Apa v Natowan [2018] SBHC 15; HCSI-CC 467 of 2011 (6 February 2018)

IN THE HIGH COURT OF SOLOMON ISLANDS

(Faukona PJ)

Civil Case No. 467 of 2011.

BETWEEN: JUDE APA First Claimant

AND: JOYCE APA Second Claimant

AND: REUBEN NATOWAN First Defendant

AND: JOY DAUSABEA Second Defendant

AND: RAMO DAUSABEA Third Defendant

AND: THE COMMISSIONER OF LANDS Fourth Defendant
(Represented by Attorney General)

AND: THE REGISTRAR OF TITLES Fifth Defendant (Represented by the Attorney General)

Date of Hearing: 26^th October 2017
Date of Judgment: 6^th February 2018

Mr A Rose for the First and Second Claimants
Mr Tabo for the Second and Third Defendants
Mrs Soma for the Fourth and Fifth Defendants
No one for the First Defendant

JUDGMENT

FAUKONA J: The first Defendant in this case was not present, neither legally represented at the hearing due to his health some years back. For some reasons unexplained, he was not represented either by his next of kin or any member of his family or any person close to him or any friend.

2. The cause of action concerns a fixed term estate (FTE) in Parcel Number 191-034-040 located at upper Mbua Valley Heights, Honiara.
3. It is a non-issue that the first Defendant was the registered owner of the property.

Background Chronology:

4. Around July 2010, or therefrom, the Claimants and their family were renting the subject property owned by the first Defendant.
5. At that time or little later, the first Defendant approached the Claimants to obtain their consent if they would agree to purchase his vacant Lot at the back of the property for the sum of $50.000.00. The sale would include a canteen building in front of the residence.
6. The offer was accepted and a formal written agreement was executed by the parties on 13^th July 2010.
7. What eventually transpired was that the sale only concerns the front portion of the existing resident excluding the vacant Lot at the back of the property which was the subject of the initial negotiations.
8. The significant portion of the agreement was that, the sum of $24,000.00 be paid in cash together with $8,754.50 land rented arrears, making it a total of $32,574.50; the amount the first Defendant agreed being received on 13/7/2010 when the agreement was executed. The outstanding balance of $17,245.50 was to be paid on completion of the subdivision and transfer of title.
9. At that time ANZ Bank had a charge over the entire property to secure the first Defendant’s loan. In fact at that moment in time the amount of $12,000.00 was yet outstanding. The Claimants following execution of the agreement on 21^st October 2010, paid $12,000.00 to ANZ Bank on 9^th December 2010, bringing the total up to $48,754.50. The Claimant also paid $1331.00 survey fees on behalf of the first Defendant. The total paid to the first Defendant is $50,085.00. The Claimant had also paid $2,440.00 stamp duty fee for the transfer, which then accelerate the total amount to $52,525.00.
10. It would appear from initial discussions which subsequently materialised into an offer made; was an event occurred in July 2010.
11. A month before that, on 10^th June 2010, the first Defendant had already had in mind to subdivide the FTE. Hence, on 10^th June 2010, wrote to the Ministry of Lands that he consented to subdivide his land. On 28^th June 2010, the Permanent Secretary who was Acting Commissioner of Lands granted consent for the subdivision.
12. Perhaps with some uncertainty, the first Defendant wrote again to the Chief Physical Planner on 20^th October 2010 requested for subdivision. Despite the second request, consent for subdivision had been granted on 28^th June 2010, hence kick start the mutation process.
13. As a result of the subdivision two lots were created, lot 4099 and lot 4100. On 11^th March 2011, the first Defendant wrote to the fourth Defendant for consent to transfer lot 4100 to the first Claimant, that lot was never transferred.
14. There is an argument that the required processes between the fourth and the fifth Defendants which ought to have been done were not complied with. There could have probably be, hence retar-date any registration of the new parcel numbers were done. Only when the lots acquired the status of registration and parcel numbers were given would then is capable of transfer.
15. All that places responsibilities upon the fourth and the fifth Defendants. There was nothing which can be expected from the first Defendant; he had done his part.
16. Unfortunately, events occurred did not permit any grant of transfer of lot 4100 to the Claimants. One possible reason could have been because it was not registered. Secondly, the first Defendant still continue default in repayment of his loan and the interest was accruing; the other reason could have been because the first Defendant had received payment of $56,650 from the second and third Defendants on 7^th September 201, including full loan repayment.
17. Form 11^th March 2011 when a request for transfer was made, until 7^th September when the second and the third Defendants purchased the whole entire land, was six months.
18. Six months of inaction led to the first Defendant executed another agreement for sale with the third Defendant for the whole entire PN: 191-034-040, which later transferred to the second Defendant on 12^th September 2011.
19. Undoubtedly, this is a clear case whereby which the first Defendant sold part of PN: 191-034-040 to one purchaser, and the whole entire land to another purchaser. As a result, there was a conflict of interest. How would this be sorted out? By far, the first Defendant was wrong in selling part of the land and then the whole of the land to two purchasers. In a mild approach the first Defendant said he had changed his mind.
20. The Claimant alleges that registration of the estate in the name of the second Defendant, as owner, ought to be rectified, on the ground that the registration was obtained by mistake. Alternatively, the Claimants be reimbursed by the first Defendant with all the monies paid to him totaling up to $55,440.00

Rectification under S.229 of the Land and Title Act:

21. Section 229(1) of the Land and Titles Act, subject to subsection (2), conferred power upon the High Court which may order rectification of the land register by directing that such registration be cancelled because it was obtained, made or omitted by fraud or mistake.
22. Subsection (2) is a protective clause protecting the title of the owner who is in possession and had acquired the interest for valuable considerations unless the owner had knowledge of the omission, fraud or mistake, or cause such omission, fraud or mistake or substantially contributed to it by his act.
23. In the case of Billy v Daokalia,^[1] the court held “there are two enacted facts set out in the above subsection which the Plaintiff must necessarily establish to the satisfaction of the court. One is the fact of a mistake, secondly the fact of knowledge of that mistake by the owner.”
24. The Court of Appeal in the above case also held that the claim of fraud or mistake must be necessarily linked to the time when registration was obtained, made or omitted; the knowledge refer to must be confined to that period.
25. The question to pause is, by registering the transfer of the title in the name of the second Defendant; was it a mistake committed by the Commissioner of Lands and the Registrar of Titles; which in doing so jeopardise the rights of the Claimants? Further, whether the second and the third Defendants had knowledge of such acts, or them being caused, or substantially contributed to by their acts.
26. The evidence reveals that after mutation process was done, there were two lots created. Lot 4100 was supposed to be the subject of the purchase agreement executed by the Claimants and the first Defendant. A request for grant of consent to transfer was made but was not acted upon by the Commissioner of Lands. Six months after, another sales agreement was executed by the first Defendant and the third Defendant.
27. The reason for delay in executing the transfer of the lot is not forthcoming, and in such circumstances the Claimants rely on the common law principle of legitimate expectation. Whilst that expectation was what was hoped for, could not materialise.
28. The argument for the delay was twofold. Counsel for the fourth and fifth Defendant submits that because of the letter of 10^th September 2010 from ANZ Bank informing the Commissioner of Lands that subdivision was to be on halt as NPF held a charge over the property.
29. That letter becomes automatically redundant when on 3^rd December 2010 a consent instrument was executed by ANZ Bank to subdivide the fixed term estate provided the charge to remain intact on new parcel numbers.
30. Inevitably, it is out of conscience to think now, that there was no subdivision at all yet the mutation process had been done, and two lots were created (see forms on pages 106 and 107 or result on page 109) of the court trial book. The process after the two lots were created was an administrative function vested upon the officer of the fourth and the fifth Defendant which the Claimants expected to be done.
31. It is true that the mutation process reached surveying stage and lot numbers were given. However, it is also true that the fourth Defendant had never was in possession of any parcel number, that is FTE, corresponding to those two lots, but had perpetual estate title as usual.
32. If the mutation process was uncompleted, then who would be blamed? Is it the fault of the Claimants or the fourth and the fifth Defendants? Evidence shows the fourth and the fifth Defendants had not performed their functions effectively to complete the mutation process. Apparently, it would be true that state land cannot be transferred when still at lot status.
33. The problem which could have been the basis for delay is that although consent for subdivision was given by the NZ Bank, the condition that required the charge to remain intact on both parcel numbers did not clear the air so far as the rights of the Claimants in their parcel number is executed. The incumberance by way of first charge by the bank was still not being removed.
34. The Claimants would still be liable to lose their interests in their parcel number, should the first Defendant continue default in payment of his loan. It ought to be noted that the $12,000.00 paid by the Claimants was for loan arrears only and not for the principle amount. The condition will never change, even if the parcel number was eventually registered in the Claimants names, the charge remain standing.
35. The worst scenario which perceivably depicted the delay in registration of the parcel number was because the first Defendant continued to default in financing his loan, and perhaps accumulating arrears as well. Inevitably force to create another agreement endorsed by the first Defendant and the third Defendants for the second sale.
36. Indeed it was the second sale which preserved the entire property being sold by ANZ Bank. Property in this context refers to both lot numbers created after the mutation process. The $12,000.00 paid by the Claimants did not deter the first Defendant defaulted. He did default. Hence, six months after the first sales agreement the bank legitimately was in a proper position to sell both parcel numbers.
37. Fortunately, the sales agreement executed by the first and the third Defendant on 7^th September 2011 saved the properties. The payment of the outstanding loan of $53,650.00 by the second and the third Defendants, made it possible for the ANZ Bank to discharge the charge wholly, see Exh. 2 attached to Mr Dausabea sworn statement on page 129 of the Court trial book 2.
38. For this court to exercise its discretionary under S.229 of the Land and Titles Act, there must be evidence that the fourth and the fifth Defendants had committed mistake or fraud at the time of registration. And that the second and the third Defendants had knowledge of that mistake or fraud, and cause or substantially contributed to it.
39. There is no evidence to proof that the fourth and fifth Defendant had committed any fraud or mistake. Fraud or mistake claim by the Claimants against the fourth and the fifth Defendant derived from a mistaken belief for not pursuing registration of the two lots followed on from the mutation process; let alone transfer.
40. The difficulty which the Claimants failed to perceive is that, the payment of $12,000.00 loan arrears inclusive of the total payment, did not discharge the charge against the property. In fact created further problems that though two lots were created were subject to the charge; even if one lot was transferred both were still subject to the encumbrance of the charge.
41. Further problem was foreseeable when the first Defendant continued to fail in refinancing his loan. Six months from the first agreement of sale, the first Defendant still fail in repayment of his loan. That failure had created risk to both lots. The only mistake notable is that the first Defendant had failed to give first option to the Claimants, if they so wish, to pay out the entire outstanding loan and arrears for the six months. In any event that would mean another negotiation to purchase the other lot where possible.
42. In what I have narrated above, there is no evidence to proof any mistake made by the fourth and the fifth Defendants. Therefore, there is nothing legally required for this court to order rectification of the register. The fourth and the fifth Defendants were merely facilitating the transfer and registration of the land to the second Defendant according to the first Defendant’s consent to transfer as he was then the registered owner.
43. Where there is no evidence to proof fraud or mistake the second Defendant was a bona fide purchaser for value automatically and is protected under S.229(2) of the Act. In spite of being bona fide purchaser, she did not take possession of the land. The reason is that after the first agreement the Claimants had entered and occupied part of the land which they purchased in anticipation of a future transfer. That did not materialise because the first Defendant still had a problem with the Bank at that time.
44. Furthermore, it would appear when the Claimants had discovered that the title of the land had been transferred to the second Defendant, on 16^th September 2011; they immediately sought legal advice and thereafter filed this claim on 24^th November 2011.
45. The second Defendant may not in a short span of time file a case for eviction. However, it depends on whether she was aware of the first sales agreement or not. From materials, it appears that the second and the third Defendants only had knowledge of the prior sale after the title had already been registered in the name of the second Defendant. Therefore it would be wrong to suggest that the second and third Defendants had knowledge, or they cause or substantially contributed to any mistake or fraud. In fact, the second Defendant acquired the interest in the land for valuable consideration. They had finally entered the property and took possession of it. The Claimants have no equitable right to remain or occupy part of the property.

First Agreement for sale of part of property:

46. The first agreement was for sale of part of the PN: 191-034-040. The vendor was the first Defendant who held the title of the fixed term estate. The purchasers were the current Claimants. It is not denied the part that was sold was Lot 4100 after the subdivision was done after a formal request.
47. The argument emerges is that there was no offer made by the fourth Defendant to the Claimants and there was no allocation.
48. This case concerns a land which the first Defendant held title to the fixed term estate. He had all the legal rights to dispose it by way of sale transaction to whomever he chooses; hence the first agreement for sale.
49. According to the law of contract, an offer was made and acceptance was conveyed resulted in the payment of an amount accepted by the first Defendant. The first Defendant had acted responsively by requesting subdivision of the land to enable the part purchased to be conveyed.
50. In view of the obligations under the agreement, a conclusive contract had been made. The rest of the activities expected to follow were administrative functions to enable an effective transfer. However, what was hoped for was never materialised.
51. Six months later the whole entire PN: 191-034-404, including the portion intended to be sold to the Claimants, was sold to the second Defendant.
52. In the law of contract, the first sales agreement was valid and a conclusive contract. The truth of the matter now points to the first Defendant who had architecture the mistake of this case. There was indeed a double deal sale to two different purchasers. This sort of dealing in interest in land is neither the first of its kind in this country; and neither nor an unfamiliar business dealing at all. If fact it is so common that it carries a label of common nuisance or corrupt practice.
53. The first Defendant’s actin by concealing the first agreement of sale from the second Defendant was a shrewd action and evil activity architecture to benefit himself that cannot be denied. The grip of this evil approach had rendered prejudicial and loss to the Claimants at the expense of the second Defendant.
54. Therefore the first Defendant cannot be exempted from being responsible for the loss. The Claimants are bad losses and they ought to be remedied.

Conclusion:

55. The approach in this case is twofold. On is in regard to the issues whether the registration was done by mistake or fraud. And the other is an approach provided by the law of contract.
56. As far as the issue of registration is concerned, it is my respectable view that the Claimants cannot benefit from the litigation under that process. But they do so under the law of contract. This was highlighted as one in the reliefs that the Claimants be reimbursed the sum of $55,440.00.

Orders:

1. That registration of PN: 191-034-040 in the name of the second Defendant was done in an orderly manner and will remain as it is.
2. That the Claimants are not entitled to the subdivision of PN: 191-034-040.
3. That the Claimants be reimbursed the sum of $55,440.00 by the first Defendant forthwith.
4. The costs of this case is to be paid by first Defendant to the Claimants.
   

The Court.

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^[1](1995)SBC A5; CA-CAC 1 of 1995.