Tion v Court Appointed Manager (MSG) for Development Bank of Solomon Islands [2017] SBHC 4; HCSI-CC 479 of 2010 (27 January 2017)

IN THE HIGH COUR TOF SOLOMON ISLANDS
(Faukona PJ)

Civil Case No. 479 of 2010

BETWEEN: RASITE and AGNES TION - Claimants

AND : COURT APPOINTED MANAGER (MSG) FOR
DEVELOPMENT BANK OF SOLOMON ISLANDS - First Defendant

AND : ATTORNEY GENERAL (Representing the Registrar of
Title) - Second Defendant

AND : ATTORNEY GENERAL (Representing the Commissioner
of Lands) - Third Defendant

AND : JOSEPHINE KAIRORONGA MEN (as Administrator of the
Estate of Joseph Kairoronga) - Fourth Defendant

Dates of Hearing: 17^th September 2016 and 18^th October 2016
Date of Judgement:

Mr M. Pitakaka and J. Taupongi for the Claimants
Mr B. Upme for the First Defendant
Mr D. Manilea for the Second and Third Defendants
Mr A. Radclyffe for the Fourth Defendant

JUDGMENT

Faukona PJ: This case concern a property at Noro, Western Province, described as Lot 499 prior to 2013 and now described as Parcel Number 098-011-47 (PN 47)

2. Among the relief caught are order for declaration and damages against the First Defendant. And as against the Second, Third and the Fourth Defendants the Claimants sought rectification of the fixed term estate in Parcel No. 098-011-47 (the Noro Land) on the grounds of mistake.

RELEVANT CHRONOLOGY OF EVENTS:

3. On 8^th November 1996, the Commissioner of Lands offered a fixed term estate in Lot 499, PN 098-011- 47 to Joseph Kairorongo (“the Late Kairoronga”). The required fees were completely paid on 14^th July 1999.

4. On 14^th April 1997 Development Bank of Solomon Islands (DBSI) granted a loan of $143,000.00 to Paul Haneteroai (the son of late Kairoronga) to construct a commercial building on Lot 499. Part of the security was a first charge on Lot 499 when it is registered and transferred to Paul. On 2000 Paul started defaulting on is loan repayment.

5. On 9^th April 1998, DBSI granted a loan of $72,000.00 to the Claimants for overseas goods and an additional loan of $30,000.00 was granted on 16^th April 1999, this was to part finance the import duty costs.

6. What .............next were nothing but very extreme statements on to the commencement of the recovery process which the First Defendant intended to resort to, to recover the outstanding loan from Paul Waneteroai.
   

7. This is significant to assess whose idea was to transfer the loan arrears from defaulting borrower to another borrower, and to see meter that burden can be managed without any legal implications, and over burdening of the other borrower.

8. Meantime, I agree this dispute concerns two legal relationship at play. One is when Paul applied for a loan to construct the building on Lot 499; part of the security was to be a charge over the property when the late Kairoronga obtained the title to it. On that arrangement, DBSI treated Paul as the owner to be of PN 47. Secondly when Paul defaulted on his loan the Claimant and the First Defendant entered into an agreement that the Claimants to take over Paul’s loan or the condition that an additional loan is granted to complete the building as well an title to PN 47.

9. From the two relationships I will deal with them separately. In furthermore, to ascertain whether in any of the relationship legally connected to the Second, Third and the Fourth Defendants.

CASE AGAINST THE FIRST DEFENDANT

10. When Paul applied for a loan of $143,000.00 from the First Defendant part of the security was a charge on Lot 499 when it is registered and transferred to him from the Late Kairoronga, his father. On 14^th April 1996 DBSI granted that loan. By 2000 Paul started defaulting on his loan repayment.

11. The most absurd scurried, in the ..............stage of the chronology, was that DBSI being an incorporated commercial financial institution could able to accept a prescriptive security which yet to materialise in the future. Ignoring the reality of that title of the application, Mr Paul had neither a title to Lot 499 nor even an offer made to him. The rightful option to resume to was to prolong any approval of the loan until the title is finally transferred to Paul.

12. By ignoring or being iterate about the best option, the First Defendant was at risk for approving a grant of a loan hence at that time was not secured. Mr Paul cannot assume and foresee the future expectation would materialise as they would like it to be. Their expectation would precisely be distorted by a member of factors. One, that the registration might not occur because of other dealings with other clients of the Lands Department or Secondly Mr. Kairoronga would refuse or reserve the report not to transfer the title for his son Paul Waneteroai. Reasonably that should sound a warning that security of Lot 499 was uncertain.

13. Despite the foreseeable encumbrances and problems, the First Defendant granted the Loan to Paul. Ignorance of the reality and relying on an uncertain future transfer to secure the loan was in fact a risk which parties have to ........ and in particular the First Defendant which must accept some consequence that was flow from the grant.

14. On the same note, the First Defendant ought to know that relying on Paul’s proposal lacks tangible source to secure the loan. In order to secure confidence Mr Kairoronga ought to have been requested to execute a letter of consent to affair any transfer to Paul will be done as soon as the fixed term estate of the property was granted. There was nothing done.

15. By paragraph 6 of Walasanau’s sworn statement of 15^th July 2011, he deposed that Mr Kairoronga had assured the First Defendant that he would make PN 47 available as security. The problem with that evidence is that the deposer should know that security plays a major role before an agreement to grant loan is finally executed. It is also expected of him that he is administering the affairs of a Financial Commercial Institution. By accepting a verbal assurance is not enough in any commercial dealing. The First Defendant should have sought and pursue that Mr Kairoronga must make a letter of consent that a transfer of property is registered in his name. I will repose to accept any evidence related to verbal assurance for the reason that the route to acquire better affirms security is available but was not resort to for some ..............reasons.

16. The second part of the Claimant’s case concern when Mr Paul had defaulted in his loan repayment in 2000. Before that, in 1999, in accordance to paragraph 17 of Mr Walesanau’s sworn statement filed on 15^th July 2011, the Claimant also defaulted in their loan repayment. As a result in June 1999 negotiations took place between the Claimants and the First Defendant which it was agreed to reschedule repayment.

17. Negotiations continued in day 2001 between the Claimant and the First Defendant. In 2002 according to Walasanua’ sworn statement the Claimant’s informed the First Defendant that they were closing their ChiceTown business house and were moving to Munda to avoid the ethnic tension and steep business competition in Honiara, and did wish to have a property of their own from which they would operate their business.

18. In one of those negotiations the First Defendant informed the Claimants that Paul was in default of loan repayments and was constructing a building at Noro. In paragraph 20 Mr Walasanau stated that the Claimant wanted to take over Paul’s loan and property on PN 47 at Noro subject to inspection of the property.

19. Against the evidence on paragraph 18 above, Mrs Agnes Tion deposed on paragraph 10 and 11 of her sworn statement filed on 28^th January 2016, that it was Francis Tepaia, Manch Manager of DBSI, Munda, who approached her at her Cheia Town pursuing with a business offer. The offer is that Mr Paul had defaulted in his loan repayment and had unable to complete his building at Noro. She deposed that Mr Tepaia proposed to her to take over Noro land and Mr Paul’s loan. Two days after Mr Tepaia returned and made further proposal that if the Claimant accepted Paul to takeover Paul’s loan then the First Defendant would give them additional loan to complete the building and also ensure FTE in Noro land be registered in their names.

20. The fight as to whose ideology was to take over Paul’s loan was a war in vain. It was a war that fights but loose. After all the end will always be the same. Passing the buck was eventually to avoid.

21. It is quite fascinating to learn after being .............. in number of ..................negotiating, the parties subsequently endorsed the final conclusion and alas the Claimants agreed to take over Paul’s loan amicably.

21. Without any inch of doubt, during negotiations the Claimants and the First Defendant fully aware that the PE to the land was still with the Commissioner of Lands, and there was no offer to Paul neither did he had the title to the land. Hence both were merely assuming that the title will be transferred from Mr. Kairoronga to Paul some day in the future.

22. What manifested from the negotiations is that the First Defendant was a desperate party wishing to discover the most appropriate process to recover partly secured loan granted to Paul who had defaulted in repayment. Hence the Claimants were approached. To pass the luck that it was the Claimants who desired to takeover Paul’s loan because they wished to move out from Honiara is an excuse which I would not accept.

23. In a most perplexed scenario, was despite having knowledge that the Claimants had defaulted in their loan repayment in 1999, the First Defendant care less, continued to negotiate with the Claimants in 2002 which eventually hatched into an agreement for the Claimant to takeover Pauls loan arrears. Already the Claimants were overburdened; nevertheless the First Defendant thought to takeover Paul’s arrears would resurrect them from their financial woes. In fact that was indeed a wrong financial reconstruction. Instead of filing a civil suit against Paul the First Defendant opted to a non-beneficial financial strategy which it did not benefit from, but adding further financial constraint to the Claimants.

24. Despite financial burden such arrangement would affect the Claimants’, brushing aside all odds, agreed to such arrangement. Even worst endorsed the agreement although two important terms were not inclusion, that is extra-loan to reconstruct the failed building and title transfer of the land.

25. The First Defendant bear that Paul did not have title to the land and that the Commissioner of Lands still had to PE, and the fixed term estate has yet to be granted to Mr Kairoronga. Out from ...........the First Defendant requested transfer of the title to Paul which it had no opt to do so. Paul had never applied for the land. Any title to be granted must be to Mr Kairoronga whom an offer was made to.

26. I have expressed the difficulties the First Defendant would encounter in such situation. The land could be offered and registered in the names of other person, a practice becoming ...............in the lands office, or a slow process of registration, or that Mr Kairoronga would have changed his mind as nothing bond him to transfer the title to anyone.

27. To describe the agreement made between the Claimant and the First Defendant to take over the arrear in an empty, presumptive and had agreement for lack of certainty. It is an agreement that none of them will benefit out of it.

28. The question to ask, were the Claimant led as try being induced by the misrepresentation statement offer by the First Defendant”. I noted the definition adopted in R v CLAC (western) ex-parte Pitakaka (^[1]) and the principle laid down in Chitty on contracts (^[2]).

28. To answer the above question I must say, partly “yes”. The reason being that the Claimant and the Frist Dependent were trying to agree on the transfer of the land which the First Dependant never own. In fact they were trying to bring into consensus land that someone else own with an unreasonable expectation that the owner would transfer to Paul. Sadly for them at that time of negotiations Paul had already defaulted at that was a common knowledge to both. At the same time there was also common knowledge that the Claimants were also defaulted in their loan repayment. Who would accept extra-burden when he had already defaulted, this is logic and logic prompted reasonable excuse.
    

29. Furthermore, I accept the comment that no person in this right mind would agree to take on another, debit to a bank without anything in return. That paying will be wholly true if the Claimant’s upon reading the offer and digested critically that there was no additional loan included and the promise of title to PN 47 was not possible from the beginning, which require a transfer transaction from a different ................being a party to the agreement. The First Defendant clearly knew the status of PN 47 that it had no charge or other registered interest PN 47. Any good and common sense the Claimants would not have accepted the offer. They would have refused it because it was clear they would not here fit out of accepting Paul’s loan. If there is any interment, it would be minimal in my view, or them to contribute to their own detrimental.

30. The ................ Of the eviction order by DBSI to Mr Paul’s family and the promise of title to the Claimants does not change the circumstances. DBSI had no title to the Land or cannot force others to surrender to its tune. There was a charge and DBSI had .....power even attempted to acquire title from Mr Karoronga. There was no formal or written connect from Mr Kairoronga to have his land secured Mr Paul’s loan.

31. Finally, an agreement to take on the burden from Paul had been executed. From the two significants conditions the Claimants expected to include was not included, that was additional loan and transfer of the land from Kairoronga to Paul and then to them. A contract was therefore finally concluded and nothing can be added or altered. Verbal assurance by the First Defendant that those ........condition would be added later was a myth. This is a dealing concerning large commercial financial institutions. Any business dealing with such large financial institution must be done by written form and no other way. The Claimant cannot return now and cry foul of a lot they had put their signature and claim that the First Defendant had induced them.

32. Allegation of misrepresentation was not conceded in any manner. If the misrepresentation was purposely to deprive the Claimant by way of inducement, then that would be fraud in its legal sense.

33. In this case, upon implementation of by agreement, the Claimant’s moved into the building erected on the land and commenced reconstruction or renovation work. Having done part of it, they rented some of the rooms. They lived there for ten years. In reality the Claimant began to achieve here fits. And if properly managed the Claimants should not encounter financial constraint to pay service both loans. However, challenges and business in viabilities cannot be positively assessed looking in from outside. An area of which only the Claimants would able to offer general over view of how the business thrives. If fraud means using false representation to obtain unjust advantage, also then .......unjust advantage? Definitely not the First Defendant. In fact evidence reveals the Claimants began to achieve advantage by renting rooms from the building. Being in possession for ten years and perhaps receiving rentals for more than five years is an advantage the Claimants acquired.

34. In any event the decision by the First Defendant to encourage the Claimants to take over the loan of Mr Paul whilst themselves had already defaulted in serving their own loan was a bad decision made by the First Defendant. Not only have that but offered no assistance which eventually ...... to be detrimental to the Claimants’ business. That is ..........prevailing when weighing the balance of contributory which the Claimants may not fully aware of their rights to sign the agreement though acknowledge they would not benefit out of it. In the ......of that situation I must avoid damages in 70% for the Claimants against the First Defendant with costs of 70% as well.

THE COUNTER CLAIM BY THE 1^ST DEFENDANT

35. To find the misleading statements conveyed to the Claimants have had their basis as partly inducement And partly misunderstanding. I have awarded 70% damages for the Claimants as a ........the First Defendant. However the latest agreement between DBSI and the Claimants is never ............ as a result of unfair inducement or misunderstanding. The loan is outstanding and the Claimants must repay.

36. To rate the words of inducement offered by the First Defendant as fraud is absolutely for a ............, so far as facts of this case retreats. The arrangement and agreement DBSI had with the Claimants is not in any way in the true definition of fraud. The fact DBSI in implementing the agreement, the Claimants had benefitted out of it. The Claimants had acquired that privilege to spend money in reconstruction and had benefitted by receiving rents for rent out rooms of the building on the land and that continued for about ten years. So fraud ..................application comes into play when someone was deprived of his expected benefit because of the inducement representation of someone intended or by mistake that one party suffered because of the consequence of an act of someone.

37. In this case fraud, if there is any, had enriched the Claimants rather than depriving them. With that result, the Claimants cannot rely that such alleged fraud has ..........or rescinded the First Defendant’s counter-claim. The loan which was obtained under a different is still outstanding and the Claimants reliable to repay if. Therefore I award First Defendant’s counter claim against the Claimants.

38. The case against the Fourth Defendant in clear and simple; it is a case for rectification of the title under S.229 (I) of the Lands and Titles Act. That the registration had been sustained, made or omitted by fraud or mistake.

39. History has manifested that the Fourth Defendants late father (Late Mr Kairoronga) was offered FTE to the land in 1996. An offer was made and was accepted and the premium and offer fees were paid. The title was not registered in the name of the late Kairoronga until later in 2012, 16 years later.

40. Section 229 (2) says that rectification cannot be made against an owner in possession also acquired the interest for valuable consideration unless the owner had knowledge of the omission, or mistake or his substantially contributed to it by his act, neglect or default.

41. The Claimant must establish mistake on fraud or must satisfy the court that the mistake cause the registration to occur – see Maneniaru v AG (^[3]). There is no evidence to suggest otherwise, that the Fourth Defendant’s late father had acquired the registration by mistake or his contributed to it. The late father of Fourth Defendant applied for the land, was given offer, paid the necessary fess and resulted in him registered as owner of FTE in December 2012. He acquired the property for valuable consideration and the Fourth Defendant is now in possession of the land. That how simple the Fourth Defendant’s case is. At the end thereof the legal interest in the Land had been transferred to the late date of the Fourth Defendant. There is also no evidence as well establishing the late Kairoronga had knowledge of the mistake or his contributed to it by his action.

42. From the back door, the Claimants then claim they had prescriptive rights in the land on the grand of at least 12 years peaceable, overt and an interrupted possession of the land. In no uncertain term, that principle in law is supported by S.224 (I) of the Land and Titles Act, but by virtue of S.224 (1) (b) no one shall acquire ownership of any estate or lease in any land vested in or owned by the Commissioner of Lands.

43. More so, it would be difficult for the Claimants because the Fourth Defendant’s late father acquired the title only in December 2012. Before that the estate was owned by the Commissioner of Lands. From 2012 until now is merely 4 years and that the Claimants cannot claim prescriptive rights against the Fourth Defendant. They could only qualify to do no under the law on the ground they have uninterrupted possession for at least 12 years. Therefore the claim under the principle of prescriptive rights is not available to the Claimants and reliance on it is unmerited.

44. Further, the Claimants still argue that the Commissioner knew or right to have known in 2002 what the Claimants moved into the property and spent merely on the building, and lived there for 10 years.

45. I noted the Claimants had moved into the property and spent money following an agreed amalgamation agreement executed with the First Defendant. The defect in that agreement was that it was executed without the major element components which the Claimants expected. Verbal assurance that they be included later is non sense and cannot be relied on. Dealing with large financial institutions in respect to borrowing and loan must be done a written form and nothing verities will be accepted, as they only comprise non reliable facts.

46. After 10 years living on the property, the Claimants ........ regarded that a measurement/agreement as fraud committed by the First Defendant. If so, was it a fraud which the Claimants had benefitted out of it by receiving rentals, of course from the property they had improved without owning it?

47. Notwithstanding that, DBSI had indulged dealing with the property it did not own; thus resulted in are order made against it earlier for taking wrong decision.

48. The question here, had the Commissioner of Lands knowledge of the Claimants occupying the land for 10 years, stood by and allowed the Claimants to belief that they had ...... to PN 47. Was 10 years of occupation qualifying the Claimants to acquire equitable interest in the land? The answer is no, address possession must at least for 18 years.

49. In the case of Lefu v Feitei (^[4]) which the counsel for the Claimants referred to as basis for acquiring equitable interest so as to mount a case for rectification. Unfortunately the facts in Lefu case are different from this case. In Lefu’s case the legal owner (Mr. Feitei) promised others that he purchased the land on behalf of them all. Therefore encouraged the Claimant to indulge in work by cutting copra without any pay for years as their equitable contribution to the purchase transaction. The court accepted that the Claimants’ reliance on the Defendant’s words and action render the Claimants acquiring such equitable interest.

50. The problem with Claimants claim of acquiring equitable interest is that S.224 (I) (b) has barred them from acquiring the land own by the Commissioner of Lands. Therefore, thee is thong gave rise to equitable interest acquired. Logically that will not assist the Claimant at all to pursue rectification of the register.

51. In my view S.224 (I) (b) has ...............effect over S.114 of the Land and Titles Act. One can have such an overriding interest against a registered owner as prescribed in S.224 (I), but not as against the Commissioner of Lands also hold PE interest on behalf of the Government of Solomon Islands.

52. The question whether the Commissioner was aware of such uninterrupted adverse possession or of the fact remains unchanged. The Claimant is barred to pursue a claim under prescription by virtue of S.224 (!) and S.224 (1) (b) of the Land and Titles Act.

53. Another issue is whether the Commissioner by its conduct condone for such possession resulted in legitimate expectation any application of law, the Claimants are barred from claiming prescriptive opts, hence, where such claim is illegal there cannot exist any legitimate expectations, it does not exist whatsoever.

54. Earlier I do mention the claim against the First Defendant is quite different from the case against the rest of the Defendants. The only link which may involve the Fourth Defendant was the claim of verbal assurance made by the late Kairoronga that he consented to offer a first charge over the land as soon as title was registered in his name. I have ruled out verbal assurance without written consent cannot be accepted in commercial dealings to secure a loan.

55. The question whether the Commissioner knew of the Claimants interest and expectation by November 2010, that the land was under dispute was of very little or no purpose at all. An offer for sale of FTE was made to the Fourth Defendant’s father. The offer was accepted and the required fees were paid, that concluded the contract. The process of registration is a mere matter of administration. So where does mistake comes in. There is no evidence to establish mistake.

56. Clearly the Claimant’s do not have legal interest in the Land as they do not have title to it. Neither do they have equitable interest. They are not parties to any contract for the purchase of FTE. They do not also have permission from PE holder to occupy the land. DBSI has against the law and good sense to give permission to the Claimants to enter and occupy the land which it did not own, with myth verbal assurance that events would occur in the future. Those are presumptions without legal basis.

57. IF the Claimants had spent money on reconstruction of the building, it was done without the permission of the late Kairoronga. The rentals they received were not entitled to because they do not own the land and the building.

58. The claim for rectification must therefore fail.

Orders

1. That order for damages against the First Defendant payable to the Claimant at 80%, damages are to be assessed or a date set by the Registrar of the High Court. Cost to be decided at assessment hearing.
   
2. That the Claimants pay outstanding loan including interest to the First Defendant plus costs as in the counter claim.
   
3. That the Claimants claim .........first to the Fourth Defendant dismissed with cash.
   
4. That order for rectification of the title is refused.
   

THE COURT

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^[1] (1985) 50 HC 27; (1985-1986) SILR 69 (5 June 1985).
^[2] Chitty a Contracts: Vol 1 – General Principles (32d; sweet & Maxwell, London, 2015)
^[3] (A 39 of 2014)
^[4] (2009) SBHC 14; HCSG – CC 411 of 2008 (8 May 2009)