Reggiero v Kashiwa [1998] FJSC 8; CBV0005U.1997S (20 March 1998)

Fiji Islands - Reggiero v Kashiwa - Pacific Law Materials

IN THE SUPREME COURT OF FIJI

AT SUVA

ON APPEAL FROM THE FIJI COURT OF APPEAL

CIVIL APPEAL NO. CBV0005 OF 1997S
(Fiji Court of Appeal Civil Appeal No. ABU0002 of 1996)

:

GUISEPPE REGGIERO
Appellant

AND:

NABUYOSHI KASHIWA
Respondent

Coram: The Hon. Sioci Tuivaga, President

The Rt. Hon. Lord Cooke of Thorndon
The Hon. Sir Anthony Mason

Hearing: 11 March 1998
Jnt: 20 March 1998

Counsel: Mr. A. Patel for the Appellant
Mr. R.A. Smith for the the Respondent

JUDGMENT OF THE COURT

These proceedings are between Nabuyoshi Kashiwa, a Japanese businessman resident in Japan (the purchaser), and Guiseppe Reggiero, an Italian businessman resident in Fiji (the vendor). The proceedings arise out of an agreement between the parties for the sale and purchase of a leasehold interest in two parcels of land on Viti Levu on either side of the mouth of the Vuda River. Area A has an estimated area of 16 acres 2 roods (less a house site), area B an estimated area of 15 acres (including, according to a finding of the trial Judge, some land which the vendor had reclaimed).

The agreement was rescinded or repudiated by the purchaser in the circumstances hereinafter mentioned. The purchaser brought proceedings against the vendor claiming among other things that the sum of 10 million Japanese yen paid by the purchaser be refunded by the vendor. In the High Court the action was dismissed by Lyons J., in a decision delivered on 17 November 1995, on the ground that in his opinion the agreement was illegal as infringing section 13(1) of the State Lands Act, formerly the Crown Lands Act (Cap. 132 Ed. 1978). On appeal the Court of Appeal (Sir Moti Tikaram P., Casey and Thompson JJ.A.) reversed the decision by a judgment delivered on 16 May 1997. They held that what occurred had not amounted to a ‘dealing’ is breach of section 13(1), that the purchaser was entitled to rescind by reason of breach by the vendor going to the root of the contract, and that the purchaser should have judgment for the amount in Fiji dollars equivalent to 10 million yen, calculated at the middle rate of exchange on which yen could be bought in Fiji on the date of their judgment. The vendor now appeals to this Court.

It is common ground that both parcels are State (formerly Crown) land and that the lease of area A about to be mentioned and the proposed lease of area B are protected leases within the meaning of that Act. The land comprising area A plus the house site was the subject of a registered agricultural lease from the Director of Lands to Raj Naicker for 22 years 9 months from 1 April 1973; the latter died in 1988 and his widow and administratrix had become the registered proprietor of the lease by transmission. On 14 August 1991 she had granted the vendor an option to purchase the leasehold land (except the house site) within three months. As regards area B, the vendor had applied for a lease, and by notice dated 26 September 1991 the Director of Lands had approved the grant to him of a lease of an estimated area of 6.1514 hectares, subject to survey, for 99 years from 5 February 1988. The purpose was described in the approval notice as ‘special lease - recreation.’

The vendor appointed either Ichoro Yagi of Plaza Homes Limited, a real estate broker, or Mr Yagi’s company as his agent for the sale of area A. Nothing turns on whether the appointee was strictly Mr Yagi or his company. Mr Yagi approached the purchaser in Japan. The purchaser came to Fiji and as a result of a site inspection expressed interest in acquiring both areas A and B. An agreement for the sale and purchase of leasehold interests in both areas, written in Japanese, was signed on 23 November 1991. It was between TAC Proprietary Limited as purchaser and Reggiero Investments Limited as vendor. But there was a later agreement in English, dated 15 December 1991, between the vendor and the purchaser as individuals. This has been treated by the parties as superseding the earlier agreement. Drawn up without legal assistance, it contains many obscurities. But the trial Judge held that it was not void for uncertainty, and on that point his decision has not been challenged.

The agreement of 15 December 1991 (to which we will usually refer henceforth as the agreement) was for the sale and purchase of a total area of approximately 32 acres, of which further details were given, described as ‘99-year lease property by Crown Lease (Educational and Recreational use).’ In effect, therefore, the vendor was contracting to sell areas A and B leased from the State for 99 years and available for educational and recreational use. This would involve among other necessary steps a major extension of the term of the State lease and a change in the use permitted thereunder, and implementation of the approval of the lease of area B. One composite lease of both areas was envisaged. The approval by the Director of Lands of the purchaser would also obviously have been needed. Other requirements would be surveys, lawful subdivision of the land in the existing State lease (so as to exclude the house site from the sale), and town planning approval.

Various steps were taken to enable the agreement to be carried out or in performance of the agreement. We will refer to some of them more particularly later. At this stage we mention that of the total selling price of F$630,000 an initial payment of F$100,000 was to be made before 10 December 1991. That date was in fact before the date of the agreement; it is possibly one of the provisions carried over from the November agreement in Japanese. Immediately after specifying 10 December 1991 the December agreement added ‘and at the time of the application for provisional registration’. Subject to possible variations under an ‘options method’, the balance of the purchase price, F$530,000, was to be paid before 31 December 1992 at the time of the application for plenary registration. These references to provisional registration and plenary registration, expressions unknown in the law of Fiji, are among the obscurities of the agreement.

At all events, on 10 December 1991 the purchaser had remitted to Mr Yagi’s bank account in Lautoka Y10,000,000, which at that date converted to F$112,447.99. Mr Yagi withdrew forthwith F$112,000 and on the same day (10 December) the vendor issued to the purchaser a receipt in the name of the vendor’s company for ‘Y10,000,000, F$100,000'. Then on 11 December 1991 the vendor, for a consideration of F$50,000, was granted by the administratrix an extension of the option over area A for one year one month after its expiry. It is a reasonable inference that the vendor used some of the first instalment received from the vendor to make the payment for the extension of the option.

Early in March 1992 the purchaser came to Fiji, and after speaking to the purchaser he orally renounced the agreement on 7 March. He gave evidence of several reasons for this, one being that there was no provisional registration. He asked for return of the 10 million yen but the vendor refused, maintaining that the agreement was still in force.

After correspondence and discussions the purchaser’s action was commenced in November 1992. There is an amended statement of claim dated 3 October 1995. Therein the purchaser claimed in effect that the agreement was void for uncertainty, and further or in the alternative that the vendor was in breach in failing to register as agreed upon payment of 10 million yen and failing to provide a certain guide book. Fraudulent misrepresentations and other fraudulent conduct by the vendor were also pleaded. Those allegations of fraud and misrepresentation were negatived by the trial Judge. They are no longer in issue. The purchaser claimed among other things a refund of his payment, damages, and a declaration that he was entitled to rescind. A statement of defence dated 20 January 1993 (to the original statement of claim) denies the purchaser’s main allegations. It includes a pleading that it was clearly understood by the parties that a deposit of F$100,000 would be paid and a caveat lodged against the properties or notice of sale be given to the Director of Lands.

Section 13(1) of the State Lands Act provides -

"13.-(1) Whenever in any lease under this Act there has been inserted the following clause:-

"This lease is a protected lease under the provisions of the Crown Lands Act" (hereinafter called a protected lease) it shall not be lawful for the lessee thereof to alienate or deal with the land comprised in the lease of any part thereof, whether by sale, transfer or sublease or in any other manner whatsoever, nor to mortgage, charge or pledge the same, without the written consent of the Director of Lands first had and obtained, nor, except at the suit or with the written consent of the Director of Lands, shall any such lease be dealt with by any court of law or under the process of any court of law, nor, without such consent as aforesaid, shall the Registrar of Titles register any caveat affecting such lease.

Any sale, transfer, sublease, assignment, mortgage or other alienation or dealing effected without such consent shall be null and void."

Provisions such as section 13(1) are not construed so as to prevent the making of a contract by the lessee to alienate subject to the written consent of the Director of Lands first had and obtained. When a contract is so made there are binding contractual obligations on the parties, or such of the parties as is appropriate, to take all reasonable steps to obtain the Director’s consent. In the absence of an express time limit, such steps must be taken within a reasonable time. If such steps are not taken within a reasonable time, the party not in default may rescind the contract and recover any payment he has made under the contract. If the Director’s consent (or the consent of the Minister on appeal under section 13(3) of the State Lands Act) is not obtained within a reasonable time, the contract will be at an end and monies paid under it may likewise be recovered. The foregoing is a brief statement of fairly elementary law; for present purposes it need not be expanded, except in one respect as follows.

In Chalmers v Pardoe [1963] 3 All E.R. 552 the appellant had an arrangement with a lessee of land under the Native Land Trust Ordinance (Cap. 104) which in section 12(1) contained provisions materially similar to those of section 13(1) of the State Lands Act. Under the arrangement the appellant could build on part of the lessee’s land provided that the appellant obtained the consent of the Native Land Trust Board. He put up six buildings on the land but did not obtain the Board’s consent. He claimed an equitable charge or lien on the land for the cost of the buildings. The Privy Council held that, treating the arrangement as one for a licence to occupy coupled with possession, when this purpose was carried into effect by the erection of buildings a ‘dealing’ with the land took place without prior consent and therefore unlawfully. Hence equity would not lend its aid to the appellant by granting him a charge or lien. Their Lordships accepted that it would be an absurdity to say that a mere agreement to deal with land would be contrary to section 12, for there must necessarily be prior agreement in all such cases, and otherwise there would be nothing for which to seek the Board’s consent. In Chalmers v Pardoe, however, there was not merely agreement, but, on one side, full performance; and the Board found itself with six new buildings on the land without having the opportunity of considering beforehand whether this was desirable. See the passage in the judgment delivered by Sir Terence Donovan at page 557 of the report we have cited.

Jai Kissan Singh v. Sumintra (1970) 16 F.L.R. 165 is an essentially similar case.

We think that these authorities show that the relevant section is infringed if, without the prior consent of the Director of Lands or the Board, as the case may be, action contrary to the policy of the section is taken in performance of an agreement. Such contrary action, coupled with the agreement itself, constitutes a prohibited ‘dealing’. Denning v Edwardes [1961] A.C. 245, cited by Gould V.-P. in Jai Kissun Singh at 169-70, is another Privy Council decision supporting, in our view, the proposition that we have stated.

In the two authorities last mentioned the word ‘inchoate’ is used to describe an agreement which remains unperformed pending the necessary consent. That word should not be understood as suggesting that there is not a binding agreement, albeit subject to the consent.

Another important authority on section 12 of the Native Land Trust Ordinance - and hence on section 13 of the State Lands Act - is the judgment of the Privy Council delivered by Lord Wilberforce in Kulamma v Manadan [1968] A.C. 1062. For some reason, although a Fijian case, this authority tends to be overlooked in Fiji, as was noticed also in the later Privy Council case of Maharaj v Chand [1986] A.C. 898.

Kulamma was concerned with a share farming agreement whereunder the farmer was to farm native land which ‘the owner’ held as lessee from the Colonial Sugar Refining Company Limited. The agreement was to enure until all monies owed by the owner to another person were paid. By clause 4.A,

‘Upon payment of all moneys owing by the owner to Murtuza Hussain Shah the owner will apply for and use his best endeavours to obtain the consent of the Colonial Sugar Refining Company Limited to the transfer of one half interest in the said farm No. 581 to the farmer.’

Nothing was said in the agreement about the consent of the Native Land Trust Board. The Privy Council, after pointing out after that licences include a considerable range of transactions, held that this licence to farm was of a purely contractual and personal character, which, even in the most general sense, could not be said to amount to a dealing with the land.

We regard that part of the decision as consistent with the view that the policy of the Act is to be borne in mind in determining whether what has occurred in any given case amounts to prohibited dealing. So, too, in Maharaj a purely personal right arising from promissory on equitable estoppel, whereby a separated de facto wife was entitled as against the de facto husband to reside permanently on land, was held outside the purview of section 12: see [1986] A.C. at 906.

Further, as to clause 4.A in Kulamma their Lordships said at 1070 -

‘... as regards the possible future alienation which might take place after the money owing had been paid and the consent of the Colonial Sugar Refining Company Limited had been obtained, there is nothing in the clause which leads to the conclusion that, prior to such alienation, the consent of the board would not be sought. The parties should be presumed to contemplate a legal cause of proceeding rather than an illegal.’

That observation is very much in point in the present case. If prepared by a competent lawyer, the agreement of the parties would have been expressed to be subject to the consent of the Director of Lands and there might have been express provisions about who has to make the application and times. As it is, the parties left all this largely to implication. But there is significance in the reference to the application for provisional registration, at the time of which the first payment was to be made by the purchaser, followed by the reference to the application for plenary registration, at the time of which the balance of the purchase price was to be paid. This suggests that provisional registration was a form of registration which would protect the purchaser’s position pending any necessary preliminaries and satisfaction of any conditions laid down by the Fijian government authorities for a transfer to him. Plenary registration would be the formal transfer of a registered title.

The purchaser is recorded as saying in evidence:

‘I understood by provisional registration that to secure the proprietor of land as the first person with priority to buy, that there was some documentary evidence to secure this priority. This was the method often used in Japan to protect a buyer against a double sale.’

As against time that, the vendor is recorded as saying:

‘I do not know what provisional registration means ... We agreed to leave the clause in because there was nothing to register. Nobody knew which it was about. The plaintiff wanted it in. I agreed.’

Echoing that approach, the vendor’s counsel, Mr Patel, submitted in this Court that the reference to provisional registration in the agreement meant nothing.

The trial Judge appears to have refrained from expressing a definite opinion on the meaning of provisional and plenary registration, being content at one stage in his judgment to treat them as not relevant to an essential term of the contract. Later he referred to the purchaser’s evidence that provisional registration was similar to that which in Fiji would be called a caveat. He then found that by paying the 10 million yen the purchaser had waived the requirement. There is a dispute about the notes of evidence bearing on this point, but the Court of Appeal, after reviewing the relevant passages as a whole, concluded that the purchaser meant that he had made the payment on Mr Yagi’s assurance that provisional registration was being applied for ‘and all was okay’. The Court of Appeal considered that this was not evidence of waiver. We can only agree.

In our opinion the vendor was at fault in treating the term regarding provisional registration as of no significance. Whatever its precise meaning, it was intended as a safeguard for the purchaser. Especially from the point of view of a Japanese citizen, resident in Japan, investing in a project in Fiji, such protections as were available to secure his interest by way of official registrations or approvals, were obviously required. Against that background, and in the light also of the facts that the vendor lived in Fiji and had made the initial approach leading to the agreement, the natural inference was that it was the vendor’s obligation to take the necessary steps in Fiji.

Indeed the vendor accepted in evidence that it was his obligation to get the consent of the Lands Department and subdivisional approval. There are provisions in the agreement confirming this interpretation, including ‘Mr Reggiero shall undertake the necessary negotiations with the Authorities concerned with buyers expenses.’ The last three words we understand to mean at the cost of the purchaser. There is an earlier provision that the seller will bear the expenses of various legal procedures ‘transfer of ownership, registration, etc.’ except the remuneration of a solicitor. For present purposes we need not decide whether the provisions are in conflict as to expenses. The important point is that the obligation to progress the matter by the necessary legal steps fell on the vendor, although the purchaser was bound to provide whatever co-operation was reasonably needed.

As to caveats it is no answer to say, as was suggested before us on behalf of the vendor, that because of the state of the titles neither block could be caveated on the purchaser’s behalf. It was said that the leasehold title to area A was registered in the name of the administratrix and that the vendor had no registered title to area B. Moreover we note that the prior approval of the Director of Lands was required for any caveat against a protected lease : see the last limb of the main paragraph of section 13(1). It appears from the vendor’s evidence nonetheless that he may have placed - or taken steps to place - a caveat on the title covering area A, but apparently only to protect his option and not in the name of the purchaser. If it was impossible to place on the areas within a reasonable time caveats in the name of the purchaser, provisional registration had simply proved unavailable and the purchaser was entitled to rescind as he did and recover his deposit. Three months after the payment of the 10 million yen on December was in the circumstances clearly more than a reasonable time. On this key issue in the case we agree with the conclusion of the Court of Appeal.

In argument in this Court Mr Smith for the purchaser put forward a different interpretation of provisional registration. He said that it meant that recording of the purchaser’s interest with the Director of Lands which occurs on a lessee’s obtaining the Director’s approval of the lessee’s intended dealing with the land. Although there is no precise evidence of departmental practice, we accept that in principle it was the duty of the vendor to seek the Director’s approval of a transfer to the purchaser. We think that this is better seen, however, as an application of the vendor’s general obligation to carry the transaction forward by applying for all necessary approvals. The duty to caveat on behalf of the purchaser, of which the purchaser spoke in evidence and which was the interpretation put forward for him in the Courts below, was another aspect of the general obligation.

It is to be observed furthermore that, although the purchaser did apply to the Director of Lands by letter dated 9 January 1992, it was for consent for him to purchase area A only. And the letter represented that ‘the development will be carried out in association with T.A.C. Fiji Limited (Japanese company registered in Fiji).’ This uncandidly suggests a joint venture rather than an on-sale to the purchaser. The Director replied on 29 January 1992 indicating that he had no objection to the proposal, subject to a considerable list of conditions and qualifications. His letter contains nothing which could pass muster as approval in principle to an on-sale to the purchaser. Similarly, when Harrison Grierson Consultants Limited applied to the Director of Town and Country Planning for rezoning, as they did on 12 February 1992, and in their application at the same time for subdivisional approval, the applications were confined to land in the existing State lease and it was stated that Mr Reggiero was the proposed developer.

The limited nature of the applications to which we have just referred compounded the seriousness of the absence of any caveats on behalf of the purchaser. The fact is that up to the time when he rescinded in March virtually nothing had been done by the vendor to protect him. He was justified in bringing an end to the agreement and is entitled to his money back, subject to the issue of illegality.

In the history of this case the issue of illegality has been allowed undeserved prominence. There was no illegality in paying the 10 million yen, which would be recoverable if provisional registration was not obtained in reasonable time. If there was any illegality on the part of the vendor in using part of this sum to secure an extension of his option - and certainly we do not say that there was, the question not having been argued before us - the purchaser was not implicated in it. As we have already indicated, the parties are to be treated as having contemplated a legal course of proceeding, rather than an illegal. Such steps as were taken by the vendor, or on his instructions, towards obtaining the approval of the Director of Lands and planning and subdivisional approval were, so far as they went, part performance of the vendor’s obligations to take all reasonable steps to achieve a lawful transfer for the purposes of the development intended by the purchaser. None of them violated the policy of section 13(1) of the State Lands Act. There was no illegality which could prevent the purchaser from recovering his payment. The same applies to whatever clearing of the land the vendor had carried out, although, as the Court of Appeal said, there was no evidence of when any was done.

The Court of Appeal reached the same result by saying that the vendor’s acts were preparatory to performance of the contract and not in implementation of it. They spoke of the agreement as still inoperative and inchoate. As already explained, we consider that the preferable analysis or mode of expression is that they were acts in part performance of the vendor’s obligations under a binding but necessarily conditional contract.

For these reasons the appeal is dismissed with costs.

Sir Timoci Tuivaga

Lord Cooke of Thorndon

Sir Anthony Mason

Solicitors:p>S. B. P B. Patel & Co, Lautoka for the Appellant
Munro, Leys & Co, Suva for the Respondent

CBV0005U.97S