Cowrie Furniture Industry Ltd v T-Maris Development Company Ltd [2014] SBHC 59; HCSI-CC 94 of 2013 (3 June 2014)

IN THE HIGH COURT OF SOLOMON ISLANDS

(FAUKONA J)

CIVIL CASE NO. 94 of 2013

BEFORE:

COWRIE FURNITURE INDUSTRY LIMITED
(Reg. N: 20118645)
First Claimant

AND:

T-MARIS DEVELOPMENT COMPANY Ltd
(Reg. No. 1000411)
Second Claimant

AND:

ATORNEY-GENERAL
(Representing the Ministry for Health and Medical Services)
Defendant

Date of Hearing: 5th May 2014
Date of Ruling: 3rd June 2014

Mr G. Suri for the First and Second Claimants
Mr S. Hanu for the Defendant

RULING

Faukona J: A debt claim (Category B) was filed on 3rd April 2013 supported by sworn statement deposed by Belani Tekulu filed on 1st May 2013. Service was effected on 3rd April 2013 at 10:25am. At 3pm on 1st May 2013, an application for default judgment was filed by the Claimants. 1st May 2013 was supposed to be the last date to file a defence.

2. Rule 15.12.22 limits default judgment against the Crown therefore the Claimants cannot proceed with the application for default judgment unless leave is obtained. Leave was obtained on 16th July 2013. That eventually paved the way for this application to be heard.

3. Mr. Hanu contends that indeed there was no defence filed within specified period required by the Rules. However, there was a draft defence now available. A draft defence is indeed on file but appears yet to be filed.

4. Undoubtedly, there can be no dispute that there was no defence filed. But Mr Hanu submits there were reasonable causes for the delay in defending the case. The causes are outlined by Mr Hanu in his submissions. The major cause is difficulties to obtain instructions from the Ministry of Health. The second reason is that a defence cannot be filed in the absence of documentary evidence to proof how the Ministry was in possession of the warehouses and lands PN 192-010-144 and PN 192-010-145 over long period of time.

5. In the absence of documentary evidence, the Ministry have to find those who have direct knowledge of the Ministry's dealings. As a result, Mr Silas Chekana and Mr Josiah Riogano were called to Honiara. After discussions with them, the Ministry then instructed the Defendant on 6th June 2013. After receiving instructions, the Defendant by his Counsel wrote to the Claimant to oppose the application for default judgment.

6. Further, Mr Hanu points out that the Defendant has a meritorious defence. That in 1991 there was an oral contract entered into by the Under Secretary of the Ministry of Health Mr Silas Chekana and the owner of the first Claimant Mr. Harry Narain. The agreement was basically for the Ministry to purchase the two warehouses located at PN 192-010-144 and PN 192-010-145 for a consideration of $300,000.00 which was paid to Mr Henry Narain. An obligation is expected on Mr. Narain to surrender the land and ownership be reverted to Commissioner of lands and then to the Ministry. At that time of transaction, the Ministry was in possession of the land, even up to now for 22 years. For that period the first and second Claimants never demanded for outstanding rentals or illegal occupancy of the properties.

Non filing of defence:

7. Mr Hanu concedes no defence was filed, though a draft had been issued. Mr Suri is correct to say that the new civil rules do not contain direct provisions or guides dealing with a situation where no defence is filed at all. However, the overriding objective expressed in Rule 1.3 and 1.4 is to ensure the case is dealt with speedily and fairly. That falls squarely with Rule1.14 which demands examination of merit of the defendant's argument for purposes of ascertaining whether the rules can be dispensed in the interest of justice.

8. It has been noted that delay was caused by trying to locate Mr Chekana and Mr Riogano who had direct knowledge about the sales transaction of which the Ministry of Health had purchased the properties from one named Henry Narain, the owner. After both deponents had been located instructions were given and their sworn statements were filed on 12th June 2013. The problem with those sworn statements is that there is no documentary evidence exhibited to support and proved the purchase transaction of $300,000.00. Mr Chekana's sworn statement focussed on a need to have storage and the payment of $300,000.00. He did not mention the money was paid in 1991, how it was paid, the actual date of transactions and where. If the money was arranged and paid by the Ministry of Finance as a probable option then of course documents must be involved. In this case there was nothing exhibited to the sworn statement of Mr Chekana. The same can be said about the sworn statement of Mr Riogano. All he exhibited is map of the location of the properties. Are they reasonable excuses for not filing a defence? I don't think so. That brings as to the next sub-heading.

Meritorious defence:

9. With a brief analysis of the value of the two sworn statements, can I accept they hold a meritorious defence as I am urged to? It has to be absorbed that the dealing was of a high level status. We are talking about transaction between an organ of the state and an incorporated business entity. It is not a business dealing that involved villagers with low calibre, who do not know about agreement, its importance and the elements of an agreement.

10. If there is no record in the Ministry of Health in terms of correspondences, memorandums, payment requisition forms, payment vouchers, receipt etc, then the payment could have been transacted out of petty case money floating in the Ministry of Health without proper records kept and accountability.

11. The other option is that money was paid by the Department of Finance and treasury. In that case, there could be fossils of documentations as evidence to verify such transaction. In this case, there are no copies of payment requisition forms, payment vouches and receipts. There was nothing ever located and found and exhibited to the sworn statements.

12. Correspondingly, there was no documentary evidence of a copy of the receipt issued by one named Mr Narain. The transaction was of high commercial nature and there must be some documentary evidence to establish the role each party played prior, during and after the purchase transactions. If no evidence is available to support the defendant's content then I don't think it has meritorious defence. There was nothing in the sworn statement of Mr Chekana asking for a receipt from Mr Narain for the $300,000.00 paid.

13. It may appear now the blame is on Mr. Narain, the deceased, for not surrendering the titles to the Commissioner of Lands. That I must describe as over optimistic. If the money was actually given to the negotiators but was never handed to Mr Narain that would definitely boils down to another scum. Now Mr Riogano seems to accept the blame for not ensuring registration process was done. Previously he wouldn't dare done so.

14. One interesting point I noted from what Mr Tekulu said on paragraph 9 of his sworn statement filed on 1st may 2013. He said, "when I enquired about the buildings on the two lot numbers, I was told that the government was interested in the buildings". Gather from what was said it would appear that the information would have disseminated to Mr. Tekulu by either Rautene Narain or Ruta Narain who were the wife and daughter of Mr Henry Narain and was said in about 2002. If the property was indeed sold, would a husband continued to conceal such transactions from his wife and daughter? Since Mr Narain died ten years before, then of course someone as a spouse or child of the deceased is granted letters of administration to administer the deceased estate. In such proceedings, undoubtedly the purchase transaction would be definitely emerged. Clearly and definitely nothing was said by Mr Narain about the purchase. Therefore, the surviving spouse and daughter were not aware of. Hence, in 2002 the second Defendant bought the properties. Transfer of title instruments reinforced and affirmed the purchase transaction by the second defendant was real and done in good faith.

15. Further Mr Hanu submits that other contributory factors that add to meritorious defence are adverse possession, lack of stamp duty on transfer of shares and transfer of Fixed Term Estate.

Adverse possession for 22 years:

16. It may seem though not aggressively advanced by Mr Hanu, however, the principle of adverse possession implicates a point in law. He submits that the Ministry of Health had been in possession or in occupation of the properties since 1991, assumably from a date it was purchased.

17. Mr Suri in his rebuttal argues by referring to Section 224 of the Land and Titles Act. The section applies against a registered owner who does not take any action to protect his interest for a period of 12 years. In this case, the fixed term estates were transferred to the second Claimant on 23rd June 2011. It is now about 2 years and ten months. Therefore, the 12 years cannot run against the second Claimant who is now the registered owner of the fixed term estates. As registered owner of the estates the Claimants made demands for payment of rentals. This was done by number of letters written to the Defendant.

18. Further, the law regarding adverse possession does not vest title automatically on a person who occupies land uninterrupted for 12 years. The occupant still has to apply to the High Court under S.224 (2) for an order that he be registered as the owner. The section requires notice be advertised before application is made. There is no evidence of such notice or application being made to the High Court in this Case.

Lack of stamp duty on transfer of FTE:

19. The draft defence points out that the registration of properties by the second Claimant was unlawful because it was not complied with section 104 of the Lands and Titles Act; that the registration can only take place when such properties are free from fees and stamp duties.

20. Mr Suri in rebuttal points out that argument will not assist the Defendant because it does not change the ownership of the properties. I accept his further argument that stamp duty is not payable on transfer with value below $10,000.00. This is clearly stated in paragraph 11 of the schedule to the Stamp Duty Act. In this case, transfer documents in relation to both parcel numbers carry $9,000.00 each. Surely, the argument by the Defendant must be flawed on its face.

Mistake in registration of properties:

21. The draft defence contain a single sentence which alleged that the registration of the properties was done by mistake. That allegation seems to stand alone. There was nothing in the written submissions to elaborate to substantiate that allegation. However, I noted Mr Suri's submission which in my view takes on the issue elaborately. S. 4 (4) of the Lands and Titles Act vested power on the Commissioner to hold and deal with interest in land on behalf of the Government. S. 172 (2) states that no fixed term estate or lease shall be transferred without prior written notice of the Commissioner. A consent letter Exh.BT-13 attached to sworn statement of Belani shows the Commissioner had freely consented to the transfer by first Claimant to second Claimant. The Commissioner who was vested with authority and power had dealt with the interest in land accordingly.

22. There are adverse submissions that Mr Silver, Commissioner at that time was not well versed with the purchase transactions administered by Mr Chekana and Mr Riogano. If there were no records of such transaction in the Ministry of Health, Finance and Treasury and Lands Department, then the Defendant is really relying on mere narrations without proof. No files, no documentations so the Commissioner had no option but to issue written consent for transfer.

23. As regards to surrender instrument, the blame now is upon late Narain. It was alleged he had failed to formally surrender the instruments. At a prior meeting in Mr Riogano's Officer which he explained that Mr Narain need to surrender by way of a letter. For clarity purposes, at that time, the money was yet to be transacted. The meeting was conducted at preliminary negotiation stage. If no tangible money paid and received by Mr Narain then there could be no expectation of a surrender letter be written to the Commissioner. Conclusively, what comprises prior negotiations seems to dominate by vacuum with empty words. Actually, nothing was done at all. Section 123 (1) of Lands and Titles Act states that interest appearing in the register shall have priority according to the order in which the instruments which led to their registration were presented in registrable form to the land registry, irrespective of dates of instruments notwithstanding that the actual entry in the registry may be delayed. Assuming the Defendant produce a surrender instrument executed by first Claimant, such instrument would be ineffectual because of the operation of Section 123 (1) above.

24. In relation to rectification of title there is nothing shown that collaborates fraud or mistake to give Defendant right to seek rectification.

25. From what I have outlined I find I am not satisfied on the Defendant's reason for not filing a defence within time specified in the Court rules.

Like as well, the meritorious defence which the Defendant opted to rely on is not satisfactorily made out on the balance. To conclude, I could possibly accept delay because the root cause premises on officers who had retired and had gone home to be called to give instructions. That being not the only reason but the meritorious defence which the Defendant rely or is absolutely out of course and has no prospect to providing an arguable case. I must therefore grant default judgment against the Defendant.

Orders:

1. Application for default judgment against the Defendant granted.

2. Grant declaration pursuant to Section 18 of Crown Proceeding Act, that the Defendant is liable to pay first Claimant rental monies, to be assessed, for occupation of the properties on both lands for the period from 23rd June 2006 to 23rd June 2011, being the period when the rental monies remained unpaid and when the FTE was still registered under the name of the first Claimant.

3. Grant declaration pursuant to section 18 of the Crown Proceedings Act, that the Defendant is liable to pay to the second Claimant rental monies, to be assessed, for occupation and use of the properties situated on the land parcels describe as PN192-010-144 and PN 192-010-145 from 23rd June 2011, being the date when the Claimant's application for registration of the FTE in the two parcels was presented to the Registrar of Titles, to the date of judgment.

4. Cost of and incidental be paid by the Defendant.

The Court.