Trading Company (Solomons) Ltd v PKR Pacific Sales Ltd [1981] SBHC 13; [1980-1981] SILR 172 (31 July 1981)

[1980-1981] SILR 172

IN THE HIGH COURT OF SOLOMON ISLANDS

Civil case No. 32 of 1980

TRADING COMPANY (SOLOMONS) LTD

v

PKR PACIFIC SALES LTD

High Court of Solomon Islands
(Daly C.J.) .
Civil Case No. 32 of 1980

31st July 1981

Registered land - priorities of interest - protection of registered owner - meaning of " fraud" and " bona fide" in Land and Titles Act (Cap. 93) - " owner in possession" in section 209 (2) - " person in actual occupation" in section 104 (g)

Facts:

On 29th April 1980 the Plaintiff contracted with G to buy a parcel of land with a completion date of 14th May 1980. The completion did not take place. On 6th June 1980 the Defendant entered into a contract with G to buy the same land. On 4th August 1980 the Defendant was registered as owner having duly completed. At the time of registration the house was occupied by an accountant in the employ of the Plaintiff. Possession was finally rendered to the Defendant, in October 1980. The Plaintiff claimed that the May contract gave it prior rights to the land and that the Defendant held on trust for the Plaintiff. The registration was alleged to have obtained by fraud within the meaning of the Land and Titles Act. The plaintiff also claimed to be "person in actual occupation of the land".

Held:

1. The Land and Titles Act in creating a system of registration should be interpreted in accordance with its terms rather than by reference to equitable doctrines (Midland Bank Trust Co Ltd v. Green [1980] UKHL 7; (1981) 2 WLR 28 applied).

2. Section 100 of the Act should not be construed to incorporate a requirement that acquisition of registered title to be protected must be "in good faith".

3. The proviso in section 100 and section 108 (2) read together prevent the equitable doctrine of constructive trust from applying in the circumstances of this case where no fraud is established.

4. "Fraud" in the Act should be regarded as synonymous with "dishonesty" (Assets Company Ltd v .Mere Roihi [1905] UKLawRpAC 11; (1905) AC 176 applied). On the facts of the case no dishonesty on the part of the defendant was established and it was therefore a bona fide purchaser and registered owner untainted by fraud and protected by the Act.

5. "Owner in possession" for the purposes of section 209(2) refers to the date of action rather than registration. Therefore the Defendant was in possession at the relevant date.

6. The Plaintiff was not "in actual occupation" for the purposes of section 104 (g) as the accountant was not employed to occupy the land nor did he occupy the land as a matter of duty (Strand Securities Ltd v. Caswell [1965] EWCA Civ 1; (1965) 1 All ER 820 applied). In any event the Plaintiff’s interest was a right to claim specific performance of the May contract and this did not entitle him to the relieve claimed in the writ in this action. (Howard v. Miller (1915) AC 318 applied).

7. The Plaintiff’s claim dismissed and judgment given for the Defendant on its counterclaim for mesne profits during the time the land was wrongfully withheld.

Other cases referred to:

Peffer -v- Rigg (1978) 3 All ER 745
Waimiha Saw Milling Co Ltd -v- Waione Timber [1923] NZGazLawRp 32; (1926) AC 101 1923 NZLR 1137
Abigail -v- Lapin (1934) AC 491
Bridges -v- Meer (1957) 2 All ER 577
Williams & Glyns Bank -v- Roland [1980] UKHL 4; (1980) 3 WLR 138

For Plaintiff: J. Dowsett
For Defendant: A. Radclyffe

Daly CJ: This case concerns a fixed term estate in a parcel of land ("the land") on Kola’ a Ridge in Honiara. On the land is a house at present occupied by a Director of the Defendant Company (PKR Pacific Sales Limited). On the Registrar of Titles the land is shown as Parcel Number 191-034-2. The fixed term estate in the land is registered in the name of the Defendant Company. Previously it was registered in the name of D.J. Gubbay & Co. (New Hebrides) Pty Limited (which I shall call Gubbay (New Hebrides) to distinguish it from another company which is called D.J. Gubbay & Co (Solomon Islands) Limited). How that change of registration came about and the effect of it; is the nub of this case as the Plaintiff (Trading Company (Solomons) Limited) claims an .interest in the land which it says should be recognised as giving it a prior right in the land to that of the Defendant. The Plaintiff claims relief to give recognition to its prior right in the land to that of the Defendant. The Plaintiff claims relief to give recognition to its prior right. The Defendant denies the prior right and counterclaims for damages for a period of time when the land was out of its possession.

Some facts are not in dispute. Gubbay (New Hebrides) is a company in compulsory liquidation. The liquidator was Mr Ian Mackintosh of Vila, New Hebrides who was represented in Solomon Islands by Mr Lindsay Freeman. The company has or had assets in Solomon Islands and in the early part of 1980 tenders were invited for land and buildings in Honiara including the land. The invitation to tender in fact reads as if the land and buildings belonged to D.J. Gubbay & Co. (Solomon Islands) Limited but it is common ground that the land belonged to Gubbay (New Hebrides) as at that stage the Register of Titles showed the latter company as registered owner. By letter dated 31st March 1980 the Defendant tendered for Lot 163/109 in the sum of $39,000.00. A photocopy of a sketch plan accompanied the tender to further identify the lot in question. That makes it clear, despite some confusion about lot numbers, that the land for which a bid was then made was the land at present in dispute.

On 29th April 1980 two contracts were signed by Mr Mackintosh as liquidator of Gubbay (New Hebrides) and the Plaintiff. One contract concerned ten parcels of land one of which was Parcel Number 191-034-2: the land in this case. This contract provided for the purchase by the Plaintiff of that and other parcels of land with a completion date of 14th May, 1980.

On 13th May 1980 a caveat under section 200 of the Land and Titles Act Cap. 93 ("the Act") was lodged by Mr Keith Golgate Williams acting on behalf of the Defendant and Mr Terence Leslie Drake of Bowmans S.I. claiming an interest in the land. This read:-

"That our companies have a vested interest in the sale of the lands listed below by virtue of a successful Tender Bid placed on behalf of our Companies on 31 March 1980 to Mr. L. Freeman of Coopers & Lybrand acting on behalf’ of D.J. Gubbay and Company (New Hebrides) Proprietary Limited."

Parcel 191-034-2 was listed.

There can be no doubt that this caveat was inaccurate as at that stage the tender had not been accepted and Mr Williams had not received any intimation that it had. The circumstances in which this caveat came to be entered will be considered later in this judgment.

As I have said the contract of 29th 1980 between the liquidator and the Plaintiff ("the Plaintiff’s contract") was due for completion on 14th May 1980. Such completion did not take place for reasons which have not been canvassed in this trial. Thus for this trial I accept that the Plaintiff’s contract was and is a subsisting contract. I am told that proceedings are being taken for specific performance of it, that is, that the Plaintiff considers he has rights under the contract and intends to pursue them. The Defendant is not in a position to dispute any of these matters. On the 27th May 1980 the Plaintiff wrote to Messrs Drake and Williams demanding that they withdraw their caveats by 30th May 1980 or proceedings would be taken for compensation. This letter would have been received shortly after the date upon which it was posted.

On the 29th May 1980 a letter signed by the liquidator was sent by Mr Freeman to the Defendant accepting its bid of $39,000.00 for the land (with the wrong lot specified again). Again this would have been received shortly after its date of despatch by the Defendant. This letter also refers to the caveat entered on 27th May 1980 as being "wrongful".

On the 3rd June 1980 Mr Williams withdrew the caveat of himself and Mr Drake. On the same day a caveat was entered by the Plaintiff against the land claiming rights under the Plaintiff’s contract.

On the 6th June 1980 a contract was signed by the Defendant and Mr Freeman, as witness of the signature of the liquidator, for sale to the Defendant of the interest of Gubbay (New Hebrides) in Parcel No. 191-034-2 (with the numbers at last correct). This I call the Defendant’s contract. This contract provided for payment of a deposit of $3,900.00 and completion on 16th June, 1980.

On 25th July 1980 an application for transfer of the estate in parcel 191-034-2 was signed and sealed by the Defendant and Gubbay (New Hebrides) (in liquidation). On 28th July 1980 the Registrar of Titles removed the caveat of the Plaintiff from the Register on the basis that it had lapsed. There is no suggestion that the Defendant played any part in this removal. The same day the transfer was filed with the Registrar of Titles. On 31st July 1980 the Bank of the Defendant sent to the liquidator a Cashier’s order for the sum of $35,000.00 to " claim title" to the land.

On 4th August 1980 the transfer to the Defendant was registered. Subsequently the Defendant made demands for possession which was finally rendered as a result of an order of this court in October 1980. The parties are agreed that from the date of the transfer to the date of possession was two and a half months.

These are the barebones of the facts in this case but it will be necessary to consider the legal implications arising from the contentions of the parties before those facts can be clothed with the flesh of the court’s findings as to the part the Defendant and its officers played in the land finally becoming registered in its name. I must say immediately that I am indebted to Counsel for the clarity of their arguments and the way in which they were presented.

I am concerned in this case with registered land which is dealt with in the Land and Titles Act (Cap. 93). I start therefore with my consideration of the provisions of the Act. I have been referred to the provisions of legislation in other common law countries setting up systems of land registration and the authorities in which such provisions have been considered. This has been most useful to me but I must bear in mind that I must apply the words of the Solomon Island statute and be cautious about accepting general expressions of principle flowing from the way other acts are framed. Having said that, I must say that all these systems, which are based on the original Torrens Systems introduced in New Zealand in 1860, have the common intent to simplify dealings in land by permitting reliance upon a Register of Titles. In so doing immunity from adverse claims to the land or the interest in land in respect of which a proprietor is registered must be enjoyed to some extent by such a proprietor. Otherwise the system has failed in its purpose. The extent of that immunity and the exceptions to it under the Solomon Islands Act are in question in this case.

Section 99 of the Act specifies the interest conferred by registration. This provides so far as is relevant:-

"Subject to the provisions of this Act -

(b) the registration of a person as the owner of fixed term estate shall vest in that person the fixed term described in the grant thereof, together with all implied and express rights and privileges belonging or appurtenant thereto and subject to all implied and express obligations, liabilities and incidents of that estate."

The general defeasibility section is section 100 which provides:

"The rights of an owner of a registered interest, whether acquired on first registration or whether acquired subsequently for valuable consideration or by an order of court, shall be rights not liable to be defeated except as provided by this Act, and shall be held by the owner, together with all privileges and appurtenances belonging thereto, free from all other interests and claims whatsoever, but subject -

(a) to the leases, charges and other encumbrances and to the conditions and restrictions (if any) affecting the interest, and shown or .referred to in the land register or implied by this Act; and

(b) to such liabilities, rights and interests as affect the same and are declared by section 104 (which relates to overriding interests) not to require noting in the register:

Provided that nothing in this section shall be taken to relieve an owner from any duty or obligation to which he is subject as a trustee."

The proviso to this section is said to be of importance and unusual in such legislation. It does not appear, for example, in the English legislation (Land Registration Act 1925 c.f. Section 20). However the balance of this section is drafted in wide terms, in particular the words "free from all other interests and claims whatsoever" if interpreted literally would seem to give considerable immunity to the owner of a registered interest.

Section 101 deals with estates acquired without valuable consideration.

Section 104 provides that owner of a registered interest shall hold subject to certain overriding interests even if not noted on the register.

One of these is: -

"(g) the rights of a person in actual occupation of the land or in receipt of the rents and profits thereof, save where enquiry is made of such person and the rights are not disclosed;"

Section 108 provides protection of persons dealing in registered interests in the following terms:-

"108 (1) No person dealing or proposing to deal for valuable consideration with an owner of a registered interest in land shall be required or in any way concerned:-

(a) to enquire or ascertain the circumstances in or the consideration for which such owner or any previous owner was registered; or

(b) to see to the application of any consideration or any part thereof; or

(c) to search any register kept under any previous written law relating to the registration of documents relating to land.

(2) Where the owner of such an interest is a trustee, he shall, in dealing therewith, be deemed to be the absolute owner thereof, and no disposition by such trustee to a bona fide purchaser for valuable consideration shall be defeasible by reason of the fact that such disposition amounted to a breach of trust."

This section is not drafted in the same terms as other similar provisions elsewhere. For example section 182 of the New Zealand Land Transfer Act 1925 expressly exempts a person dealing with a registered proprietor from being affected "by notice direct or constructive of any trust or unregistered interest" (similar exclusion is contained in section 74 or the English Land Registration Act, 1925). On the other hand subsection (2) does purport to deal with certain trust situations in a way which does not appear elsewhere. It may be that the trust provisions in this section and the proviso to section 100 have a bearing on each other. This, two must be considered later in this judgment.

The other omission from these provisions which is interesting is the omission of any reference to fraud. Defeasibility provision in land registration system usually lay some emphasis on the fact that registration obtained by "fraud" is exempted from protection. This is made clear, for example, in sections 62, 63 and 182 of the New Zealand Act and sections 44 and 109 of the Queensland, Real Property Act 1961. The’ English Act, however, is not so clear on the subject of fraud but judicial interpretation (see Peffer v. Rigg (1978) 3 All ER 745) has endeavoured to give fraud similar scope to that contained in express provisions elsewhere.

To return to the Solomon Islands provisions: section 209 provides for rectification by this court in these terms:-

"209 - (1) Subject to subsection (2), the High Court may order rectification of the land register by directing that any registration be cancelled or amended where it is so empowered by this Act, or where it is satisfied that any registration has been obtained, made or omitted by fraud or mistake.

(2) The land register shall not be rectified so as to affect the title of an owner who is in possession and acquired the interest for valuable consideration, unless such owner had knowledge of the omission, fraud or mistake in consequence of which the rectification is sought, or caused such omission fraud or mistake or substantially contributed to it by his act, neglect or default."

Subsection (2) places restrictions on the power to rectify which are relied upon by the Defendant in this case. It will be noted that here, at least, there is clear mention of fraud.

In this brief summary of the relevant provisions I must also refer to Part XIX of the Act which deals with caveats. This part enables those claiming certain interests (including a benefit under a trust) to enter a caveat on the register: Section 200(1). The entry of a caveat prevents an entry on the register being made of any change of ownership without the consent of the caveator: see section 201. Section 203 provides for duration of caveats and in particular for the removal of a caveat if it is not substantiated or if a certified copy of court proceedings is not filed (section 203(5)).

The Plaintiff accepts that the Defendant in this case was a purchaser for value of the land and that he is now the Registered proprietor. However the Plaintiff contends that the Defendant has been guilty of fraud and as such is not entitled to the protection of the Act when he pleads his registered title.

What then is the scope of fraud in the Act and what must be proved before fraud is established? I have already referred to the words of section 209(2). Leaving aside for the moment a further question raised by the Plaintiff as to whether the Defendant should be treated as "an owner who is in possession," it is clear that this court cannot grant rectification unless it is established either that the Defendant:-

(a) had knowledge of the fraud in consequence of which rectification is sought or

(b) caused such fraud or

(c) substantially contributed to it by his act.

The Plaintiff does indeed seek rectification of the register by cancellation of the registration of the Defendant as proprietor of the land. The Defendant denies fraud. In relation to this dispute the word "fraud" in the Act falls to be considered together with the facts in issue.

It maybe argued that this being the only use of the words in the Act, that is the end of its scope. However such an argument was not accepted in Peffer v. Rigg (Ab cit) a case upon which Plaintiff relies. In that case Graham J. held on the facts that a purchaser took a transfer of the whole property for valuable consideration knowing "perfectly well" that the vendor could only transfer half the property the remainder being the subject of a trust in favour of the Plaintiff. The Purchaser sought to rely on the terms of section 20 and 59 of the English Act which are in similar terms to section 100 and section 108 of the Act. Of this argument Graham J. said at page 751, 752:

"If, however, the proper view is that there was valuable consideration for the transfer, then it argued as follows. There is a contrast between section 20 and 59 of the 1925 Act. Section 20(1) protects any ‘transferee’ for valuable consideration. By section 18(5) of the 1925 Act ‘transfer’ and ‘transferee’ in relation to freehold land have very wide meanings but are not specifically defined in section 3. It is to be noted, however, that section 20 though it mentions valuable consideration, does not mention ‘good faith’ as being necessary on the part of the transferee, nor does it mention notice. It can be argued therefore that section 20 seems to be saying that a transferee whether he had good faith or not and whether he had notice or not, takes free of all interests (other than overriding interests) provided he has given valuable consideration. This at first sight seems a remarkable proposition and though undoubtedly the property legislation of 1925 was intended to simplify such matters of title as far as possible, I find it difficult to think that section 20 of the Land Registration Act 1925 can have been intended, to be as broad in scope as this. Similar doubt is expressed in Brickdale and Stewart-Wallace’s "The Land Registration Act 1925". The provision for rectification in section 82 of the 1925 Act as against a proprietor in possession who has been a party to a fraud, mistake or omission in consequence of which rectification of the register is sought also seems to me to show that section 20 must be read with some limitations; see also Ruoff and Roper’s Registered Conveyancing. Section 59(6) on the other hand speaks of a ‘purchaser’ not being affected by matters which are not protected by a caution or other entry on the register. Be definition however (see section 3(xxi), "Purchaser", means a purchaser in good faith for valuable consideration ....’ It seems clear therefore that as a matter of construction a purchaser who is not in fact one "in-good faith" will be concerned with matters not protected by a caution or other entry on the register, at any rate, as I hold, if he has notice thereof. If sections 20 and 59 are read together in the context of the 1925 Act they can be reconciled by holding that if the transferee spoken of in section 20 is in fact a ‘purchaser’ he will only be protected if he had given valuable consideration and is in good faith. He cannot in my judgment be in good faith if he has in fact notice of something which affects his title as in the present case. Of course if he and, a fortiori, if a purchaser from him has given valuable consideration to go behind the register, and will in such a case be fully protected. This new of the matter seems to me to enable the two sections to be construed consistently together without producing the unreasonable result of permitting transferee purchaser to take advantage of the 1925 Act, and divest himself of knowledge of defects in his own title, and secure to himself a flawless title which he ought not in justice to be allowed to obtain"

Thus the learned judge was prepared to introduce into the statutory-provision a requirement that a transferee must be in good faith and to equate that with lack of notice.

However it would appear that the House of Lords has taken a different view in Midland Bank Trust Co Ltd v. Green [1980] UKHL 7; (1981) 2 WLR 28. This case was not cited to me, no doubt because the full report was not available at the date of trial.

In that case a father granted to his son an option purchase land which should have been registered but was not. The relevant legislation stated that his option being unregistered was void against "a purchaser of a legal estate for money or money’s worth." The father, in an endeavour to defeat the option, subsequently transferred the land to the mother for what was held to be money or money’s worth.

It was argued, inter alia, that the legislation should be construed as to include after the words "a purchaser" the words "in good faith". In the speech of Lord Wilberforce (with which all the learned Lords of Appeal agreed) there is a cogent and convincing analysis of the historical background to the English Property legislation of 1922-25. He comes to the conclusion that the legislation "effected massive changes in the law affecting property" and the previous cases "should firmly discourage us from muddying clear waters" by incorporating into that legislation the equitable concept of the bona fide purchaser for value without notice (at page 33 B). At page 34 Lord Wilberforce said:-

"My Lords, I recognise that the inquiring mind may put the question: why should there be an omission of the requirement of good faith in this particular context? I do not think there should be much doubt about the answer. Addition of a requirement that the purchaser should be in good faith would bring with it the necessity of inquiring into the purchaser’s motives and state of mind. The present case is a good example of the difficulties which would exist. If the position was simply that the purchaser had notice of the option, and decided nevertheless to buy the land, relying on the absence of notification, nobody could contend that she would be lacking in good faith. She would merely be taking advantage of a situation, which the law has provided, and the addition of a profit motive could not create an absence of good faith. But suppose, and this is the respondent’s argument, the purchaser’s motive is to defeat the option, does this make any difference? Any advantage to oneself seems necessarily to involve a disadvantage to another: to make the validity of the purchase depend upon which aspect of the transaction was prevalent in the purchaser’s mind seems to create distinctions equally difficult to analyse in law as to establish in fact: avarice and malice may be distinct sins, but in human conduct they are liable to be intertwined. The problem becomes even more acute if one supposes a mixture of motives. Suppose - and this may not be far from the truth - that the purchaser’s motives were in part to take the farm from Geoffrey, and in part to distribute it between Geoffrey and his brothers and sisters, but not at all the obtain any benefit for herself; is this acting in "good faith" or not? Should family feeling be denied a protection afforded to simple greed? To eliminate the necessity for inquiries of this kind may well have been part of the legislative intention. Certainly there is here no argument for departing violently from the wording of the Act."

With the reasoning and conclusions of the learned Lord of Appeal I respectfully agree.

In this court then, the question is should section 100 of the Act be construed so as to introduce a requirement that to gain the protection therein provided the acquisition by the owner of the registered interest must be in good faith? I am not prepared to give it such a construction. First, to do so, in the words of Lord Wilberforce, which would destroy the usefulness of it. Second, as there is an express exception to that protection in the proviso it would have been an easy matter for the legislature to exclude expressly an acquirer who was not in good faith. It did not do so and in my view it would be an act of judicial legislation going beyond interpretation for this court to hold that such an exception should be implied in the section. In reaching this conclusion I am assisted by the fact that in section 108(2) the legislature has expressly referred to "a bona fide purchaser." I therefore find that section 100 should be construed in accordance with the language used as embodying no requirement that the acquisition of the rights said to be protected must have been "in good faith". Thus for the purpose of that section it is not necessary for me to consider the good faith or otherwise of the Defendant in acquiring the rights in the land which became a registered interest.

That is not however the end of consideration of section 100 as it is argued for the Plaintiff that the Defendant holds as trustee and therefore the proviso expressly excludes the Defendant from protection of the section. The argument is based on general principles of equity and it runs thus: On signature of the Plaintiff's contract Gubbay (New Hebrides) become trustee for the Plaintiff under the general equitable rule that a vendor becomes a trustee for the purchaser of the interest contracted to be sold (see Howard v. Miller (1915) A.C 318 at 326, 238, 239) .

Further as there is another equitable rule that a purchaser who takes with notice of the prior equity of another is fixed with the equity the Defendant becomes a trustee itself (see Peffer v. Rigg ab. cit at page 752 c). In this case it is then submitted on e facts that the Defendant had notice, either actual or constructive, of the Plaintiff's prior contract and therefore the Defendant is a trustee for the Plaintiff and takes the land only as such.

First one must consider whether the Act has had any effect on the application of these equitable rules. Although in relation to other registration systems the Courts have frowned upon the mixing of too much equity with statute law (see Assets many v. Mere Roihi [1905] UKLawRpAC 11; (1905) A.C 176 at 210 a New Zealand case) 1t is submitted by the Plaintiff that the registration system embodied in the Act has preserved equity as applicable in Solomon Islands to registered land. Counsel refers to the express provisions of section 100 and section 108(2) and by implication from other sections which embody the same rules as in equity (e.g. section 101). I have already indicated that, in my view, the Act should not be given a construction which will incorporate in its provision equitable principles unless the express words require that to be done, so that the argument from general implication is not one that appeals to me. However there are express provisions and these must be given careful consideration.

The proviso to section 100 provides that that section does not "relieve an owner from any duty or obligation to which he is subject as a trustee." It should be borne in mind that the equitable rules as to priorities, that is, as to whose equitable interest was first in time and therefore with priority, relate to equities which "attach to the property" (see Snell, Principles of Equity 27th Edition at page 45). It may, with some force, be argued that the proviso to section 100 was intended to preserve the liability of a trustee to be sued in personam for any breach of his "duty or obligation" despite the fact that he holds on the face of the Register free from all other interests. This argument would be based on the word "he" which carries a personal connotation.

When one turns to section 108(2) one finds again the words "owner" and "trustee". In my view the proviso to section 100 and section 108(2) should be read together. There is no comparable section to section 108(2) in other legislation elsewhere but then our legislation does not have a section absolving the person receiving the registered title from enquiries as to prior title or to the application of purchase money and providing that notice, direct or constructive, shall not affect the transferor.

Against this background let me examine section 108(2). It can be conveniently split into two parts as indicated by the comma and the word "and". Thus the first part reads: -

"Where the owner of (a registered) interest is a trustee he shall, in dealing therewith, be deemed to be absolute owner thereof,"

The second part reads: -

"and no disposition by, (a trustee owner of a registered interest) to a bona fide purchaser for valuable consideration shall be defeasible by reason of the fact that such disposition amounted to a breach of trust."

This division is for convenience only as clearly the subsection must be read as a whole. But it appears to me that what the draftsman was attempting to do was to give protection to a registered owner against unregistered trust interests. In the first part by "deeming" the trustee owner to be absolute owner he was endeavouring to wipe the title clear of unregistered equitable interests. In other words, a purchaser would get a title unfettered by equitable interests in acting upon reliance on the register. This means that a person dealing with a trustee owner need neither enquire into the nature of the trust nor enquire whether the trustee was dealing properly with the trust interests or with the purchase money. As far as the purchaser is concerned he is dealing with an absolute owner. It is debatable, in view of the wide terms of the first part, whether or not the second part of subsection 108(2) is tautologous. It could be argued that a clear title received from an absolute owner would not be defeasible by reason of a breach of trust as the person registering the new title could not be fixed with a trust situation which the statute has deemed did not exist. However the vendor trustee must of course be subject to personal liability for the breach, hence the need for the proviso to section 100.

Giving the second part of subsection 108(2) such effect as one can, I read that part as taking effect to prevent the constructive trust rules from applying to dealings with registered land under the Act where the transfer is bona fide for value. The essence of the constructive trust is that trust property is received with actual or constructive notice; that is notice that it is trust property and that the transfer is in breach of the trust (see Snell ab. cit. at page 186; the second head of constructive trust set out in paragraph (ii) on page 187 is not relied upon in this case but there too there must be a breach of trust at some stage). As subsection 108(2) expressly provides that the disposition shall not be defeasible by reason of the fact that it amounted to breach of trust, then the Act removes an element essential to the creation of a constructive trust namely, the breach of trust itself insofar as a bona fide purchaser for value is concerned. Therefore it cannot be said in relation to our legislation, as Graham J. said in relation to the English legislation, that, even if the statutory provisions were successful in "striking off the shackles" of a prior trust, the purchaser with notice that the transferor is in breach of trust must have a new constructive trust imposed upon him by equity (see Peffer v. Rigg ab. cited at page 752 (c); although in that case the bona 1des of the purchaser was also in question). By removing defeasibility on the grounds that the transfer is a breach of trust the draftsman has rendered the equitable rules relating to notice, direct or constructive, irrelevant in situations to which the later part of the subsection apply. This interpretation not only accords with the words of the Act but with the intention underlying this, and other, systems of Land Registration.

What has been done, however, is to restrict the protection in the second part of the subsection 108(2) to "bona fide purchaser for valuable consideration". I need not consider the question of valuable consideration in this case. But it has been submitted that the Defendant cannot be described as bona fide purchaser. Counsel for the Plaintiff submitted that this expression meant the same as "without notice" in the cases upon the equitable principles. As I have indicated, I prefer to interpret the statute on its express words; if the legislature had wished the expression to be "bona fide, without notice" it could have said so. Even then I, for my part, would be reluctant to import into registration legislation equitable doctrines of constructive notice without a clear indication that was the intention of the legislature. I consider that the expression "bona fide" should be read together with section 209 and in particular subsection (2) of that section. If it could be said that in this legislation fraud is the antithesis of bona fide, then a structure would be provided into which these two sections would fit without strain; on the one hand a person who acts without fraud (that is bona fide) gets an indefeasible title and the register is not subject to rectification by the court; on the other hand the person who is contaminated with fraud (that is who is not bona fide) has a defeasible title which is subject to rectification.

The authorities which have been cited to me and Midland Bank Trust Company Ltd v. Green (ab. cit) support the proposition that expressions in registration legislation should be given meanings to accord with the purpose of that legislation rather than to reflect concepts used elsewhere in law and equity. Although there has been wide judicial agreement on the general meaning to be given to the word "fraud" in such legislation, understandably views have varied as to which facts fall within that meaning. The locus classicus on the subject of the meaning of the word "fraud" in Torrens legislation is Assets Company Ltd v. Mere Roihi (ab. cit). Lord Lindley said in delivering the judgment of the court at page 210: -

"Passing now to the question of fraud (the appropriate sections of the New Zealand legislation) appear to their Lordships to show that by fraud in these acts is meant actual fraud, i.e. dishonesty of some sort, not what is called constructive or equitable fraud - an unfortunate expression and one very apt to mislead, but often used, for want of a better term, to denote transactions having consequences in equity similar to those which flow from fraud" and at page 212: -

"The Lordships cannot help thinking that the equitable doctrines of constructive fraud have weighed too much with the Court of Appeal and have induced it to impute fraud to the Assetts Company, although no dishonesty by the company or its agent was really established".

The question for determination is whether such actions on the part of the defendant company amounted to honesty or to dishonesty fraud or bona fides - within the meaning of the Land Transfer Act"

The learned judge, then, was regarding fraud and bona fides as antithetic and synonymous with dishonesty and honesty. As, I have indicated this is a view which accords with the structure of the Act and one which I gratefully propose to adopt.

I have had a number of cases cited to me as examples of the ways courts in various parts of the world have approached different facts in deciding what is, and what is not, dishonest. I have given consideration to those cases and the most useful summary of them in the article by Professor Douglas J. Whalan entitled "The Meaning of Fraud under the Torrens System" (1975) 6 NZULR 207. What seems clear is that the New Zealand courts have been more ready to find dishonesty than have the courts of Australia despite the fact that the Australian legislation omits words which one would have thought would strengthen the case of a New Zealand transferee. Lord Buckmaster said in the Privy Council in the Waimiha Case (ab. cit. at page 106): -

"If the designed object of a transfer be to cheat a man of a known existing right, that is fraudulent, and so also fraud may be established by a deliberate and dishonest trick causing an interest not to be registered and thus fraudulently keeping the register clear. It is not, however, necessary or wise to give hypothetical illustrations of what may constitute fraud in hypothetical conditions, for each case must depend upon its own circumstances. The act must be dishonest, and dishonesty must not be assumed solely by reason of knowledge of an unregistered interest."

Accepting the learned law lord’s intimation that each case must depend on its own facts I do not intend to consider in detail in this judgment the facts of the cases which have been cited most helpfully to me but to go to the facts of this case and consider the question of whether the Defendant company can be said to have committed fraud or whether it is in this case a purchaser bona fide.

The prime actor on the behalf of the Defendant was Mr K. G. Williams and it is on the basis of his conduct that the Plaintiff submits that fraud or lack of bona fides can be established. It is suggested that Mr. Williams was aware throughout of the Plaintiff’s contract and his conduct in proceeding with the purchase of the land and its registration was with the intent of defeating the interests of the Plaintiff and that this amounted to dishonesty. Mr Williams denies such knowledge and denies any intent to defeat the interests of the Plaintiff by obtaining registration. Thus the issue on those aspect of the matter is in the first instance one of fact to be decided upon the evidence which I have heard.

The first observation on the facts I make is that the conduct of Mr Williams must be seen against what, on any view, appears to be a complex business situation. Mr. Gubbay is a director of the Plaintiff. He was also founder of Gubbay (New Hebrides). There is a further company D.J. Gubbay &. Co. (Solomon Islands) Limited which has come into the case. The relationship between these companies inter se and between the companies and Mr Gubbay himself has not been made clear to me in this case and there is no reason to think it was any more clear to Mr Williams. At one stage (see the tender notice) it did not even appear to be clear to the agent for the liquidator of Gubbay (New Hebrides). The second observation is that this is registered land and a person dealing in such land is entitled to rely to some extent upon the register. There is provision in the Act for the entry of caveats in the Register to protect interests by preventing registration of further dealings while a caveat is in force. In this case Mr Williams says that he accepted from the fact that the caveat of the Plaintiff had been removed that he was entitled to proceed otherwise he would not have paid money to get a title. It has not been argued that as a result of the Plaintiff failing to prevent their caveat from lapsing the Plaintiff is unable to claim a prior interest as a matter of law (see Abigail v. Lapin (1934) A. C. 491). But it is, in my judgment a material actor in assessing honesty or dishonesty that Mr Williams and those acting for the Defendant proceeded on the basis that the register at the time of payment of the purchase price showed no caveat of the Plaintiff. It will be remembered that Lord Wilberforce in Midland Bank Trust Co. Ltd v. Green (ab. cit) was of the view that "if the purchaser had notice of the option, and decided nevertheless to buy the land relying on the absence of notification, nobody could contend that she would be lacking in good faith. She would merely be taking advantage of a situation which the law has provided, and the addition of a profit motive could not create an absence of good faith." With the necessary substitution of the "Plaintiff’s contract" for "option" and "caveat" for "notification" we have, on the Plaintiff’s case alone, a situation in this case not too dissimilar to that in which Lord Wilberforce said no one could contend there was lack of good faith.

On the evidence it is submitted to me that I should not be impressed by Mr. Williams as a witness. On a number of occasions it was suggested that Mr Williams acted in a manner not compatible with the conduct of a man of business. Mr Williams is an elderly man. He suffers from deafness and he also appeared to be a man who would prefer to use five words when two would do. The combination of those features made the full and fair cross-examination of Mr Williams a hard task. However observing Mr Williams closely I did not form the view that he was an unsatisfactory witness; indeed I found that his conduct in this case was all of a piece with his conduct in the witness box, that is, it was the conduct of a man who would do something impetuously and then lose interest in it and let matters take their course.

I turn now to the evidence of Mr Williams’ knowledge of the Plaintiffs contract. It can not be suggested that the original tender of the Defendant on 31 March 1980 was anything except a proper response to an invitation to tender. Such an invitation would entitle Mr Williams to proceed, as he said he did, on the assumption that tenders from all persons (including the Plaintiff) were on a highest bid basis. We know now that in fact a contract was signed by the Plaintiff and the liquidator on 29th April 1980. There is no suggestion that this contract was actually brought to the attention of the Defendant. Mr Williams said "I know from scratchy indications that negotiations (between the Plaintiff and the liquidator) were going on. I did not know what the subject matter of the agreement was." The other evidence on this aspect of the case was, first, from Mr Freeman, the agent for the liquidator, who said that early in May Mr Williams came -to his office and said he had heard rumours of a contract between Mackintosh (the liquidator) and the Plaintiff. Mr Freeman refused to discuss the matter. Mr Williams said he did not ask Mr Freeman about negotiations going on with the Plaintiff although on being pressed his certainty dwindled. I accepted this conversation took place. It is however consistent with Mr Williams’ evidence about his limited knowledge of negotiations. There was also some evidence from Mr Gubbay that on social occasions before the end of June Mr Williams insisted he would get the land "despite our activities to prevent him." Mr Williams was as vague as Mr Gubbay on the conversations he had had on social occasions with that witness. I do not find this takes the matter much further.

I am also asked to infer from the lodging of the caveat on 13 May 1980 that Mr Williams was aware of the Plaintiff’s contract. Mr Williams said that lodging of this caveat was on the basis that he had heard rumours that his bid was the highest although he had no official notification to that effect. It was lodged, he said, as an indication of "buyers beware". Mr Drake said that he and Mr Williams went to the office of the Registrar of Lands and there found that caveats were possible. Mr Drake has a vague recollection about a conversation about a contract between the liquidator and the Plaintiff. What is clear is that on an indication from the ‘Plaintiff that the caveat was illegal Mr Williams promptly withdrew it.

In all the circumstances of this case and after hearing and seeing the witnesses I find that Mr Williams was not aware of the Plaintiff’s contract during the period up to this removal of his own caveat. The highest it can be put, to use his own words, was that he had "scratchy indications" of negotiations. I do not consider that there was anything like sufficient indication to put Mr Williams in a position to make further inquiries or enable it to be said that he wilfully closed his eyes to the situation. As far as the caveat is concerned I find that that was an act of impetuosity based on a belief that as highest bidder he should put others on notice of his interest.

Turning to the period following removal of his caveat, I have indicated that on the same day (3rd June 1980) the Plaintiff entered its own caveat. In the meanwhile on 29th May 1980 Mr Williams had been informed that his bid was successful by the agent for the liquidator. On the 6th June 1980 a contract was signed. On 25th July 1980 the transfer document was signed. As to the completion of the financial details Mr Williams says he left that entirely to his Bank and the evidence is that in Solomon Islands it is in fact Banks who deal with Conveyancing of registered land.

Can it be said, accepting for the moment that Mr Williams should be taken as having knowledge of the Plaintiffs contract from the entry of the caveat on 3rd June 1980, that he acted dishonestly in signing these documents? There is, first, no evidence that he was acting otherwise than at arms length with the liquidator. He had made a proper bid and it had been formally accepted. Second, there is no evidence that he had put any pressure on the liquidator or that the documents were signed or filed with undue haste. Indeed, if anything, there is evidence of a desultory course as the Defendant’s contract provided for completion on 16th June 1980 but no completion took place until the end of July 1980. Third, the removal of the Plaintiffs caveat, vital to the transfer being registered, was effected without any act or encouragement by Mr Williams. Indeed I find he had and has no knowledge as to why that caveat was removed. Fourth, I find that the Defendant or its agent was, in proceeding with the transfer, relying on the clear title shown on the face of the Register.

A point is taken by the Plaintiff that payment of the purchase price was made after title was granted. If by that it is meant that the transfer was signed and lodged before payment was made that would appear correct although the title was not registered until some days later. I am told that it is unusual for the documents to be lodged before the purchase price is paid. Mr Williams said this was all a matter for his Bank and he had no knowledge of it. I accept his evidence. I cannot say that this course, albeit unusual, in any way indicates to me that I should draw an inference that Mr Williams or indeed his agent the bank was pursuing a dishonest course. Taking the evidence on this period as a whole I find that Mr Williams (and hence the Defendant) and its agent pursued an honest course which made the Defendant a bona fide purchaser ‘at the date of the disposition of the land to it.

Looking at the evidence as a whole I find that I am satisfied that the Defendant did not act with fraud at any stage nor is it tainted with fraud within the meaning of Section 209(2) of the Act.

These findings of fact have the following results: -

(a) that the Defendant is entitled to the protection embodied in Section 108(2) in that its title is not defeasible even though the disposition to it may have amounted to be a breach of trust;

(b) that, if the Defendant is "an owner who is in possession," it is entitled to the protection of Section 209(2) and this court has no power to order rectification.

As to the question of whether the Defendant is "an owner in possession" for the purposes of section 209(2) counsel for the Plaintiff submits that the vital time is the time of registration rather than the time when the court is considering the application for rectification. He cited no authority for that proposition which to my mind imposes an undue strain on the words used. As I pointed out the effect of that proposition would be to render section 209(2) virtually meaningless as it must be a rare case in which a person is in possession on registration. In this case the Defendant was registered as - owner, and, as such an owner of a fixed term estate it had the right to occupation, use and enjoyment of the land (See section 103(1) of the Act). Subsequently it entered upon the property and from the moment become an owner in possession.

From that time in my judgment the Defendant also become entitled to rely upon the protection embodied in section 209(2) of the Act which is intended to give certainty of title to a person, as in this case, registered without the taint of fraud who has properly entered into possession. I therefore find that the Plaintiff is entitled to the protection of section 209(2) of the Act.

It remains for me to consider whether the Plaintiff can claim an overriding interest under section 104(g) of the Act, as "a person in actual occupation of the land save where enquiry is made of such person and the rights are not disclosed." The way the point is put is that the Plaintiff through its employee was in actual occupation of the land at the date of registration. Thus the Defendant took subject to the rights of the Plaintiff even though those rights were unregistered. Two matters thus arise for determination: -

(a) was the Plaintiff in actual occupation; and

(b) if it was what are the rights protected?

The evidence is that at the time of registration the Accountant of the Plaintiff was in occupation "by virtue of his contract of employment." The nature of that contract has not been explored. It is not suggested that the accountant personally had any rights to the land. What is submitted is that, as he was an employee of the Plaintiff, the Plaintiff had actual occupation itself. This submission is based on Strand Securities Ltd v. Caswell [1965] EWCA Civ 1; (1965) 1 All ER 820. In that case property was sold in relation to which the first defendant had a sublease which was not registered. The first defendant had given possession in turn to a Mrs. Rheinold who was step daughter. Mrs Rheinold was a licensee rent free. The Court of Appeal held that the first defendant was not entitled to the protection of section 70 (1) (a) of the English legislation which is in the same terms as section 104(g) of the Act. Lord Denning said at page 827: -

"Again if the first defendant put his servant or caretaker into the flat, rent free, he would be protected because his agent would have actual occupation on his behalf.

However Russell L.J. at page 829 restricted the wide terms of this obiter dictum somewhat when he said: -

"Suppose it was said that the first defendant employed a resident caretaker to look after the flat in question, would he not be a person in actual occupation: I think that that is correct. Then it was argued, that is because the caretaker would be his licensee, bound to go at the will of the first defendant: and that was the position of his step-daughter. I think, however, that there is a distinction between occupation by the caretaker as a matter of duty on behalf of the first defendant, and the occupation of the step-daughter on her own behalf: both are licensees, but the caretaker, by her occupation for which she is employed, is the representative of the first defendant, and her occupation may therefore be regarded as his. The proposition that in each case the first defendant is in actual occupation because neither caretaker nor stepdaughter has a right to occupy independently of him seems to me too broadly stated and to ignore that distinction. I do not say that a contract of employment or agency with the person residing there is essential to actual occupation by the other person."

It seems to me that the important words here are "occupation by the caretaker as a matter of duty on behalf of the first defendant" and "the caretaker, by her occupation for which she is employed, is the representative of the first defendant, and her occupation may be regarded as his."
In the present case there is no evidence that the accountant was employed to occupy the land or that he occupied the land as a matter of duty. Indeed such a state of affairs seems most unlikely in the case of an accountant. Nor is there evidence that he was anything more than a licensee at will. Again of which company he is a licensee at will is not clear and counsel was unable to point to any evidence which assists me upon how the accountant of one company comes to be in occupation of the property of another company. In all the circumstances I am unable to come to the conclusion that the occupation by the Accountant was as representative of the Plaintiff in a way that would make the occupation by the Accountant the occupation of the Plaintiff.

Were I to be wrong on that point I would have to consider the rights of the Plaintiff which are protected under section 104(g) of the Act. In my view that paragraph is intended to protect the rights of an occupier by virtue of which he is in occupation rather than the interests at large of the occupier in the property. The paragraph is intended to ensure the enquiry is made of a person on the premises to find out on what basis he is in occupation. As I have indicated, there is no evidence which shows that the Plaintiff had rights by virtue of which it is entitled to occupation. Were there some kind of lease or tenancy agreement between the Plaintiff and Gubbay (New Hebrides) then the rights under that agreement would be protected. But there is no such agreement before the court. To say that the word "rights" in section 104(g) includes an interest of the Plaintiff such as is claimed in this action seems to me go well beyond the scope of the section.

What can those "rights" be said to be? The Plaintiff claims as purchaser under the Plaintiff’s contract. Of such a situation Lord Parker of Waddington in delivering the judgment of the Privy Council in Howard v. Miller (ab. cit) said at page 326: -

"It is material to consider what this interest really was. It is sometimes said that under a contract for the sale of an interest in land the vendor becomes a trustee for the purchaser of the interest contracted to be sold subject to a lien for the purchase-money; but however useful such a statement may be as illustrating a general principle of equity, it is only true if and so far as a court of Equity would under all the circumstances of the case grant specific performance of the contract. The interest conferred by the agreement in question was an interest commensurate with the relief which equity would give by way of specific performance, and if the Plaintiff Miller had in his application attempted to define the nature of his interest, he could only so define it. Further, if the registrar had, as in their Lordships’ opinion he ought to have done, specified on the register the nature of the interest which he registered as a charge, he could only have so specified it. Had he attempted further to define the interest, had he, for example, stated it as an equitable fee subject to the payment of the purchase-money, he would have been usurping the function of the Court, .and affecting to decide how far the contract ought to be specifically performed. As a matter of the fact the registrar did not, any more than the plaintiff Miller, attempt to define the interest in respect of which registration was granted. He granted registration, having (their Lordships will assume) first entered a copy of the agreement in the register of instruments under section 116, but the register merely shows that the Plaintiff Miller is entitled to a charge under the agreement on the land in question, and leaves the nature of the charge to be inferred. At most, therefore, the plaintiff Miller became the registered owner of an interest commensurate with the interest which, under all the circumstances, equity would decree by way of specific performance of the agreement."

Thus the Plaintiff could in reality in this case only claim as his interest a right to go to a Court of Equity (in Solomon Islands the High Court) to claim specific performance. It is not until the court has decided that he is entitled specific performance that he has an equitable fee in the land. It cannot be said then, that at the date of registration the Plaintiff has a right to possession on the land by virtue of his contract (a different situation might have obtained) if the purchase price had been paid (see Bridges v. Meer (1957) 2 All ER 577 as applied in William & Glyns Bank v. Roland [1980] UKHL 4; (1980) 3 WLR 138 per Lord Wilberforce at page 146 d). The interest of the Plaintiff protected under section 104(g) could only be specified in the way Lord Parker of Waddington defined the interest in Howard v. Miller (ab. cit). The Plaintiff has not lost his right to claim specific performance against his vendor although the extent to which that ought be granted may have been affected by the transfer to the Defendant. On that ground too, in my view, the protection of an overriding interest under section 104(g) is not a matter upon which the Plaintiff can rely in seeking the relief claimed in this action.

In my judgment, then, the Plaintiff is not entitled to the relief claimed in his writ and statement of claim.

In relation to the counter claim it is not disputed that the conduct of the Plaintiff kept the Defendant out of possession of the land, to which I have now found it was entitled, for a period of two and a half months.

The agreed rent for such period was at a rate of $350.00 per month making a total $825.00. The Defendant is entitled to this sum as damages.

ORDER: Judgment for the Defendant on the claim which is dismissed.

Judgment for the Defendant against the Plaintiff on the counter claim in the sum of $825.00

That the Plaintiff do pay to the Defendant its cost of this action.