Ika v Szetu [2005] SBHC 96; HCSI-CC 060 of 2003 (8 April 2005)

HCSI-CC 060-03

HIGH COURT OF SOLOMON ISLANDS
Civil Case Number: 060-03

LUCY IKA

-v-

REX SZETU AND REGISTRAR OF TITLES

(Palmer CJ)

Hearing: 20th October 2004
Judgement: 8th April 2005

A.N. Tongarutu (Mrs.) for the Plaintiff
A. Radclyffe for the first Defendant
N. Moshinsky Q.C. and F. Waleanisia for the second Defendant

Palmer CJ: The Plaintiff seeks orders for rectification of the Fixed-Term Estate register in parcel number 191-035-053 ("the Kukum land") on the grounds of fraud. She alleges the Kukum land had been disposed off without her consent and authority as the registered title holder and that registration of the first Defendant had been obtained by fraud.

The initial title to the Kukum land was held by the Kukum Development Company Limited ("the Company"). According to material before this Court Victor Eoaeo (deceased) held 347 shares in the Company. Victor Eoaeo ("Victor") died on 15th June 1979. According to the Plaintiff’s claims, her husband Idarabwe Ika (deceased) (hereinafter referred to as "Ika") had acquired shares in the Company and thereby acquired title as well over the Kukum land. Before he died Ika willed his properties inter alia, the Kukum land to the Plaintiff.

Unfortunately the Kukum land could not be administered as Ika's shares were tied up with Victor's shares which in turn were tied up in his estate; he had died without making a will. In an attempt to expedite matters, the Plaintiff applied for grant of letters in the administration of Victor's estate in Civil Case 130 of 1996. The court heard her application and granted letters of administration to her legal Counsel, Mr. Tegavota by order dated 11th November 1996. The Court also ordered inter alia, that the Kukum land be transferred to her as the beneficiary under Ika's will. On or about 9th December 1996, she obtained registered title to the Kukum land. The widow of Victor, ("Maria") who was residing in Nauru, heard about what was going on and applied for orders to restrain the Plaintiff from dealing inter alia, with the Kukum land. The application was heard on or about 19th December 1996 and interim orders staying in further dealings over that property was granted. Those orders however were never registered in the lands registry as encumbrances against the Kukum land. By order of the court dated 1st July 1999 those restraining orders were made permanent. Again they were never registered. Maria however, sometime back in 1994, had registered a caveat which subsisted. It remained as an encumbrance on the property throughout and in a way provided an indirect protection to Maria's interest.

Sometime in 1998 the first Defendant registered a caveat over the fixed-term estate register to protect his interest over the sale and purchase agreement he had entered into with the Plaintiff. In July 2002 he obtained title to the property after Maria's caveat it seemed had been removed. It is not clear if this caveat was removed by consent or otherwise, but it is evident that sometime in 2000, it was removed, paving the way for the first Defendant to have his interest registered.
Claim of the Plaintiff

The Plaintiff seeks an order for rectification of the land register; in lieu thereof, damages limited to $45,000.00. Her claim is pitched on the basis of a loan or borrowings of a sum or sums of money from the first Defendant totalling some $110,000.00 by 1997. The terms of the loan agreement included inter alia, the following: (i) that repayments would be made when the Kukum land was sold, and or when the Ronwan Account held in Nauru which contained Ika’s phosphate royalties was released to her. She claimed that a "loan document" was executed in 1997 for those monies.

Defence of the first Defendant

The first Defendant does not dispute existence of the court order dated 19th December 1996, but denies knowledge of it at the relevant time. He says the order would not have affected him as he was not a party to the Civil Case 130 of 1996 and because it was never registered against the said fixed-term estate. He relies on a written agreement for sale and purchase of the Kukum land dated 27th December 1996 for $500,000.00. He claims the sum of $55,000.00 was paid on that same day as part payment towards the purchase price.

In December 1997, the Plaintiff verbally agreed to reduce the purchase price to $150,000.00. He says this was done at the request of the Plaintiff as she needed money urgently to finance an overseas trip in December 1997. Title however could not be transferred at that time as Maria's caveat was still registered against the property. The sum of $115,000.00 has been paid towards the purchase price; a sum of $35,000.00 remains outstanding. The First Defendant relies also on a transfer document which he alleged was executed voluntarily by the Plaintiff in December 1997 in the presence of Beti as witness. He also signed as transferee in the presence of the same witness for a consideration of $150,000.00. They did not sign however before an authorised officer. When an attempt was made in July 2002 to have the signatures certified by an authorised officer, the Plaintiff declined. Shortly thereafter he lodged the transfer for registration. It was registered on or about 20th August 2002. He says this should not be interfered with.

The first Defendant also counter-claims for wrongful occupation of the land since 20th August 2002 and for loss and damages. He claims mesne profits for the period 20th August 2002 at $3,000.00 per month and an order for immediate possession of the property.

Defence of the second Defendant

The second Defendant denies any wrong doing on his part. He says there is no allegation of conspiracy in the Amended Statement of Claim and therefore the Plaintiff cannot rely on it in her submissions. He says there is no link with the actions of the officers in the Land's Office. He says there is nothing fraudulent about the registration process as the transfer was lodged prior to the caveat of Roslyn Tapalia. The fact an earlier application number 305 was given to Roslyn Tapalia's application should not be taken as indicating that it should be given priority over the first Defendant's application number 307. Mr Moshinski points out this was a mistake in numbering committed by officers in the Registrar of Titles Office and did not affect priority of registration regarding the first Defendant's application.

Was there a loan agreement or sale agreement?

The first issue for determination is whether a loan agreement was entered into between the parties as opposed to an agreement for sale of the Kukum land? In order to succeed, the Plaintiff must demonstrate on the evidence on the balance of probabilities that such loan agreement/arrangement exists. Unfortunately in so far as that claim is concerned the evidence adduced by the Plaintiff has been vague and ambiguous, evasive and uncertain. In contrast the evidence in support of the existence of a sale agreement is clear and precise. I find the following evidentiary material supportive of the first Defendant's version rather than the Plaintiff's.

(i) There is direct evidence in support of an agreement for sale of the Kukum land between the parties from the evidence in chief of the Plaintiff herself. She admitted in chief for instance that after she received title to the Kukum land (this would be after 9th December 1996) she immediately made plans to sell it! She told the court that part of the reason for wanting to sell the land was to buy a vehicle; she had identified a forerunner vehicle which she wanted to buy. She enlisted Donley Beti ("Donley") to assist in finding a buyer. In this instance, the buyer recommended was Rex Szetu, the first Defendant, who was an acquaintance of Donley. This concession of the Plaintiff clearly supports the first Defendant's version of the existence of a sale and purchase agreement over the Kukum land rather than arrangements for a loan.

(ii) There is uncontroverted evidence in the form of a written agreement for sale of the Kukum land dated 27th December 1996. That agreement reads:

"I, Lucy Ika of PO Box 1001, Honiara being the sole vendor of the Kukum Cinema in parcel number 191-035-53 hereby agree to sell the property for a sum of $500,000.00 to REX SZETU of PO Box 112, Honiara.

Signed by:........... Dated: 27-12-96

I, REX SZETU of PO Box 112, Honiara hereby agree to purchase the property in parcel number 191-035-53 from LUCY IKA of PO Box 1001, Honiara for SBD500,000.00 of which an initial deposit $55,000.00 is paid today on 27/12/96, CHQ. NBSI 046834.

Signed by:............ Dated: 27/12/96"

The Plaintiff admitted signing that agreement at the first Defendant's place at Kukum, in her evidence in chief. Under cross-examination by Mr. Moshinsky however, she denied signing the agreement. Although she conceded that the signature was hers, she denied signing it. She alleges other people signed the agreement. Later in cross-examination, when it was put to her that Donley would say that he witnessed her signature to the second transfer instrument (Exhibit 5) she initially denied this but then conceded signing a document for a loan instead of for a transfer. I find the Plaintiff to be evasive vague and contradictory in her evidence. The documentary evidence speaks for itself and convincingly shows that an agreement for sale of the Kukum land was entered into on 27th December 1996.

(iii) The Plaintiff admitted in chief having received the sum of $55,000.00 for purchase of a forerunner consistent with her earlier admission of the sale agreement. The $55,000.00 was the first down payment or deposit towards the purchase price. There is no evidence to support any suggestion that that payment was intended or meant to be part of a loan agreement. This was confirmed by the first Defendant and Donley in their evidence.

(iv) There is inconsistency with her pleadings in which she claimed that she had borrowed the sum of $110,000.00 when in court she only raised for the first time references to a loan regarding the subsequent payment of $40,000.00 to finance a trip to Nauru and Kiribati in December 1997. The Plaintiff has produced no documentary evidence to support any suggestions that this sum was a loan or part of a loan. The only document claimed to be a loan agreement was none other than a transfer document. Again the transfer document speaks for itself.

Also when contrasted with the evidence of the first Defendant, I find the first Defendant’s evidence to be consistent clear and credible. He says after signing the sale agreement Donley was instructed to prepare a transfer. Donley confirms this in his evidence. He identified exhibit 10 as the transfer instrument he had prepared, his signatures and that of the Plaintiff and first Defendant, which he witnessed at pages 1 and 3. He also witnessed the variation of the amount from $500,000.00 to $150,000.00 (Exhibit 10) and the signatures of the Plaintiff and first Defendant beside the alterations. He says these were done in December 1997 when the Plaintiff was preparing to take her dance group to Nauru and onto Tarawa; she was in dire financial straits at that time and needed money for the trip.

The only way she could induce the first Defendant it seems to part with money was to reduce the purchase price from $500,000.00 to $150,000.00. This was consistent with the variation endorsed for the consideration in the first transfer instrument (Exhibit 10). Donley says he made the alteration on their instructions and also witnessed the Plaintiff and first Defendant's initials on the document. He later arranged for a second transfer instrument (Exhibit 5) to be typed up and again witnessed their signatures. He says Mrs. Roslyn Tapalia accompanied the Plaintiff on that trip to Kiribati. His evidence has been virtually unchallenged and entirely consistent with the version of the first Defendant.

(v) The first Defendant has provided clear evidence of numerous payments totaling some $20,000.00 paid to the Plaintiff in 1997 at her request as part payments towards the purchase price. He maintained records of those payments throughout and has provided receipts to support his claims. His evidence on this has been unchallenged. His evidence about being approached for some more money and for the variation to the purchase price in December 1997 is consistent with Donley’s evidence. In contrast the evidence of the Plaintiff can only be described as being evasive, vague and contradictory. For instance, she describes signing a blank paper when the $40,000.00 payment was made but has not produced a copy of it or even given a clear description of what it looked like. The only document put in evidence by the first Defendant and which consistently bears the signatures of the Plaintiff as witnessed by Donley are the two transfer documents. Explanations provided as to how that document came into existence have hardly been contradicted by the Plaintiff. While she talks about the money ($40,000.00) being borrowed she has not produced any evidence in support of the existence of such arrangement, other than her own. The first Defendant on the other hand has produced evidence which completely contradicts her evidence and renders it unbelievable and untrue. I cannot understand how the Plaintiff would put her signature to a document and still say she did not understand or know what it was. The documents she had put her signatures to speak for themselves.

(vi) In her closing submissions, Mrs. Tongarutu submits that the transfer instruments entered into were unenforceable under the rule of "non est factum". The case for the Plaintiff was that the documents she executed were blank documents which had no writing on them. No documents or evidence in support of the existence of such documents have been produced. In contrast the only documents tendered clearly had writings printed on them. These were prescribed instruments under the Land and Titles Act (see section 201(1)). In the absence of any other document, it can only be concluded that no such other document existed.

The first Defendant on the other hand has been consistent throughout about the existence of a sale agreement and the execution of transfer instruments in the presence of Donley. I have listened carefully to both sides and reject the version of the Plaintiff outright. I do not believe her when she says that the sum of about $110,000.00 was paid pursuant to a loan agreement. I do not see how any reasonable person would part with such a large sum of money with nothing but spurious assurances of repayments of money and which remain unpaid to date.

(vii) Finally, the Plaintiff clearly contradicted herself when she later conceded the existence of the agreement but sought to submit that the variation had been obtained through undue influence. It is important to bear in mind that this was never raised in the pleadings and raised for the first time only at trial. In any event I find no evidence of any forms of undue influence on the part of the first Defendant regarding reduction of the purchase price. To the contrary, the evidence adduced showed that it was the Plaintiff who had offered and initiated the variation so that she could obtain some more moneys from the first Defendant. The first Defendant ensured his interests were protected by requiring that a transfer instrument be executed between the parties to reflect their intentions.

I find accordingly that no borrowing as claimed in the Statement of Claim occurred. I find instead that there was an agreement for sale of the Kukum land initially for $500,000.00 but later reduced to $150,000.00.

The events of July 2002 and thereafter.

Sometime in July 2002, (Roslyn Tapalia fixes date as 24th July) the first Defendant approached her and asked her to verify the signature of the Plaintiff, by completing the verification certificate at page 3 of the transfer instrument. By then both the caveat of Maria and the court order of 19th December 1996 had been discharged. Mrs. Tapalia however refused and insisted on the Plaintiff’s attendance. She asked the first Defendant to return the next day. When both arrived on the following day, the Plaintiff refused to have the document verified. She had had a change of mind and offered instead to refund all the payments made. The first Defendant refused and insisted on the transfer being completed. No agreement was reached and the parties left her office.

What happened thereafter is the subject of this action for rectification.

The Plaintiff alleges fraud in the registration of the transfer instrument in the absence of a properly verified document. She alleges the document was incomplete and therefore ought not to have been processed for registration. The second ground relied on as being fraudulent was the action of the second Defendant in failing to register the caveat of Mrs. Tapalia on the basis that her application was lodged prior to that of the first Defendant. Had her caveat been given priority the transfer would not have been completed by registration.

The caveat of Mrs. Tapalia

On or about 2nd August 2002 Mrs Tapalia lodged a caveat against the Kukum land in an attempt to secure monies totaling some $78,000.00 which she claims the Plaintiff owed her. Mrs. Tapalia alleged that when she lodged her application there was no dealing against the Kukum land by way of a transfer from the first Defendant. She was surprised however to find that the property had been transferred to the first Defendant in priority to her application. The Plaintiff says that the application number 305/2002 allocated to Mrs Tapalia reflected priority in dealing to the first Defendant's application and therefore her caveat should have been processed first.

The first Defendant on the other hand says that following the refusal of the Plaintiff to have her signature verified by an Authorised Officer he lodged the transfer instrument with the Lands Registry for registration. He states this occurred shortly after their meeting with the Plaintiff. He recalls the date as on or about 26th July 2002. Ms. Violet Silas, Senior Registrar in the Lands Registry confirms this. She couldn’t remember the exact date but it was around 26th July 2002. John Hikimae ("Hikimae") of the Lands Office, however confirms that the document was brought to him for verification on that date. His signature on the transfer instrument (see Exhibit 5) at page 3 shows that he appended his signature to the document on the 26th July 2002. The evidence of Hikimae, Violet Silas and that of the Deputy Registrar of Titles, Haelo Pelu regarding date of filing has been consistent throughout and unchallenged. I accept their evidence as correct. They did not however record the date and time of lodgement though as there were yet a number of outstanding matters to be attended to. For purposes of acceptance however, they had accepted the application for processing. This explained why they said a later time and date (11.00 am 30th July 2002) was entered in the application form (Form I C - Exhibit 20) and the number 307/2002 given. It was more an oversight on their part in not recording the details at time of first lodgement. That however did not affect the priority of dealing given to that case. I have listened carefully to the unchallenged evidence of Mr. Pelu and Ms. Silas and accept their explanations on this matter. The fact that a cheque for the application was dated 1st August 2002 is not inconsistent with the explanations provided as to date of lodgement at the Registry Office. Both Ms. Silas and Mr. Pelu pointed out that as they were familiar with the applicant in that case, although there were outstanding matters to be attended to, they exercised their discretion in not rejecting the application outright and instead required that the first Defendant attend to the outstanding matters; such as payment of Stamp duty, payment of application fees, execution of the verification certificate and consent to transfer property from the Commissioner of Lands.

But even if Mrs. Tapalia's caveat may have been lodged first and assuming it had been registered, that does not detract from the fact that she had no caveatable interest on the Kukum land and her application ought to have been rejected in the first instance. The failure to have her caveat registered first therefore would not have made any difference to her rights to have it remain on the register. As her claim is for moneys owing to her as a debt and quite separate to the Kukum land, she had no caveatable interest. Her caveat was therefore an abuse of process.

Validity of the Sale and Purchase Agreement.

It has sought to be suggested that the sale and purchase agreement was incomplete and therefore void from the beginning. That submission however is inapplicable in the facts of this case where the intention of the parties is crystal clear, that the sale and purchase agreement was entered into on the common understanding that it was subject to the removal of Maria’s caveat; it was therefore a conditional agreement, conditional on the happening of a future event and not a void agreement.

Termination by repudiation.

It is not in dispute that on or about 24th July 2002, the Plaintiff had a change of mind. She refused to have her signature verified by an authorised officer and complete the sale transaction. It has been submitted that thereby the agreement was repudiated. Even if that might be the case, the first Defendant was entitled to rely on the document and seek to have it enforced. The alternative action would be to claim for damages for breach of contract. The first Defendant opted to have it enforced as a valid document. The question whether this amounted to fraud is addressed later in this judgement.

Illegal Contracts

It has also been suggested that the sale agreement of 27th December 1996 was illegal? Mrs. Tongarutu submits it was void in the light of the existence of the Court Order of 19th December 1996.

It is not disputed that the Plaintiff was clearly restrained from dealing with the Kukum land. Her actions therefore in deliberately flouting those restraining orders I find to be clearly in contempt of the court orders and liable to punishment. I find it hard to believe that she would seek to rely on that ground of defence when she was clearly in contempt. She definitely has not come to court with clean hands.

The first Defendant on the other hand denied knowledge of the court orders, save the caveat of Maria. There is no evidence to the contrary that he was aware of the court orders either. In fact it has not been denied by the Plaintiff that the first Defendant may not have been aware of those orders. To that extent he was an innocent purchaser of property based on the assurances of the Plaintiff that she had valid title to the property and therefore entitled to rely on the records that the Plaintiff had right to sell the land to him for valuable consideration. The Court Order of 19th December 1996 or other orders were never registered as encumbrances on the land register. It cannot be deemed therefore that the first Defendant had knowledge. Secondly, no attempt was made to have the title in the Plaintiff’s name removed or cancelled at any time to reflect the orders of the court dated 19th December 1996 or 1st July 1999. The first Defendant therefore was entitled to rely on what the Plaintiff had told him that the sale was subject to the removal of Maria's caveat. The submission of a contract being void therefore for illegality cannot be sustained.

The transfer instrument

Was the transfer instrument a valid document? Did it contain/reflect the mind/intentions of the parties in this case? In my respectful view it cannot be denied by the Plaintiff for one moment that that document did not reflect their mind or intentions. Clearly the Plaintiff intended to transfer and the first Defendant intended to acquire that property. It was but reflective of the initial agreement which I have found in favour of the first Defendant for the sale and purchase of the said property. That document therefore was a valid transfer document binding on the parties and capable of being enforced in any court of law. It had the signatures of the respective parties duly witnessed by Donley. The fact that the Plaintiff may have had a change of mind in July 2002 did not affect the validity of that transfer instrument as a document capable of being enforced in a court of law. The first Defendant had option to have that document enforced or to sue for damages. He opted to have it enforced.

Verification of execution

The issue of fraud arises principally from the actions of the first Defendant in lodging the document for registration when the requirements for verification stipulated by legislation had not been complied with.

Section 203 of the LTA provides:

"(1) Subject to subsection (3) a person, other than the Commissioner and a body corporate, executing an instrument required to be registered under section 116, shall appear before the Registrar or a person prescribed as an authorised officer for the purposes of this section, and, unless he is known to the Registrar or such authorised officer, shall be accompanied by a credible witness for the purpose of establishing his identity.

(2) The Registrar or such authorised officer shall satisfy himself as to the identity of the person appearing before him and ascertain whether he freely and voluntarily executed, and appeared fully to understand, the instrument, and shall complete thereon a certificate to that effect.

(3) The Registrar may dispense with verification under this section –

(i) e considers that it cannot be obtained or can be obtained only with difficulty and he is otherwise satisfied that the document has been properly executed; or

(ii) cases in which to his knowledge the document has been properly executed,

(iii) and shall record on the document his reasons for dispensing with the appearance of the parties."

Regulation 8 of the Land and Titles (General) Regulations prescribes a list of persons entitled to act as authorised officers whilst regulation 9 sets out the form of the certificate of verification. No issue is raised regarding the authority of Hikimae to verify that transfer instrument.

The requirements of verification set out in section 203 of the LTA are two-fold: (i) to establish identity of the person executing the transfer instrument, and (ii) to establish volition and comprehension in the execution process.

Issue for determination

The crucial issue for determination in this case is whether what happened in the registration process fraudulent or not? Were the actions of Hikimae in having the transfer instrument verified in the absence of the Plaintiff and the witnessing officer appearing in person before him fraudulent?

The clear answer to this question must be no. There is no suggestion whatsoever that Hikimae had any ulterior motives in appending his signature as the authorised officer to that document. There is no suggestion either that he was aware that the document may have been defective, that it did not contain the true intentions of the parties or that the signatures which he sought to certify as correct were inaccurate or fraudulent! Hikimae gave clear and concise evidence and nothing he has said amounts to fraudulent conduct. He provided reasonable explanations for accepting the document and having it verified in the absence of the parties. He said he was familiar with the first Defendant’s signature and the witnessing officer’s signature, though he conceded he was not familiar with the Plaintiff’s signature. He did explain though that he was satisfied in view of the fact that the document was in the process of being accepted and was of the view that it was a formality to be completed. Whilst there was irregularity in the verification process I am not satisfied it was fraudulent. It is important to note that despite the irregularity, there was nothing wrong with that document. The evidence adduced had clearly established beyond a shadow of doubt that the document had been executed by the parties themselves voluntarily and freely and that they clearly understood what they were doing. In the Plaintiff’s case, she knew what she was doing. I do not believe her evidence or any suggestions that she was confused by the documents, that she was unfamiliar with them, or had not seem them before and therefore did not understand what she was signing, or that the documents were forgeries. I am more than satisfied she was a voluntary and willing participant throughout. All that happened in July 2002 was that she had a change of mind. The first Defendant however elected to enforce the transfer agreement by having it lodged for registration, which he was entitled to do. I have listened to his evidence and that of his witnesses and that of the Plaintiff and her witnesses and satisfied that there was nothing fraudulent about his actions.

I accept the verification certificate may have been incomplete to some extent as a result of the verification section being uncompleted by an authorised officer and that the actions of Hikimae in failing to require the parties to appear before him for verification purposes did not comply with the requirements of section 203. I am unable to accept the argument however that this was fraudulent. The evidence adduced fell sought of the requirements of establishing fraud¹; that fraud is proved “when it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false”. I am not satisfied it had been shown on the balance of probabilities that Hikimae acted fraudulently when he signed the document as the authorised officer. That there was an irregularity cannot be denied, however I am not satisfied it was fatal to the validity of the document or the registration process. The transfer instrument was a valid and binding document as between the parties capable of being enforced and his verification was entirely consistent with their intentions as set out in that document.

In so far as the first Defendant is concerned, he had a valid transfer instrument in his possession and which he was entitled to enforce. The fact the Plaintiff had changed her mind later did not affect his entitlement to proceed with registration. He was entitled to rely on that document as a valid and binding document reflecting the will of the parties and to have it lodged for registration purposes. Whilst there may have been irregularities in the verification of the instrument, I am not satisfied it was fraudulent or fatal to the registration process and to warrant the intervention of this court.

The registration is valid, correctly reflected the will and mind of the parties and ought not to be interfered with by the court.

Counter-claim of the first Defendant

The first Defendant counter-claims for mesne profits since 20th August 2002 at the rate of $3,000.00 per month. No argument to the contrary has been adduced which would require me to find otherwise. The Plaintiff has been in wrongful occupation of the Kukum land since that time and the Plaintiff is entitled to be awarded damages for the loss of the use and enjoyment of the property to be calculated at the rate of $3,000.00 per month to date of judgement. I also award costs in favour of the first Defendant to be taxed if not agreed.

Orders:

Dismiss claim of the Plaintiff.

Grant claim of the first Defendant in his Counter-Claim for mesne profits at the rate of $3,000.00 per month with effect from 20th August 2002 to date of judgment.

Costs of the first and second Defendants to be paid by the Plaintiff, to be taxed if not agreed.

THE COURT.

ENDNOTE:

1. See Derry v. Peek (1889) 14 App. Cases 337 at page 374 adopted by this Court in Henry Ha'aina v. Robert Taloaniwaiau HCSI-CC 331-01