Westpac Banking Corporation Ltd v Sawane [1999] SBHC 62; HC-CC 365 of 1996 (4 June 1999)

HIGH COURT OF SOLOMON ISLANDS

CIVIL CASE NO: 365 OF 1996

WESTPAC BANKING CORPORATION

-v-

FRANCIS SAWANE

(PALMER J.)
CIVIL CASE NO: 365 OF 1996

HEARING: 18TH JANUARY 1999
JUDGMENT: 4TH JUNE 1999

A. RADCLYFFE FOR THE PLAINTIFF
A & A LEGAL SERVICE FOR THE DEFENDANT

PALMER J.: On or about 30th October 1989, Francis Sawane ("the Defendant") obtained a loan of $80,000-00 from Westpac Banking Corporation ("the Bank") (see Bank Statements at pages 79 & 80 of the Bundle of Agreed Documents) under account number 01-817861-20. Repayment of the said loan was secured by a first charge taken over the fixed-term estates in Parcel Nos. 171-001-253 and 171-001-254 held by the Defendant (see Document No. 3 at page 14 of the Bundle of Agreed Documents).

At the same time the Bank entered into a lease agreement with the Defendant for the lease of the said fixed-term estates in Parcel Nos. 171-001-253 and 171-001-254 (hereinafter referred to as "the Leased Property"). A copy of the lease agreement is marked Document No. 2 at page 2 of the Bundle of Agreed Documents (hereinafter referred to as "the Lease agreement"). The Leased Property contained a two story building; a top floor and ground floor (hereinafter referred to as "the Leased Premises"). The top floor consisted of a single unit, whilst the ground floor consisted of two units; a front unit used by the Bank for its Auki Branch and a separate unit at the back.

It is apparent from the evidence adduced before this Court that the parties had agreed that rental of the Leased Property would be directly credited towards repayment of the Defendant's loan account. This is confirmed by the payments reflected in the bank statements of the Defendant's loan account (see Document No. 16 at page 53),

THE PLAINTIFF'S CLAIM.

The Plaintiff claims the loan repayments had not been kept up to date and have gone into arrears. On or about 7th November 1996, a demand was made for the repayment of monies due but that this had not been complied with. The Plaintiff seeks judgment for the amount of $91,384.16 plus interest at 21.50% with effect from 6th December 1996 and an order for the sale of the Leased Properly.

THE DEFENCE.

The Defence of the Defendant is two-fold. First he claims the Plaintiff owes him rent. Secondly, the Plaintiff had breached a "1995 lease understanding" by terminating the lease in June 1996 and thereby causing him damages. The counter-claim of the Defendant repeats the defences, claiming rental payments owed and damages for breach of the Lease agreement.

THE ISSUES.

The issues for determination arise essentially from the Lease agreement entered into between the parties; whether any rental is owed by the Bank to the Defendant and whether there had been any breach of the Lease agreement.

THE EVIDENCE.

Facts not in dispute. The Lease agreement was entered into between the parties on or about 30th October 1989 for a period of five years. Rental was fixed at $2,500-00 per month for both properties; this included both floors of the whole building. Initially it was contended by the Defendant that separate rental rates applied to both properties but this was abandoned at the hearing of this case. It was also not disputed that rental for the said Leased Premises was commenced in June 1990 (see transcripts of Francis Sawane under cross-examination).

On or about 28th June 1990, the Plaintiff sub-leased the rear part of the ground floor to Coral Seas Ltd (see Document No. 7 at page 40 of the Agreed Bundle of Documents; also see transcripts of evidence of Francis Sawane in cross-examination). That sub-lease was vacated on or about September 1995 (see pleadings "Reply and Defence to Counter-claim" paragraph 2(v)).

Also it appears there was a verbal agreement that the rent was to be increased at the rate of 10% every year (see Defendant's Further and Better Particulars of Defence filed 29th April 1997 at paragraph 2(c)(ii)). This is consistent with the increased rental as reflected in the bank statements of the Defendant for the period June 1990 to July 1994. The rental as reviewed in November 1993 was $3,400-00 per month, less with-holding tax, the balance paid came to $3,060-00 per month. See also the transcripts of evidence of Kevin Bernard McCarthy under cross-examination.

Facts in dispute. In August 1994, the rent was reduced to $2,250-00 per month. This was maintained for a period of six months. Kevin Bernard McCarthy stated in evidence that discussions were held with the Defendant in June 1994 about releasing the top floor because the Bank Officer using it for accommodation had decided to live in the Village. He states this had been agreed to by the Defendant. The Defendant on the other hand denies this. Unfortunately he cannot point to any evidence in support of his denial. The payment of the reduced rent as reflected in his bank statements is consistent with such variation. There is no evidence to suggest that the Defendant at any time raised any objections about that variation. He had stated in evidence he received a copy of the bank statements each month and therefore would have been aware of the reduced rental payments. If he disagreed, he could have raised objection early. He did not do that. I am satisfied there had been a variation of the rent by mutual agreement between the parties, consideration having been provided by the Defendant by forbearing to take any action at the said time. Further, even if the Defendant disagrees, I find on the evidence before me he had waived his right to require that the Lease agreement be performed according to its original tenor. I am satisfied there was a variation of the Lease agreement in August 1994 whereby the rent was reduced to $2,250-00 per month for the months of August, September and October of 1994.

A RENEWED LEASE AGREEMENT?

In October 1994, the Lease agreement expired. The Defendant argues in his Counter-Claim the said Lease agreement was renewed on 7th March 1995. A copy of that purported renewed lease agreement is marked Document No. 6 at page 30 of the Agreed Bundle of Documents. That document had been signed it seems by Mr Sawane. In his evidence before this Court he confirmed signing that document. In his pleadings however, he denied signing the said document on the grounds that the Plaintiff had refused to pay rent for the top floor of the Leased premises (see Counter-Claim of the Defendant at paragraph 8). The Defendant maintained his denial in his Further and Better Particulars of Defence filed on 27th March 1997 at paragraph 6. In his Reply to Counter Defence, filed 26th May 1997 at paragraph 1(g) the Defendant again denied signing the said lease. The only logical explanation for this discrepancy it seems would be that the Defendant had forgotten he had signed the said lease until it was brought to his attention in court.

That Lease however was never signed by the Plaintiff. It would seem, though this was not directly raised in evidence, that the reason for not signing the Lease may have been due to disagreements with the rent to be charged for the premises. It appears the Bank was only prepared to pay rent for the use front part of the ground floor as its Auki branch but not for the rest of the building.

Apart from the evidence of the Defendant that he signed the Lease on 7th March 1995, he had produced no other evidence to support his claim that the Lease agreement was renewed on the said date. The Document No. 6 at page 30 of the Agreed Bundle of Documents speaks for itself. I reject his submission that the Lease was renewed on the said date. In the circumstances the provisions of sections 145 and 154 of the Land and Titles Act apply to that Lease. Section 154 states as follows:

"(1) Where a person, having lawfully entered into occupation of any land as lessee, continues to occupy that land with the consent of the lessor after the determination of the lease, he shall, subject to any written law and in the absence of any evidence to the contrary, be deemed to be a lessee holding the land on a periodic tenancy on the same conditions as those of the lease, so far as those conditions are appropriate to a periodic tenancy."

The Lease accordingly was converted to a periodic tenancy by operation of law from November 1994. From November 1994 to January 1995, the rent charged was $2,250-00. Note this was only in respect of the ground floor; the top floor having been vacated by consent in July 1994 and the rent reduced accordingly. In February 1995, the rent was increased back to $3,400-00, by virtue of the fact the Plaintiff had decided to re-occupy the top floor. This was maintained for a further period of ten months until December 1995 when it was reduced to only $1,200-00 per month. The reason given for the reduction was that the Plaintiff no longer needed the top floor and the rear part of the ground floor. Only the front part of the ground floor was used by the Plaintiff.

The Defendant stated in evidence he did not agree to this new arrangement. Unfortunately he took no steps to terminate the agreement or to lodge any objection with the Plaintiff. There is clear evidence which showed the reduced rent was paid without objection for a further period of six months from December 1995 to May 1996. I am satisfied there was a variation of the periodic tenancy regarding the rate of rent to be charged on December 1995. I also find the Defendant had waived his right to require that the periodic tenancy be performed according to the terms of the original Lease agreement.

On 17th June 1996, the Plaintiff gave written notice to the Defendant of its intention to close the Auki branch and to vacate the premises by 7th July 1996.

BREACH OF LEASE AGREEMENT?

The Defendant submits there had been a breach of the Lease Agreement which was purportedly signed by the Defendant on 7th March 1995. Unfortunately, I have ruled against the Defendant on the existence of any such Lease agreement. Accordingly there could not have been any breach of any such lease and no expectation that the premises would be leased to March 2000.

On the question of notice given to terminate, this is covered by operation of law, section 145 of the Land and Titles Act. I quote:

"(1) Subject to any written law governing tenancies -

(a) where in any lease the term is not specified and no provision is made for the giving of notice to determine the tenancy, the lease shall be deemed to have created a periodic tenancy;

(b) where the owner of an estate or a lease (other than the Commissioner) permits the exclusive occupation of the land comprised therein or any part thereof by any other person at a rent but without any agreement in writing, that occupation shall be deemed to constitute a periodic tenancy;

(c) the period of a periodic tenancy created by this section shall be the period by reference to which the rent is payable, and the tenancy may be determined by either party giving to the other notice, the length of which shall be not less than the period of the tenancy and shall expire on one of the days on which rent is payable."

Subparagraph 145(1)(c) above gives the period of tenancy as the period to which rent is payable; in the facts of this case, thirty days or one month. Written notice was given on 17th June 1996. Rental was paid right up to 7th July, 1996. Although this is less than one month, there is no evidence to suggest that inadequate notice was given, or in lieu thereof, one month's rent. I find no breach of termination of the periodic tenancy agreement on 17th June 1996.

The claims for rent owing from the Plaintiff and damages for breach of tenancy agreement must all be dismissed with costs.

This leaves the claim of the Plaintiff for the balance of the loan with interest at 21.50% from 6th December 1996 intact. Judgment accordingly must be entered for the Plaintiff.

Also, the charge taken out over the two fixed-term estates in Parcel Nos. 171-001-253 and 171-001-254 to secure repayment of the said loan has not been challenged or overturned in anyway. Accordingly the order sought for sale of the said properties pursuant to that charge must also be granted.

ORDERS OF THE COURT:

1. Enter judgment for the Plaintiff in the sum of $91,384-16 with interest at 21.50% from 6th December 1996, payable in thirty days.
   
2. Order that the fixed-term estate in Parcel Nos. 171-001-253 and 171-001-254 be put on sale by tender.
   
3. Approval of the Court is to be obtained for the winning tender.
   
4. Dismiss counter-claim of the Defendant.
   
5. Costs against the Defendant.
   

THE COURT