Aonima v Manepora'a [2011] SBCA 24; CA-CAC 25 of 2011 (25 November 2011)

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IN THE SOLOMON ISLANDS COURT OF APPEAL

NATURE OF JURISDICTION:	Appeal from Judgment of the High Court of Solomon Islands (Justice Faukona)

COURT FILE NUMBER:	Civil Appeal Case No: 25 of 2011 – (On Appeal from High Court Criminal Case No. 28 of 2009)

DATE OF HEARING:	14 November 2011

DATE OF JUDGMENT:	25 November 2011

THE COURT:	Sir Robin Auld, President
	Sir John Hansen, JA
	Justice Gordon Ward JA

PARTIES:	Brian Aonima - Appellant

	-v-

	Andrew Manepora'a - Respondent

ADVOCATES:
Appellants:	Mr Wilson Rano
Respondent:	Mr Donald Marahare
Third Defendant	Mr Andrew Radclyffe

KEY WORDS:	Fraud; rectification of title in Register of Titles

EX TEMPORE/RESERVED:	Reserved

ALLOWED/DISMISSED:	ALLOWED

Pages :	11

1. In early 2005 Andrew Manepora'a, the claimant/respondent, owned a house at Tasahe in Honiara, subject to a mortgage loan from the Central Bank of the Solomon Islands ("CBSI"). CBSI required him to redeem the loan, but he had difficulty while abroad studying in Fiji in finding replacement finance. He, therefore, transferred the property to a near relative, Brian Aonima, the defendant/respondent for a consideration recorded in the transfer of $130,000. So much is not in issue. What is factually in issue, though no longer itself determinable of the outcome of the appeal, is whether, as Mr. Manepora'a maintains, the transfer was subject to an oral understanding between them that Mr. Aonima would re-transfer the property to him in due course, or whether, as Mr. Aonima asserts, there was no such understanding. The determinative issue before the Judge below, Faukona J, and on this appeal is whether Mr. Manepora'a's transfer of the property to Mr. Aonima was invalidated by fraud on the part of Mr. Aonima.

2. Mr. Manepora'a's case was as follows. This was a "family" arrangement under which Mr. Aonima agreed, at no cost to him, to tide over Mr. Manepora'a's temporary financial difficulty in replacing his existing mortgage loan from CBSI for the property during Mr. Manepora'a's temporary absence in Fiji. He effected the transfer on the understanding that Mr. Aonima would re-transfer the property to him on his return to the Solomon Islands on completion of his studies in Fiji. The arrangement was that, in the meantime, Mr. Aonima would finance the purchase by obtaining a mortgage loan from ANZ Bank, rent the property and service the new borrowing from rental payments. It was part of the understanding that Mr. Aonima would not subject the property to any further mortgage without Mr. Manepora'a's consent. On Mr. Manepora'a's return from Fiji, Mr. Aonima would re-transfer the property to him and redeem his mortgage loan with monies to be provided by Mr. Aonima derived from new mortgage finance of his own.

3. Mr. Aonima's case was, as we have said, that there was no such understanding. He entered into the transfer on the basis that it was an outright disposition by Mr. Manepora'a of the property, a disposition not subject to any restrictions, promises or reservations, whether in the transfer or otherwise, as to re-transfer on Mr. Manepora'a's returns from Fiji.

4. In April 2005, at Mr. Aonima's instigation, Mr. Manepora'a and Mr. Aonima orally agreed the sale of the property to Mr. Aonima for $170,000.00. There was no formal written agreement for the sale, only, on Mr. Aonima's case, an exchange between them in April 2005 of two cryptic faxed letters, one an offer from Mr. Manepora'a to sell Mr. Aonima the property for $170,000.00, the other purportedly from Mr. Aonima in reply, accepting the offer. Mr. Manepora'a acknowledges his faxed offer to sell, but maintains that he sent it only because of pressure from Mr. Aonima. As to the written acceptance from Mr. Aonima, he maintains that he never received it, but seemingly knew of it and understood it to be a device of Mr. Aonima to enable a refinancing of the existing borrowing with ANZ Bank. More importantly, there is no contemporaneous written evidence of the "family" arrangement for later re-transfer alleged by Mr. Manepora'a. His explanation for the absence of any mention of it in his faxed offer to sell was that he had relied on the advice of Mr. John Huiare, a close relative of his and Mr. Aonima and a legal practitioner in Fiji to whom he was about to grant a power of attorney to effect the transaction. He maintained that Mr. Huiare knew of the "family" arrangement. There is no evidence from Mr. Huiare on the point, since he had died before the trial.

5. The mechanics of the transfer of title to the property to Mr. Aonima were as follows. Mr. Manepora'a, by a power of attorney, instructed Mr. Huiare to effect the transfer on his behalf. On 10th May 2005, two days before execution of the grant of the power of attorney, Mr. Hiuare anticipated the grant by executing the transfer for a consideration recorded in the transfer as $130, 000 - not $170,000, as earlier agreed in the exchange of correspondence. Mr. Aonima funded the transaction by securing a mortgage loan from ANZ Bank of $130,000, which he used, along with a further $35,000 odd, initially of his own money and later by further borrowing, to clear Mr. Manepora'a's total liability to CBSI Bank of over $165,000.

6. Thus, no money passed between Mr. Aonima and Mr. Manepora'a on the transfer. Mr. Aonima simply shouldered Mr. Manepora'a's mortgage debt with a new mortgage in his own name, with a view to servicing it out of rentals on the property.

7. The power of attorney to Mr. Hiuare was apparently not on the proper form for registration with the Registrar of Titles. It was necessary to execute another form, which the Registrar accepted along with the transfer. The Registrar registered the transfer, but - for some unexplained reason - not the power of attorney, a failure of no direct legal consequence to the issue in this case. The outcome of all this was to vest the title to the property in Mr. Aonima as from the date of its execution by Mr. Huiare on 12th May 2005.

8. While Mr. Manepora'a was away in Fiji, Mr. Aonima obtained additional borrowing secured by way of a second mortgage from Westpac Banking Corporation ("Westpac"). According to Mr. Manepora'a, this was without his consent; according to Mr. Aonima, he had not needed such consent and, anyway, some of the additional borrowing went towards clearing the balance of some $35,000 of Mr. Manepora'a's total debt to CBSI at the date of the transfer.

9. On Mr. Manepora'a's return from Fiji in 2007, he sought re-transfer of the property from Mr. Aonima, maintaining that the May 2005 transfer had been void ab initio because of fraudulent misrepresentation. He claimed rectification of the Register of Titles to re-vest the title to the property in his name and payment to him of all rental monies received by Mr. Aonima. Mr. Aonima refused, maintaining that he was the registered legal owner of the property and was under no legal obligation to return it to Mr. Manepora'a. Westpac also demanded from him payment of a sum in excess of $300,000 by way of loan and other borrowings secured under his second mortgage of the property to it.

10. By these proceedings against Mr. Aonima and Westpac, Mr. Manepora'a initially sought to enforce the alleged "family" arrangement of April/May 2005 for re-transfer to him of title to the property on his return from Fiji. He asserted in his prayer for relief that "[t]he arrangement and understanding was not honoured" and, in paragraph 24 of his Statement of Claim, "an order that Mr. Aonima had obtained title to the property through fraudulent misrepresentation". More particularly, he sought the following relief:

11. On 9th July 2009, Cameron J refused an application by Westpac to strike out the claim as disclosing no reasonable cause of action. In so doing he expressed the view that the facts in the claim, if established, would prima facie establish fraud on the part of Mr. Aonima, but also that Westpac had acted in good faith and without notice of any interest of Mr. Manepora'a in the property when advancing monies to Mr. Aonima. He ruled that Westpac should remain a party to the proceedings because, if fraud was established at trial, an issue would arise as to whether and what extent its interests as bona fide charge-holder without notice of any such interest should take priority over the interests of Mr. Manepora'a.

12. On the trial of the matter Faukona J found: (1) that Mr. Aonima had fraudulently secured the transfer of the property and registration of title to it in his name, and granted Mr. Manepora'a rectification of the Register so as to re-vest the property in his name; (2) restrained Mr. Aonima from dealing with it in any way; (3) declared Mr. Aonima responsible for repayment of the Westpac mortgage loans; and (4) ordered him to account for and pay to Mr. Manepora'a all rental payments received by him in respect of the property.

13. By this appeal of Mr. Aonima, he challenges the Judge's finding that the transfer and registration were defective by reason of his fraud or otherwise, thus seeking to retain title to the property and also, in consequence responsibility for the Westpac loans.

14. We look now in a little more detail at the nature of Mr. Manepora'a's claims against Mr. Aonima and Westpac.

15. His case as originally pleaded contained no identifiable or, certainly, no adequately pleaded allegation of fraud or even of mistake. It consisted largely of a rehearsal in summary of the mechanics of the May 2005 transfer and subsequent history of the matter. Read as a whole, it was a complaint that Mr. Aonima had failed to honour the alleged oral "family" arrangement to comply with Mr. Manepora'a's request for re-transfer of the property on his return from Fiji. Such a complaint, essentially one of alleged breach of contract relating to a transaction involving an interest in land based on a failure to honour an alleged oral arrangement faced difficulties in law and in fact in the absence of any written material evidencing it.

16. However, in his amended claim, Mr. Manepora'a changed course. He attacked the validity of the May 2005 transfer to Mr Aonima rather than Mr. Aonima's failure to honour the alleged oral "family" arrangement for re-transfer of the property to him. He now put at the forefront of his case a general assertion that Mr. Aonima had unlawfully obtained title of the property through "fraudulent misrepresentation". That assertion was unsupported by any identifiable particulars of fraud save possibly for:

1) an unintelligible complaint that the inclusion in the transfer of a figure of $130,000 for consideration, when he had received no such sum, amounted to misrepresentation by Mr. Aonima for the purpose of unlawfully obtaining title to the property;

2) the lack of any written sales and purchase agreement between the parties for "complete disposition of the property to ...[Mr. Aonima]"; and

17. Before trial the parties agreed a "Set Facts and Issues". There were only two issues for the Judge: 1) whether there was fraud as alleged, and 2) if so, should the registration of title be rectified in favour of Mr. Manepora'a "on the basis of that fraud?" So no issue remained as to the enforceability of the oral "family" arrangement if established and whether Mr. Aonima was in breach of it. However, from the way in which Mr. Manepora'a put his case on fraud at trial, he continued to place some reliance on the existence of such arrangement as a motivation for the fraud he alleged against Mr. Aonima.

18. In attacking the validity of the 10th May 2005 transfer on the ground of fraud Mr. Manepora'a relied in his pleaded and argued case before the Judge on the following principal arguments:

19. Mr. Aonima's case at trial was that the title to the property was validly registered in his name, and he denied the oral "family" arrangement for re-transfer alleged by Mr. Manepora'a. He said that the reference in the transfer to $130,000 as consideration for the transaction was because that was the limit of the amount then approved by ANZ and that he paid by installments a further $35,000 to CBSI, the balance of over $165,000 owed by Mr. Manepora'a to CBSI.

20. The Judge, in his judgment, true to the agreed issues before him approached the claim as one of fraud, but paid insufficient attention to the absence of any properly particularised pleading and evidence of fraud, as the law requires. He opened his judgment by stating:

"3... The issue for determination is whether or not there was a fraud as alleged, and if so should the register ... be rectified in favour of the Claimant on the ground of fraud."

21. After setting out the law on fraudulent misrepresentation, as he understood it, as a basis for overcoming indefeasibility of registration of title to land and examining the evidence, the Judge indicated the nature of the fraud he had in mind:

"24. .... It was the dealings by ... [Mr. Aonima] from contract to registration that this Court will examine thoroughly and scrutinise because it was alleged that his acquisition of the interest which he knew, was done by fraud and him privy and substantially contributed to it by his act.

1). an unexplained change from the agreed price in correspondence of $170,000 to $130,000 in the transfer, suggesting "some fishy dealings ... tantamount to something unusual" and which "must have been the creation by ... [Mr. Aonima] to advance his agenda";

2). a difference of some $4,000 between the amount of $130,000 shown in the transfer and $134,000 odd required to redeem Mr. Manepora'a's mortgage loan with CBSI on the property, a difference characterised by the Judge as an "ambiguity" indicating possible "mistake or part of a fraud strategy to advance ... [Mr. Aonima's] agenda"; and

3). the slips in the execution and registration of the power of attorney, inviting an inference that Mr. Aonima "architectured what subsequently transpired", namely fraudulently to engineer the transfer of the property to him and not someone else:

"37. ... To avoid being sold ... [Mr. Aonima] initiated the plan, which [sic] later agreed upon. At first it appeared that .... [Mr. Aonima] acted as a saving grace. Later he deviated and denied any mutual arrangement with ... [Mr. Manepora'a] ... He persisted that the land was sold to him. If it was done in accordance to his versions, why [sic] failed to attend to any discussion with [Mr. Manepora'a] after he returned from studies. It reflected something within him is worrying his conscience.

38. I find there is evidence on the balance of probability that the registration was appallingly marred by fraud which ... [Mr. Aonima] knew of and substantially contributed to by his act. As such the register ought to be rectified.

23. Such reasoning, coupled with the absence of any coherent or properly particularised case of Mr. Manepora'a, only has to be read to see that that there was no possible basis for the Judge's finding that Mr. Aonima secured registration to the title of the property by fraudulent misrepresentation or any other form of fraud. The Judge's findings veer between speculation as to what lay behind comprehensible and indisputable features of the transfer itself, going to the issue of its validity, and unspecified venality of Mr. Aonima going to his later refusal to honour the oral "family" arrangement, originally central to his claim. In addition, they demonstrate that the Judge failed to grasp the essential nature and outcome of the transaction between the two men.

24. The setting for the transaction was that Mr. Manepora'a urgently needed to refinance his purchase of the property and that, on his own evidence, he instigated the transaction by seeking help from Mr. Aonima. The figure of $170,000 recorded in the brief exchange of letters as consideration for the transfer would inevitably have to take the form of discharge of his borrowings to CBSI secured on the property. On the Agreed Set of Facts before the Judge those borrowings were just over $165,000 at the time, and Mr. Aonima discharged them with a sum in the region of $130,000 derived from the ANZ loan and a further of over $35,000, which he paid by installments (all or in part derived from his second mortgage loan from Westpac). He also shouldered the obligation - until then that of Mr. Manepora'a, to service the borrowing - albeit with the aid of the rentals that he would now receive from the property. In return, Mr. Manepora'a secured release from his indebtedness of some $165,000 (and rising) to CBSI, which he was clearly unable to meet himself.

25. Given that outcome at the time of the transaction, what "agenda" can the Judge have had in mind on the evidence before him in talking of a "creation by ... [Mr. Aonima] to advance his agenda"? And what "ambiguity" indicating possible "mistake or part of a fraud strategy to advance ... [Mr. Aonima's] agenda"? None particularised nor evidenced by Mr. Manepora'a.

26. One has only to contrast the outcome at the time of transfer with the outcome of the Judge's decision and orders if upheld.

1). Mr. Manepora'a would regain title to the property unencumbered by any mortgage debt;

2). Mr. Aonima, though losing title after having serviced the mortgage debts to ANZ and Westpac for several years, would continue to shoulder liability for the whole of the debt and future servicing of it; and

3). Mr. Manepora'a would be entitled to payment of all rental payments for the property received by Mr. Aonima since the May 2005 transfer, as if he had been himself servicing mortgage borrowing all that time.

In short, the effect of the Judge's order would be that Mr. Manepora'a would re-acquire the property unencumbered by debt and in an improved state for nothing, plus all past and future rental payments, leaving Mr. Aonima with a substantial mortgage debt to ANZ and Westpac in respect of a property lost to him, and deprived of all past and future rentals to offset the cost of servicing the debt.

27. As to the inference drawn by the Judge from the slips in the execution and registration of the power attorney that Mr. Aonima "architectured what subsequently transpired", namely fraudulently to engineer the transfer of the property to him and not someone else, we cannot see how such slips could have advanced the transaction, whether favourable or unfavourable, to Mr. Manepora'a. There was no evidence before the Judge that Mr. Aonima had had anything to do with the power of attorney, or to whose fraud he might have been "contributing". A possibility, we suppose, is Mr. Hiuare, but there was no pleaded allegation or evidence of fraud against him, and no evidence from him because he had died before the trial.

28. The Judge does not explain his sinister characterisation of this part of the story. Mr. Manepora'a secured what he urgently needed at the time, release, at a figure agreed by him for the property, from a substantial debt and from having to continue servicing it. Mr. Aonima, in return, secured title to the property and all the mortgage borrowing that went with it, for which he remains liable.

29. Accordingly, the Court allows the appeal and quashes the Judge's order for rectification of the Register, substituting Mr. Manepora'a for Mr. Aonima as the registered owner of the property, and the Judge's consequential orders, numbers 2 – 5. Mr. Aonima, therefore, remains the registered owner with all the normal entitlements to deal with it flowing from registration.

30. The Court confirms, albeit for a different reason, the Judge's dismissal of Mr. Manepora'a's claims of further relief affecting the interests of Westpac and of removal of the caveat, namely claim numbers 6 and 7, as no longer appropriate in this litigation, and claim number 8 as otiose.

Court of Appeal of Solomon Islands

Aonima v Manepora'a [2011] SBCA 24; CA-CAC 25 of 2011 (25 November 2011)