot nnot on this appeal overrule the findings of fact made in the Court below; but, as was stated in Hv. Wheeler

8220;In my judgment pont possession would not have changed hands if the loan had not been made. In that event the loan, if not il in itself, in that one of its objects was to achieve an illegal purpose was certainly taiy tainted by the Illegal Land Agreement itself.”

“The loa not not have been made if the appellant was not purchasing the land nor possession given by the respondent, but the facts are clear that the parties intended the $1,000 to be a simple loan and not part payment of the purchase price of the land, and to evidence the separate nature of the loan transaction a promissory note was given by the respondent to the appellant. It was to be torn up if consent to the sale was obtained. In other words the $1,000 was on consent being obtained to be credited to the purchase price of the land.”

As I see it, the conclusions reached by the magistrate and by the learned judge on appeal can properly be considered to be inferences from the established facts. As was said in Hv. Wh (supra),&#160 this Court istled to exam exam examine, as a matter of law, whether these are possible inferences from toved facts.

With regard to thment oent of $997, the learned judge held that that this sum has been paid to the Bank of New Zealand by the respondent at the request of the appellant and that there was no evidence upon which the trial magistrate could have found that this payment was on account of the purchase price of the land. The mere delivery of the lease by the Bank Manager to the respondent did not, the judge said, establish that the delivery constituted an equitable mortgage; and I can see no reason in law or in fact for the magistrate’s finding that it did. The learned judge’s finding appears in his judgment in these words:

“gards the $9he $997, in his Statement of Defence the respondent denied all knowledge of this payment. He did not contend that this payment was on account of the purchase price of the land which on the facts would have made this sum irrecoverable. There was no evidence on which the trial magistrate could have found that his payment of $997 was on account of the purchase price of land. It appears the magistrate assumed payment was on account of the purchase price as there are no other grounds for holding that this payment was tainted by the illegal land sale transaction.”

The learned judgeeeded eded to hold that the sum of $997 was properly recoverable by the appellant against the respondent, and gave judgment accoly. This finding by the learned judge must, in my opinion, stand. The appellant had for over over twelve months been in possession of the land, and there can be no suggestion that this payment was in anyway part of the consideration for the granting of possession. There is nothing in the evidence to show, or to justify the conclusion, that it was paid as part of the purchase price. It was a repayable loan, as I see it, and was no part of an unlawful contract.

With refe to the paymenayment of $1,000 it must first be determined if the transaction between the parties was an illegal one; and if not illegal ab initio,the tof ilof illegality attach to it later? It is common gron ground that the Crown Lease held by the appellant was a “protecte21; lease under the provisions of the Crown Lands Ordinance. Clause 13 (1) of that Ordinancinance provides that in the case of a protected lease:

<220;It shall not be l be lawful for the lessee thereon to alienate or deal with the land comprised in the lease or any part thereon, whether by sale, transfer or sub - lease, or in any other manner whatsoever .... without the written consent of the Director of Lands first had and obtained.”

As has already held by d by this Court in, for example. Harnam Singh and an v. B v. Bawa Singh, [1958/59] F.L.R. 31, the execution by the parties of an agreement ale and purchase, made subject to the consent of the Directirector of Lands, is not in itself a “dealing in land”. In normal circumstances, it becomes a dealing in land only when the consent of the Director of Lands is notified. There are, however, other circumstances which may constitute a dealing in land. For example, in Chalmers v. Pardo0;((P.C.) [1963] 3 All E.R. 352, a grant by the lessee to another person to enter on the lands and carry out certain work - such as the erection of a bug - thereon constituted “a dealing in land”, in;, in that it was a licence to occupy coupled with possession. It is quite clear in the present case that in January 1972, the respondent, by agreement with the appellant, entered into possession of the land, worked the ground and erected a house. This, in accordance with the doctrine laid down in Chalmers v. Pardoe&c160;constituted a “dealing in land” and was therefore unlawful under Section 13 of the Crown Lands Ordinance. For teason, the respondent would be unable to recover from the appellant the value of any improvmprovements put by him on the land, in the same way that Chalmers<160;was held nold not entitled to recover the cost of the dwelling house and accessory buildings which he had erected on the land in that case. It is clear that, in this case the granting of the licence to occupy, coupled with possession, in January 1972, constituted a dealing in land which was unlawful under Section 13.

The crucial question,y n my view, is whether or not the payment of $1,000 was tainted with that illegality.

Tis one aspect of the mthe m to which, in my respectful opinion, the learned judge has not given full consideration. Thn. The magistrate expressed himself as satd that when the loan of $1,000 was made, and the promissoryssory note signed, “it was agreed at the same time that the defendant would vacate the land and that the plaintiff take possession”. The learned judge in his judgment says:

0;The magistrate cote considered the loan would not have been made if possession of the land had not changed hands. The sale andhase agreement followed by the taking of possession by the appellant of the land without thut the Director of Lands’ consent was an illegal transaction. The magistrate held that the loan of $1,000 was on the facts tainted by the illegal land transaction and was irrecoverable.”

In other words, the maaistrate's finding was that the making of the loan represented the consideration, moving from the appellant to the respondent, for the grant of possession to the appellant of the lands concernhe authorities cited establstablish beyond question that this grant of possession was in the circumstances an unlawful transaction. The question requiring determination by this Court is whether the loan transaction was thereby rendered unlawful to the extent that the appellant cannot recover on the promissory note. InAlexander v. Rayson [1936] B. 169 the Court of t of Appeal affirmed the principle that where it appears that the subject matter of an agreement is intended to be used for an unlawful purthe Court will refuse to enforce it. In the present case itse it is clear that the making of the loan of $1,000 constituted a transaction entered into for an unlawful purpose, in that the unlawful entry into possession would not have been granted if the loan had not been made. As was stated on Chitty on Contracts

“Neither party can sue on a contract if both knew that it necessarily involves the commission of an act which, to their knowledge, is le objeable, that is ills illegal, immoral, or otherwise against public policy.”
Theract or agreemereement between to parties as to this particular transaction might, in my view, be shortly set out in these terms: “in consideration of theting of a loan for $1,000, repayable on demand, by the appe appellant to the respondent, the respondent agrees to allow the appellant to enter into and take possession of the respondent’s Crown leasehold land”. Expressed in these words it is clear that both parties knew that what was contemplated between them was the commission of a unlawful act, namely the entry into possession of Crown lands without the consent of the Director of Lands. Therefore, in accordance with the principle set out in the passage cited from Chitty otracts, neit neither party can sue on it. Accordingly, though the matter is one of some difficulty, I would hold that the transaction is tainted with illegality, and the appellant cannot recover the moneys which he paid out in respect of that unlawful contract.

In the result ld allow llow the appeal with regard to the stmt of $1,000 and reduce the judgment of the Supreme Court in respondent's favour to $997. As to costs, I would allow appellant one - half of his tcosts of the appeal, and thnd the respondent (appellant in the Supreme Court) $35 as his costs in the Supreme Court.

V.P.
<160;
There is ed for meor me to repeat the facts, which are set out in the judgment of Marsack J. A. I aghat the appeal, so far as it relates to the $1,000, lent upon the promissory note of the 22he 22nd January 1972, must be allowed. The finding, common to both Magistrate's Court and Supreme Court judgments, was that this loan would not have been made if it had not been agreed that possession of the land would be given. It is probable that the agreement for sale and purchase of the Crown Lease contemplated that possession would only be given when the consent of the Director of Lands was forthcoming, as before that such a step would render the agreement unlawful. But whether or not that is so, it is clear that the arrangement actually to give and take possession was bound up with and dependent upon the otherwise lawful transaction of the loan of the $1,000. The making and acceptance of the loan was in consideration of the giving and taking of possession.
Jai Kissun Singh v.ntra [16 FLR 165] a dec of this this Court. The loan transaction could be said to have induced this illegal contract and to be tainted on that ground. More simply, I think, the loan transaction enabled the respondenperform the illegal act of t of becoming a trespasser on Crown land, both parties being privy to this. Under section 32 of the Crown Lands Ordinance (Cap. 113) this is an offence. So far as relevant, the section reads:

“Any person not clot claiming bona fide under a subsisting lease or licence or otherwise under any Ordinance relating to the occupation of Crown land whfound occupying any Crown land or is found residing or erec erecting any hut or building, depasturing stock or cutting any timber grown there, or clearing, digging up, enclosing or cultivating any part thereof, shall be liable to immediate eviction and shall be guilty of an offence against this Ordinance.”
in i>in pari to; the; there was therefore no question of claiming bona fide under a subsisting lease.

The loan transaction was entered into to enable this state of affairs to be reached and, being tainted with the illegality, cannot be enforced by the respondent. As was said by Devlin J. (as he then was) in Edler v. ack [160;[1949] 2 All E.R. 695 695 –

&#82 is well settleettled that an agreement may be unenforceable either because on the facit itot be performed without breaking the law, or beca because, although capable of being perforerformed legally, it was made with the object of breaking the law.”

In my opinion the learned judge in the Supreme Court erred in law in this matter and the appeal should be allowed on this point.

As to the othersaction,tion, the advance of $997 by way of payment off of tgage to the bank, differenferent considerations arise. The learned magistrate found from the evidence that this transaction was alsoted by the illegal agreemeneement for sale and purchase and further, that the retention by the respondent of the lease constituted an equitable mortgage which without consent, was an illegal act in itself. In the Supreme Court the learned judge held that the only way in which the magistrate could have held that this advance of $997 was tainted by the land transaction was by finding that the money was to be applied towards the purchase price of the land. I would agree with the learned judge's finding that there was no evidence that such was the case.

As to the eqle mortgagetgage question, the learned judge also disagreed with the magistrate, whose opinion appears to have been based on the appellant's admission that lie was holding the lease document aurity. The learned judge foge found that there was no evidence that the parties agreed that the lease should be so deposited as security and this is undoubtedly correct. The respondent claimed to have been given the lease by the bank manager and the evidence as a whole is confused and the circumstances equivocal. The Supreme Court was sitting as an appellate court both on fact and on law whereas on this second appeal we are limited to questions of law. I am unable to say from my perusal of the evidence, that it contained no material which supported the learned judge’s finding, and it is not therefore a case for interference by this court.

As all membf the court ourt are agreed as to the orders to be made there will be the order as to judgment and costs proposed in the judgment of Marsack J. A.

HEJ A.
#160;
I have rea judgmendgment of the other members of the Court. I agree with the findings made and the reasons given is sufficient. I agree that an order be made as propin thgment of Marsack sack J. A.

Appeal allowed witd with regard to first loan of $1,000.00; judgment of Supreme Court reduced to $997.00.

Gould ould V.P.
Marsack J.A.
Henry J.A.