Manepora'a v Aonima [2011] SBHC 79; HCSI-CC 28 of 2009 (1 September 2011)

IN THE HIGH COURT OF SOLOMON ISLANDS
(Faukona, J)

Civil Case No. 28 of 2009.

BETWEEN:

ANDREW MANEPORA'A
Claimant

AND:

BRIAN AONIMA
First Defendant

AND:

ATTORNEY-GENERAL
(Representing the Registrar of Titles)
Second Defendant

AND:

WESTPAC BANKING CORPORATION
Third Defendant

Date of hearing: 23rd August 2011.

Date of Decision: 1st September 2011.

Mr. Marahare for Claimant
Mr. Rano for the First Defendant
Mr. Muria (Jnr) for the Second Defendant
Mr. Radcliff for the Third Defendant.

DECISION ON APPLICATION FOR DECLARATORY ORDERS.

Faukona, J: It would appear, though unclear, that the Claimant is seeking declaratory orders which summed up on page 2 of the claim filed on 4th February 2009; twelve orders in all.

2. The Counsel for the second Defendant is not present but affirm would abide by the rulings of this Court.

3. Most of the facts and exhibits are agreed upon and should not by necessity paraphrase them again. The issue for determination is whether or not there was a fraud as alleged, and if so should the register of fixed term estate in Parcel No. 191-007-54 and 191-009-94 be rectified in favour of the Claimant on the ground of fraud.

Brief background facts:

4. It is not disputed that the Claimant and the first Defendant are first cousin brothers. It is not disputed that the Claimant was the original owner of the property comprised on parcel No. 191-007-54 and 191-007-94. Toward the end of 2002 the Claimant was redundant from his employment with Central Bank of Solomon islands (CBSI). As a package under the redundancy exercise, the Claimant was reminded that his housing loan with CBSI will remain until such time the Claimant secures a loan from the Commercial banks to refinance. In 2003 the Claimant continued meeting his obligation by repaying his loan. In 2004 the Claimant went to USP to pursue his studies. In 2005 the CBSI informed the Claimant to transfer his loan to a Commercial bank since he was no longer their employee. A loan application was filled and submitted but was not approved by ANZ bank.

5. At this time the first Defendant approached the Claimant and asked him to give him the title so that he could secure a loan from ANZ bank to refinance the CBSI loan and when the Claimant return from studies he would surrender the title of the property back to him. In land and property law the first Defendant was willing to act as a trustee.

The Claimant's Case:

6. The Claimant agreed to the proposals on the understanding that the first Defendant upon securing a loan from ANZ bank would refinance his CBSI loan and that the first Defendant be entitled to rental proceeds of the house for 2005 and 2006 whilst he was away overseas. The first Defendant was also responsible for repayment of ANZ loan from the rental proceeds. It was also understood that the first Defendant should not make further mortgage of the property without the consent of the Claimant. Upon return to Solomon Islands the title of the property should revert back to him.

7. Acting in good faith the Claimant instructed a Solomon Islander Mr Willy Hiuare who practice law in Suva, Fiji. Mr Hiuare then had consultations with the first Defendant and later drafted a power of attorney, authorised by the Claimant, appointing Mr John Hauirae as Claimants attorney to sign the transfer documents on his behalf. On 10th May 2005 Mr Hauirae executed the transfer documents with a consideration of $130,000.00. The transfer was registered on 6th March 2006.

8. On 19th May 2005 the first Defendant mortgaged the property as first charge mortgage and secured a loan of $130,000.00 from ANZ bank.

9. The Claimant says the family arrangement was verbally done resulted in the Claimant consented to transfer the title in the property to the first Defendant. The first Defendant failed to honour the understanding and continued to claim ownership over the property.

The 1st Defendant's Case:

10. Before April 2005 the 1st Defendant aware that the Claimant wanted to sell his fixed term estate, including the residential property thereon. This was because the CBSI who employed the Claimant instructed that he must settle his loan. On 12th May 2005, Mr Hauirae informed the first Defendant that he was appointed by the Claimant to have power of attorney to negotiate, sign and execute any document pertaining to sale and transfer of the property. That power of attorney was executed by the Claimant and duly attended by Mr Hauirae as commissioner for Oath. In May 2005 another power of attorney was shown and similar to the previous one but was in standard form. That document was also executed by the Claimant.

11. Before executing the transfer instrument the first Defendant belief that the Claimant had intended to sell the property to him. The first schedule to the transfer instrument signed by Mr Hauirae did not contain restrictions, promises or reservations that upon Claimant's return from studies the property will revert back to him. Hence on 10th May 2005 the transfer instruments were executed by the first Defendant and signed by Mr Hauirae who exercise a power of attorney on behalf of the Claimant.

12. The first Defendant then acquired a loan of $130,000.00 from ANZ bank by mortgaging the property. The money was used to repay the Claimant's outstanding loan with CBSI. In fact the first Defendant says he paid $165,580.90 to CBSI. He rented the property out in order to assist him repay the loan. Subsequently the first Defendant mortgaged the property again to obtain further finance for his business. He claim he was entitled to mortgage the property because he had the title to it.

The Law on "Fraud".

13. Often it is said that upon registration a purchaser acquires an indefeasible title that is, a title which is conclusive and cannot be defeated. It is the title which registration itself has vested on the proprietor. The effect of registration is that it formalises the title in the name of the owner, free from all interest and claim whatsoever and which the law recognizes. That indefeasibility can be challenged by the Claimant if he can show that registration was obtained by fraud or mistake.

14. The High Court has power under section 229(1) of the Land and Titles Act to order rectification of the registration be cancelled or amended where it is satisfied that such registration has been obtained, made, or omitted by fraud or mistake.

15. Under Subsection 2 the Claimant must show in evidence two things;

(a). The first Defendant who is in possession and acquired the interest for valuable consideration had knowledge of the fraud; or

(b). That the first Defendant caused such fraud or substantially contribute to it by his act, neglect or default.

16. Mr Marahare referred to the case of Terry V Peek[1] which legally defined fraud. However he did not make any quote. A relevant paragraph of that case was quoted in a book written by Michael Evans, "The outline of equity, 2nd edition, in paragraph 602 which states;

"Common law fraud requires proof that some false representation has been made knowingly, ie, in the knowledge that it was untrue or at least, with reckless indifference to its truth or falsehood".

17. Mr Rano prefers a definition of fraud in the case of Dalgro Solomon Islands Ltd V Real Estate Proprietor Ltd[2] stated that the fraud that must be proved is actual fraud. And in the case of Tikani V Motui[3] spell out the elements of fraud which include, making false representation knowing or without belief of its truth; dishonest of some sort; intentional pervasion of truth to induce another, anything calculate to deceive.

18. In Blacks Law Dictionary (8th edition) the term fraud mean;

(1) A knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his detriment.

(2) A misrepresentation made recklessly without belief in its truth to induce another person to act. The same dictionary defines actual fraud to mean a concealment or false representation through a statement or conduct that injures who relies on it in acting.

19. In a book, "Introductions to Property Law" (2nd Edition) by Gim Long Teh, paragraph 814, page 81, stated;

"A person who acquires a registered interest through fraud enjoys a defeasible interest that is an interest which may be set aside at the instance of the person defrauded. To render a registered interest defeasible on the ground of fraud, the registered proprietor or his agent must have been privy to it; fraud committed by the person from whom the registered proprietor derived title is irrelevant unless either the registered proprietor or his agent was a party to it or knew of it.

20. Paragraph (815) states, fraud is committed when one party dishonestly deprives another of proprietor rights to which the latter is justly entitled.

21. In Walter Billy V Paul Daukalia and others,[4] the Court of Appeal said,

"The claims of fraud or mistake therefore must necessarily be link to the time when registration was obtained, made or omitted".

22. Fraud may take an almost infinite variety of forms. It embraces a wide concept of fraud from dishonesty, false representation or misrepresentation, concealment of its truth, false representation through a statement or conduct, actual fraud etc.

The Evidence:

23. I have said on the outset that most of the facts in this case are not disputed – see agreed facts filed on 2nd March 2011. Emerge from the evidence at trial, the Claimant and first Defendant conscientiously signed a valid enforceable contact which concluded the meeting of their minds. The question now is whether the contract serves the initial undertaking or not. Also emerge from the trial was the commitment and obligation by the Claimant to authorize Mr Hauirae and vested in him an instrument of power of attorney to act on his behalf in dealing with the interest in the property parcel No. 191-007-54 and 191-008-94, which he did sub- sequentially.

24. Apparently as it seem, after the instrument of power of attorney was signed and delivered upon Mr Hauirae, there was nothing more the Claimant can do. Most of the transactions and dealings involving the entire processes in transfer instruments, application for loan, refinancing of the Claimant's loan from CBSI, and obtaining a receipt for that, was the task which the first Defendant obligated to undertake. And those processes involve documentations. It was the dealings by the first Defendant from contract to registration that this Court will examine thoroughly and scrutinise because it was alleged that his acquisition of the interest which he knew, was done by fraud and him privy and substantially contributed to it by his act.

25. I now turn to the contract itself. A letter of offer for sale of the property at Tasahe Parcel Numbers 191-007-54 and 191-008-94 was signed by the Claimant on 20th April, 2005. The second paragraph specifically expressed that the consideration of $170,000.00 was the sales price. The offer was accepted by the 1st Defendant by his letter of 22 April 2005. Practically to efficate execution of the transfer instrument there ought to be a consideration for transfer. And that is a requirement of the form. If indeed was a contract in the express term alluded by the 1st Defendant then why the consideration agreed upon in the contract did not appear in the transfer instrument, instead a lesser amount of $130,000.00, a short fall of $40,000.00. There was no explanation why it had to be. The first Defendant's entitlement to borrow from the bank cannot determine or affect the sales price agreed upon in the contract which was $170,000.00. Looking at it objectively, there were some fishy dealings going on which tantamount to something unusual.

26. Actual payment for refinancing the Claimant's loan with CBSI amount to $134,371.01 as confirmed by Mr. Vava's letter of 19th May 2005. He was the property and the loans officer who had in his possession records – see page 29 of the Court Book. Why there was ambiguity on the face of the record in respect to the amount received. Was it a mistake or a part of the fraud strategy to advance the first Defendant's agenda? It may be argued this may not link with the registration processes. However in the case of Malaita Development Authority V Marilyn Ganifiri and David Ganifiri, Commissioner of lands and Registrar of Titles,[5] a case decided on the basis of allocation of land by mistake and hence the register was rectified.

27. Fraud or mistake is two elements with equal treatment under Section 229 of the land and Titles Act, which upon proof of it, the High Court may order rectification of the land register. By the above authority, in my humble view, the transfer instruments formalises the agreement which directly link to registration.

28. The most fundamental issue pertaining to this case premise on the power of attorney. In Black Laws dictionary (8th Edition) define power of attorney as an instrument granting someone authority to act as attorney-in-fact for the grantor. The authority granted specifically the legal ability to produce a change in a legal relation doing whatever acts are authorized.

29. By virtue of Section 207 (2) of the Land and Titles Act such power ought to be registered and shall be filed; and subsection (3) requires it be in the prescribed form and subsection (4) the donor at any time can give notice to the Registrar and upon approval revoke the power.

30. The power of attorney formalises the authority by the Claimant authorising Mr Haurae to dispose an interest by executing transfer instruments in a fixed term estate in Parcel Numbers 191-007-54 and 191-008-94 to the first Defendant.

31. The first power of attorney was executed by the Claimant on 12th May 2005, at Suva, Fiji. The problem with that, it lacked form therefore it was rejected. As a result another power of attorney was executed by the Claimant on 14th August 2005. Assuming the second instrument was valid and accepted as proper then any execution of transfer instruments, in those two parcels of lands be appropriately and expectedly occur after 14th August 2005. The problem with the second power of attorney was, it was not registered pursuant to Section 207(2) of the Act. The bottom part of the form tells the story; it was blank and not being filled. Even so Mr. Haurae could not have acted upon the authority of the second power of attorney because it arrived too late, and at the same time was defective for lack of registration.

32. It did not happen in this case. Mr Haurae and the first Defendant executed the transfer of instruments on 10th May 2005, two days before the Claimant executed the first power of attorney on 12th May 2005, in Suva, Fiji.

33. I could not belief a person like Mr Haurae, a professional and experience lawyer and a mature being could have totally ignored his professional duty and execute the transfer instruments without being in possession of the power of attorney instrument at that moment which specifically authorized him to perform specific duties assigned to him by the Claimant.

34. In the alternative, it could also be the case that Mr Haurae had never ever been involved in this case and had never executed any transfer instrument. Mr Manepora'a (Jr) was cross examined by Court in regards to the power of attorney and asked whether Mr Haurae had received any instrument. In answer he said, he asked Mr Hauriae after 10th May 2005 twice who told him that he had never received any power of attorney. That can be true. He could not have acted upon the first one because it was out of form; therefore on the face of it was invalid and rejected.

35. It remains, whatever done to efficate the transfer of instruments in the properties, has to be answered by the 1st Defendant himself. He cannot deny that he does not know about the power of attorney, and lay burden on Mr Haurae. That is a blank excuse. The prospect of owning or acquiring a title in land in urban area like Honiara is a real investment for a person. Once there is chance one has to put more effort and time to advance the processes so that title can be acquired on time as expected. There can be no doubt the first Defendant could have monitored every single stages of the processes and he must have had full knowledge of what actually went on.

36. I noted there are defects in two areas prerequisite to execution of the transfer of instruments. The first is the amount agreed upon if it was a genuine sale; did not appear in the transfer documents. Undoubtedly that must have been the creation by the 1st Defendant himself to advance his agenda. Secondly that there was no power of attorney instrument in the possession of Mr Haurae so as to legally effect the execution of transfer instrument on the date, or even at a later date. The dates on the instruments prove that to be true. The Registrar of Titles too was ignorant, in administering the transfer instruments knowing fully well that there was no power of attorney in existence authorizing Mr Haurae to execute. In the light of that what could have been done, a simple process was not complied with. I noted that there is evidence that first Defendant is related to Mr. Haurae. The rightful conclusion I can infer from the circumstances prevail in this case is that the first Defendant had architectured what subsequently transpired. It could have been no one else as no one else has an interest in the two parcel numbers.

37. With the specific incidences identified, the first Defendant was actually involved. He participated and knew of it all. When cross examined by Mr Marahare his answer reflected he initiated the plan to transfer the titles in the two parcel numbers to himself. That is corroborated to the Claimant's evidence. The first Defendant's offer to assist when he heard Mr Ronia of Central Bank of Solomon Islands conveyed to him that the property be sold. To avoid being sold the first Defendant initiated the plan, which later agreed upon. At first it appeared that the first Defendant acted as a saving grace. Later he deviated and denied any mutual arrangement with the Claimant who is his cousin brother. He persisted that the land was sold to him. If it was done in accordance to his versions, why failed to attend to any discussion with the Claimant after he returned from studies. It reflected something within him is worrying his conscience.

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

The Case against the 3rd Defendant.

39. The Claimant's claim against the 3rd Defendant is by way of seeking an order that the subsequent dealing with the property by the 1st Defendant in mortgaging the same to the 3rd Defendant is null and void for improper transfer of the title and illegal holding of such title by the first Defendant; and non-witnessing of mortgage/security attach to the property by the Claimant's attorney. As such the said property be discharged and detach from the mortgage.

40. It appears undisputed that the 3rd Defendant acted in good faith without notice of any adverse claim. Also undisputed that the registration of the charge was not obtained by mistake or fraud. Mr Radcliffe submits by referring to Section 2 of the Land and Titles Act which define "interest" and "owner". Once a person becomes registered owner of an interest under the Act, he has absolute liberty to deal with that interest according to the title which attaches to it under the Act. An innocent party such as 3rd Defendant is not bound to look beyond the register or look behind any signatures on the transfer of the properties to it. Mr Radcliffe refers to a Samoan case Stowers V Stowers (2010) WSSC 36, which is similar to the position of the 3rd Defendant in this case. He alludes that that case has persuasive authority to Solomon Islands Courts.

41. Mr Marahare agrees with the position of the 3rd Defendant but objects to the Samoa Case which reflect the law in New Zealand in a similar situation; this Court is not bound by that decision.

42. It is common knowledge that this Court is not bound by any decision of a foreign Court, however, those decisions have persuasive authority on our Courts. Whilst there is no authority provided by Mr Marahare as an alternative option, this Court is persuaded to make reference to the Samoan case as persuasive authority.

43. Apart from that, this case is based on land and property law and is expected that common law and equity principles will be at the centre of the process of registration.

44. Further, Solomon Islands and perhaps most of our neighbouring countries adopted the Torrens system of registration to land. I see there is no harm in making references to decided cases in neighbouring countries.

45. To start off with, let's define what is the meaning of the word "purchaser." In the Samoa case I refer to above, on paragraph 63, it means "mortgagee." On the book "Introduction to Property Law" I refer to above, paragraph 632 affirms that the word "purchaser" includes mortgagee a person who acquires a minor interest. Interestingly the author of the book stated in paragraph 1403, "that mortgage of Torrens land is a security of the land. The mortgagor remains the registered proprietor (legal owner) despite the mortgage. On the other hand, the mortgagee has an interest in land arising from the mortgage". And on paragraph 1409 it says "Once a mortgage is registered and upon its registration the mortgagee becomes the registered proprietor of the legal interest in the land".

46 The 3rd Defendant had done that. Section 114 of the Land and Titles Act incorporated a similar notion which says. "The owner of a registered interest in land shall hold such interest subject to overriding interest as any charge created by the provision of this Act or any other written law in respect of land comprised in the interest", see also Section 110 (a) of the Act.

47. So the status of the 3rd Defendant, after I have decided that the 1st Defendant had obtained the property through fraud; the Samoa case says on paragraph 64, "that if the fraudulent person transfer or mortgages to a bone fide purchaser or mortgagee for valuable consideration, the registered title of that bona fide purchaser or mortgagee is indefeasible," which mean cannot be defeated. To add, the author of a book "Land Law" by Peter Butt, 2nd Edition said on page 381, paragraph 3;

"The registered mortgagee acquires benefit of indefeasibility of the title enjoyed by the interest registered".

48. The same author, again reiterate on page 382 stated,

"Nevertheless, the totality of the rights which constitute the fee simple interest in the land are effectively diminished by the registration of the mortgage; and as the mortgage is a security over the whole of the mortgagor's rights as registered proprietor at that time the mortgage is given, the granting of interests by the mortgagor after the grant of the mortgage cannot affect the security obtained by the mortgagee"

49. Therefore the first Defendant having acquired the title by dishonest act, which of course impeached for fraud. There was no fraud on the part of the third Defendant. It was agreed to in evidence. In this circumstance the third Defendant has the right of ownership protected under sections 110 and 114 of the land and Titles Act.

50. Referring to paragraph (1409) above in contrast with what His Lordship Chief Justice Sapolu said in Samoa case paragraph 68, concludes that at the time the 1st Defendant was the registered owner. The mortgage between them was not an equitable but a legal mortgage. His Lordship continued in the same paragraph and said, "The legal estate in the disputed land becomes vested in the fourth respondents as a mortgagee. But the second respondent was entitled to redeem or obtain a reconveyance of the mortgaged property upon payment of the mortgage debt often refer to as mortgagor's equity of redemption. A mortgagor's equity of redemption is an equitable interest. The applicant, the former owner of the disputed lands, would have only a mere equity, would in the context of this case, consist of the right to set aside a deed of transfer for fraud".

51. It has to be made clear at this point that registered mortgages of land under Torrens title are sometimes equated with the legal mortgage of the land under the old system title, with some little differences. One of the differences is that in the old legal mortgage, a title deed was used, whereas in the Torrens title it is labelled as security for money advanced. But the principles related to the status and interest of the mortgagee are the same.

52. His Lordship continued in paragraph 68, "that a mere equity is an equitable right which fall short of an equitable interest in land. The distinction between an equitable interest and mere equity is that a bona fide purchaser for value for an equitable interest whether such purchaser had notice of them or not, but will take free from mere equities unless he or she had notice of them when he or she took the assignment. As such prior mere equity will be postponed to a later equitable interest acquired bona fide without notice of it because the latter is said to be the better equity. In other words, the defence of bona fide purchase for value without notice is available to the owner of the equitable interest against the owner of the prior equity".

"Given that this mortgage under a deed system the fourth respondent as mortgagee of the disputed land which were unencumbered would be vested with legal estate in the land. The Second Respondent who mortgaged the said land to the fourth respondent would have only an equity of redemption which is an equitable interest. The applicant who has been defrauded of the said land would only have a mere equity, that is to say, right to set aside a transfer obtained by fraud. His Lordship concluded that the legal estate vested in the fourth respondent as a bone fide mortgagee for value without notice takes priority over mere equity by the applicant. Therefore it is a complete defence against claim of person with a prior mere equity".

53. Upon those evidence I am satisfied that the case or claim against the 3rd Defendant on those basis hold that the legal estate vested in the third Defendant for value without notice takes priority over prior mere equity which the Claimant holds.

Power to rectify

54. Having satisfied on the evidence that the registration of Parcel Numbers 191-007-54 and 191-008-94 in favour of the first Defendant was done by fraud. It is proper in the interest of justice that the purported registration of the first Defendant over the fixed term estates respectfully must be cancelled. See powers of the High Court under Section 229 of the land and Titles Act.

55. In the case of Malaita Development Authority[6], His Lordship Palmer A CJ, define rectification on page 4, paragraph 4, stated;

"...rectification includes the correction of an error in a register or instrument see Osborn's Concise Law Dictionary sixth edition. In Black's Law Dictionary six edition rectification of register means; In old English Law, the process by which a person whose name is wrongly entered on (or omitted from) a register may compel the keeper of the register to remove (or enter) his name."

56. Apparently rectification is not merely confine to cancellation but correction as well. Section 229 expressly stated that this Court has the power not merely to cancel but amend. The meaning of amend includes changes, correct or revise, see Blacks Law Dictionary.

57. It therefore necessary for me to cancel the name of first Defendant from the register and the name of the Claimant be registered as owner of the fixed term estate property in Parcel Numbers 191-007-54 and 191-008-94.

Orders of the Court.

1. Grant order for rectification of the fixed term estate in Parcel Numbers 191-007-51 and 191-008-94 on the ground of fraud by having the registration in favour of the Claimant, Mr. Andrew Manepora'a, and reinstate the Claimant on the certificate of titles.

2. Grant order restraining the first Defendant, whether by himself or through his servants, agents or otherwise, however from dealing with the said property in whatever manner either to lease, rent, sell, transfer or through assignment.

3. Grant order that the first Defendant is solely responsible for the repayment of the loan secured with the third Defendant.

4. Grant order that the Claimant is entitled to all rental payments of the said property since it was on rental in 2005 to date.

5. Grant order for the first Defendant to reimburse all monies from the rental proceeds since 2005 to date to the Claimant and records of monies taken be produced to the Claimant.

6. That the Claim against the third Defendant be dismissed and caveat removed, with cost be borne by the Claimant.

7. Claimant's cost is borne by the first Defendant.

---

^[1] [1989] 14 App Cae 337.
^[2] [2008] SBitc 90; HCSI-290 of 2008.
^[3] [2002] SBHC ; HC-CC 29 of 2001 (18/3/2002.
^[4] Unreported, CAP, Civil Case No. 1 of 1995.
^[5] Unreported HCSI Civil Case No. 217 of 2000.
^[6] Ibid