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Supreme Court of Fiji |
IN THE SUPREME COURT OF THE FIJI ISLANDS
AT SUVA
CIVIL APPEAL NO. CBV0001 OF 2007S
(Fiji Court of Appeal No. ABU0068 of 2004S)
BETWEEN:
MUKTA BEN AND
VINOD KARSANJI BHINDI AND OTHERS
Petitioners
AND:
SUVA CITY COUNCIL
Respondent
Coram: The Hon Justice Keith Mason, Judge of the Supreme Court
The Hon Justice Kenneth Handley, Judge of the Supreme Court
The Hon Justice Ronald Sackville, Judge of the Supreme Court
Hearing: Tuesday 15th July 2008, Suva
Counsel:
Mr L.F. Kelly, SC ] for the Petitioner
Mr F. Keil ]
Mr A. Patel ] for the Respondent
Mr F. Khan ]
Date of Judgment: Thursday 24th July 2008, Suva
JUDGMENT OF THE COURT
[1] The petitioners had contracted to buy freehold land near Kinoya Village when the respondent Council set in train steps for its resumption under s.136 of the Towns Ordinance which incorporated by reference the Crown Acquisition of Lands Ordinance. The latter Ordinance is now called the State Acquisition of Lands Act ("the Act"). Following service of notices of intention to acquire, the respondent took possession of the 20 acres in question on 25 September 1967. This step transformed the petitioners’ interest in the land into an entitlement to compensation which, if quantum could not be agreed, was to be determined by the Court in accordance with the Act.
[2] The land was acquired for the purpose of a power electricity station which was erected many years ago.
[3] The petitioners commenced proceedings in the (former) Supreme Court –now the High Court - on 25 October 1967. However, they chose first to litigate a claim that the acquisition was invalid. Stuart J resolved the matter in favour of the respondent in 1975. An appeal to the Court of Appeal failed and a further appeal to the Privy Council was dismissed with costs in 1979. The parties then endeavoured to resolve the quantum issue by agreement, but when settlement failed, returned to the High Court. A series of vicissitudes further delayed the litigation until the claim was finally heard and determined by Winter J on 8 September 2004.
[4] The learned Judge determined that:
(1) the value of the land at the date of the notice of intention to take the land assessed under s12(a)(i) was $40,000;
(2) the petitioners were also entitled under s.12(a)(iv) to $2,400 for injurious affection; and
(3) interest should be allowed on the $42,000 total sum at 10.5% compounded at yearly rests.
[5] This produced an award of compensation of $1,705,709.
[6] The Council’s appeal to the Court of Appeal was unsuccessful except with regard to the interest component (see Suva City Council v Mukta Ben and Ors CA No ABU0068 of 2004S). The Court of Appeal held that there was no authority, statutory or otherwise, for allowing interest at compound rates. It set aside the award of compound interest and determined that simple interest should be calculated at the rate determined in the High Court (10.5%).
[7] This is an important and, as will be seen, a debatable proposition. There should be a grant of special leave.
[8] The Act relevantly stated:
3. The Governor may acquire any lands required for any public purpose for an estate in fee simple or for a term of years as he may think proper, paying such consideration or compensation as may be agreed upon or determined under the provisions of this Ordinance....
5. Whenever the Governor resolves that any lands are required for a public purpose the Director of Lands shall give notice to the registered proprietors of the said lands and to the mortgagees, encumbrancees and lessees thereof or to such of them as shall after reasonable inquiry be known to him, which notice may be in the form in the Schedule hereto or to the like effect.
6. The Director of Lands may, by such notice aforesaid or by any subsequent notice, direct the person aforesaid to yield up possession of such lands after the expiration of the period specified in the notice, which period shall not be less than three months from the service of such notice, unless the land in the opinion of the Governor is urgently required for the public purpose. At the expiration of such period the Governor and all persons authorised by him shall be entitled to enter into and take possession of such lands accordingly.
8. If at the expiration of three months from the service and publication as aforesaid of such notice no claim shall have been lodged with the Director of Lands in respect of such lands, or if the person who may have lodged any claim and the Governor shall not agree as to the amount of the compensation to be paid for the estate or interest in such lands belonging to such person, or if such person has not given satisfactory evidence in support of his claim, or if separate and conflicting claims are made in respect of the same lands, the amount of compensation due, if any, and every such case of disputed interest or title shall be settled by the Court, which shall have jurisdiction to hear and determine in all cases mentioned in this section upon an originating summons taken out by the Director of Lands, or any person holding or claiming any estate or interest in any land named in any notice aforesaid.
12. In determining the amount of compensation to be awarded for land acquired under this Ordinance.
(a) The Court shall take into consideration
(b) but the Court shall not take into consideration –
- (i) the degree of urgency which has led to the acquisition;
- (ii) any disinclination of the person interested to part with the land acquired;
- (iii) any damage sustained by him which, if caused by a private person, would not render such person liable to a suit;
- (iv) any increase to the value of the land acquired likely to accrue from the use to which it will be put when acquired;
- (v) any increase to the value of the other land or the person interested likely to accrue from the use to which the land acquired will be put; or
- (vi) any outlay or improvements on or disposal of the land acquired, commenced, made or effected after the date of the notice of the intention to take such land.
13. When the Governor has in pursuance of a notice under section 6 of this Ordinance entered into possession of any lands, the Court may award compensation to the owner of such lands and to all parties entitled to any estate or interest therein for loss of rents and mesne profits for the period between the time the Governor so entered into possession, and the time when the consideration due under an agreement has been paid to the persons entitled thereto, or compensation has been paid into Court under the provisions of this Ordinance."
[9] The Act makes no express provision for interest on compensation awarded. However, the market value of the land at the date of the original notice of intention to take the land is only one of several matters required to be taken into consideration in the non-exhaustive list of matters for consideration found in s12. The Act also recognises the inevitability of delay between the time when the State’s intention to take the land is first notified and the time of the taking. It is also evident that delay could occur between the taking and the judicial determination of compensation. Nothing in s.12 precludes the Court from making a proper allowance for the impact of delay or inflation upon the provision of a just compensation.
[10] The Act is modelled on the Land Clauses Consolidation Act 1845 (UK). Under that Act, the service of a "notice to treat" by the acquiring body has long been regarded as creating a relationship analogous to that between vendor and purchaser, subject to the statutory provisions (see Tiverton and North Devon Railway Co v Loosemore (1884) 9 App Cas 480 at 493, 503 and 511). A well-established corollary was the principle that a landowner with good title that has given up possession to the acquiring authority is to be paid interest on the "purchase money" on the analogy of the position of a vendor under a specifically enforceable contract for sale who has given up possession without receiving the full purchase price (see In re Pigott [1881] UKLawRpCh 125; (1881) 18 Ch D 146; Inglewood Pulp and Paper Company Ltd v New Brunswick Electric Power Commission [1928] AC 492; Commonwealth v Huon Transport Pty Ltd. [1945] HCA 5; (1945) 70 CLR 293 at 323-4; Marine Board of Launceston v Minister of State for the Navy [1945] HCA 42; (1945) 70 CLR 518 at 531-3, 534-5. In the last mentioned case, Dixon J pointed out (at 531-2) that:
"The difference, I think, is quite clear between the sum awarded or assessed as compensation as at the date of acquisition for loss of property and a sum awarded for interest or compensation because the acquisition deprived the claimant of the profitable occupation or use of the property without any immediate recoupment of capital in money. But, where a legislative instrument empowers a court or tribunal to deal with the question of compensation, it is a question of interpretation whether its jurisdiction is extensive enough to cover incidental matters and so to enable the court or tribunal to order that interest shall be paid on the compensation assessed and awarded, where according to legal or equitable principles it is payable. Though in America the reparation expressed by the word compensation is considered incomplete unless pending payment it includes interest on the capital sum arrived at, in English law I should not think that without context the primary meaning of the word would go so far. But the jurisdiction to determine compensation may be readily interpreted as extending to what is consequential upon or incidental to the award. Where the sum awarded carries interest according to the substantive law, including in that expression the doctrines of equity, it is no great step to say that the tribunal dealing with the matter may so declare."
[11] These authorities indicate that, if there is nothing in the legislation to deprive the Court of its power to award interest in cases where the general rule of equity would otherwise be applicable, then interest may be awarded as a component of a just compensation. Some of the judicial authorities speak of the interest component as interest "on the compensation" whereas others speak of "interest in the compensation." However, as Williams J pointed out in Marine Board of Launceston (at 537-8):
"But the two statements are alike in all substantial respects .... Both statements make it clear that, if there is a compulsory purchase of property of such a nature that, if it had been purchased under a contract, the court of equity could have ordered specific performance, then the court, in assessing compensation, can, in the absence of a statutory prohibition, by analogy to the general equitable rule, without any statutory authority, order the payment of interest on the amount awarded from the date that the resuming authority entered into possession."
[12] The respondent accepted in this Court, as it had below, that an interest component was properly due. However, it disputed the High Court’s "jurisdiction" or "power" to award compound interest. When confronted with the undoubted proposition that there are circumstances in which a court of equity has awarded compound interest, the respondent retreated to the proposition that the types of case in which such power has been exercised in the past involve defaulting fiduciaries, especially those who have or are presumed to have profited from their breaches.
[13] There is no longer any basis for taking such a constricted view. Both the common law and equity have abandoned lingering objections in principle to the award of interest, including compound interest, where it is just to do so in order to provide a proper remedy for an established entitlement. For example, compound interest may be awarded if this is appropriate to provide compensatory damages according to general principles in contract (see eg.Hungerfords v. Walker [1989] HCA 8; (1988) 171 CLR 125) or to provide restitution for unjust enrichment (see Sempra Metals Ltd. (formerly Metallgesellschaft Ltd.) v. Inland Revenue Commissioners [2007] UKHL 34, [2007] 3 WLR 354). These developments are, in part, the working out of general principles freed from any lingering hostility to interest as usury and, in part, the consequence of recognising the ravages of inflation since the Second World War. In Sempra, Lord Hope stated (at [41]) that " the obvious reason for awarding compound interest is that it reflects economic reality." See also Miliangos v George Frank (Textiles) Ltd. [1976] AC 443.
[14] In the specific field of assessing compensation for the acquisition of land courts have also recognised the need for a just compensation that, subject to the relevant statute, takes account of the frequency of delay between the notice and the taking of possession and the steady rise of costs since the Second World War. The leading English case is Birmingham Corporation v. West Midland Baptist Association [1970] AC 874. This is consonant with the well-accepted principle that the purpose of assessing compensation in this context is to place in the hands of the owner expropriated the full money equivalent of the land of which it has been deprived (see Nelungaloo Pty Ltd. v. Commonwealth (1948) 75 CLR 495 at 571; Director of Buildings and Lands v. Shun Fung Ironworks Ltd. [1995] 2 AC 111 at 125). These principles do not turn on the presence or absence of the word "full" in the expression "full compensation", which is sometimes found in particular statutes.
[15] The Law Reform (Miscellaneous Provisions) (Death and Interest) Act (Cap 27) has no application because the proceedings are not for the recovery of debt or damages.
[16] Courts in New Zealand have applied these general principles in concluding that, in a proper case, the award of "full compensation" may include a component that provides for inflation when the payment has been delayed. The ways and means of achieving this may very depending on the case and the evidence. They may include calculating interest at compound rates or adjusting values by reference to the Consumer Price Index (see Coomber v. Birkenhead Borough Council [1980] 2 NZLR 681; Drower v. Minister of Works and Development [1984] 1 NZLR 26).
[17] In the present case, there was detailed evidence and detailed consideration in the judgment of the High Court in relation to the proper basis for achieving a just compensation in the unusual circumstances of the present case where there had been very long delay.
[18] Winter J found that the Council always had the power to settle the matter. Nothing was ever paid into Court. His Lordship referred to the New Zealand cases as authority for the proposition that the application of commercial interest rates with yearly rests was an available option. He further analysed in some detail the unchallenged evidence about prevailing rates of interest during the period in a question.
[19] In the Court of Appeal, as in this Court, the only issue properly raised by the Council was the question whether the Court had the jurisdiction, (strictly speaking, the power) to make the type of award that was made.
[20] The Court of Appeal recognised that the Fiji statute is largely modelled on the provisions of the English Land Clauses Consolidation Act. It was also recognised that this meant that the equitable principle based on the application of the vendor and purchaser cases applied. The question was seen as whether or not there was power to apply a compound interest rate.
[21] Their Lordships continued (at [14] and [16]):
"Nevertheless Mr Khan appears to be right in saying that there is no reported instance anywhere in the Commonwealth in which compound interest has been allowed on a compensation claim. Even in equity, he submitted, compound interest is awarded only for fraud and for breach of fiduciary duty or breach of trust."
"In the end, we have come to the conclusion that, although equity made a practice of allowing interest on compensation money once possession was taken by the purchaser or the acquiring authority, there is no authority statutory or otherwise for holding that it would allow interest at compound rates.
[22] We have already referred to the New Zealand cases relating to compensation and to other developments in the general law to explain why we disagree with these propositions.
[23] The decision of South Australian Land Commission v. Perry (1977) 15 SASR 315, on which the respondent relied, is distinguishable because the statute in question made express provision for the payment of (simple) interest at a specified rate running from the date of taking. See also Coomber at 689. Here there is a complete silence on the matter of interest, with the consequence that the Court’s power is relevantly unconstrained.
[24] The respondent sought to raise various discretionary grounds for rejecting the particular award made at first instance. However, there is no petition to cross-appeal and none of the grounds had been foreshadowed in a respondent’s notice of contention as required by r.19. The suggestion that the petitioner bore responsibility for the delay in payment of compensation flew in the face of a finding of fact at trial that had never previously been challenged. The suggestion that some offset was appropriate because the costs awarded to the Council for the 1979 Privy Council proceedings has not been paid necessarily invoked issues relating to set off and limitation of actions that appear to have real difficulties for the respondent and that were, in any event, raised far too late when first voiced in oral submissions.
[25] Accordingly, the decision of the Court of Appeal should be set aside, the judgment at first instance assessing compensation should be reinstated and the parties placed in the position they would have been in had the award of compensation made by Winter J on 8 September 2004 been undisturbed.
[26] On 27 September 2004 the sum of $1,698,744.36 was paid into Court by the Council pursuant to s.16 of the Act. This may have a bearing upon the rights of the parties with respect to the rate of (presumably simple) interest running on the compensation awarded by the Court on 8 September 2004 as from that date. If the parties are unable to agree on that matter they have liberty to apply to a Judge of the High Court.
[27] The parties have agreed that each party is to bear its own costs. It is unclear as to whether this agreement extends to the costs awarded by Winter J and the Court of Appeal respectively. We shall assume that this is so. If we are wrong, and if the parties intend that, for example, the costs orders (if any) made in the petitioner’s favour by Winter J and made or confirmed by the Court of Appeal should stand then there should be liberty to apply to a Judge of the High Court to vary the costs order we shall make.
[28] We therefore make the following orders:
1. Grant leave to appeal
2. Appeal allowed
3. Set aside the orders made in paragraph [20] of the Judgment of the Court of Appeal and restore the judgment and orders made by Winter J in the High Court.
4. No order as to costs
5. Liberty to apply to the High Court on the matters of post-judgment interest and costs in accordance with the reasons of the Supreme Court.
Hon Justice Keith Mason
Judge of the Supreme Court
Hon Justice Kenneth Handley
Judge of the Supreme Court
Hon Justice Ronald Sackville
Judge of the Supreme Court
Solicitors:
Mitchell Keil and Associates, Suva for the Petitioners
S. B. Patel and Company, Lautoka for the Respondent
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