Fund Management Ltd v Uta'atu [2011] TOCA 5; AC 16 of 2010 (30 September 2011)

IN THE COURT OF APPEAL OF TONGA
LAND JURISDICTION
NUKU'ALOFA REGISTRY

APPEAL NO.AC 16 of 2010
[LA 13 of 2010]

BETWEEN:

FUND MANAGEMENT LIMITED
& TOURIST SERVICES HA'APAI LIMITED
Appellant

AND :

CHRISTINE UTA'ATU as COURT – APOPOINTED
RECEIVER for on behalf of COMMERCIAL FACTORS LIMITED
Respondent

Coram : Burchett J
Salmon J
Moore J

Counsel : Mr Niu for the Appellants
Mr Stephenson for the Respondent
Mr R. Harrison SCQC for the Intervenor Applicant

Date of hearing:
Date of Judgment: 30 September 2011

JUDGMENT OF THE COURT

[1] This is an appeal from a decision of the Chief Justice dated 20 August 2011 given as president of the Land Court. The respondent who was the court appointed receiver of property including lease number 5404 applied to remove a caveat lodged against the lease by the appellants. The Chief Justice granted that application and dismissed an application by the appellants for an extension of the caveat.

[2] At the hearing in the Land Court Commercial Factors was not separately represented. When we commenced hearing the appeal on 23 September Commercial Factors did not seek representation. During the hearing of an associated appeal in Wang v Commercial Factors Mr. Harrison appeared for the respondent and sought leave on behalf of his clients to make submissions on this appeal. We therefore resumed the hearing on 28 September and heard submissions from him and in reply from Mr. Niu.

Background

[3] Lease 5404 is in respect of the land upon which a hotel has been built. Dr. Wang was the lessee under this lease. In 1998 the appellants entered into an agreement with Dr. Wang to protect money owing to them under an agreement relating to a different property. The 1998 agreement included the following paragraph:

"7. To further protect payment of the liquidated damages as aforesaid, a caveat has been registered on the leasehold property owned by the guarantor at Fua'amotu, Kingdom of Tonga to secure the repayment of this guarantee."

[4] At the time of the signing of the agreement no caveat had been registered on the property.

[5] In February 2003 the appellants obtained judgment by default in the Land Court against Mr. Wang for the monies purportedly secured by the 1998 agreement. In August 2003 the appellant's registered a caveat on lease 5404. The document recorded the provision in the 1998 agreement that the caveat be registered and went on to refer to the judgment mentioned above. The caveat was noted on the lease.

[6] In March 2004 the Appellants may an application for a writ of distress and for orders approving the sale of lease 5404 by tender. That application was granted and the order made by the court contained the following clauses:

"5. This order shall be registered in accordance with section 131 of the land act.

6. A copy of this order and a copy of the judgment order dated 13 February 2003 shall be forwarded to the Minister of lands in accordance with section 160 of the same act.

7. For the purpose of registration of these orders it shall be sufficient in terms of sections 131 and 132 of the land act, for the plaintiffs to deliver to the Minister of lands a photocopy only of the said lease number 5404 (due to the unavailability to the plaintiffs of the original)."

[7] We understand that the property was advertised for sale by tender but no applications to purchase were received.

[8] To complete the history of the applicant's proceedings an application to set aside the judgment was made in March 2005 and was heard by the Supreme Court in February and March 2008. The proceedings were dismissed and that decision was upheld on appeal by this Court. We understand that the appellant has been attempting to finalize costs on the proceedings and that this is still outstanding.

[9] Commercial factors were another major creditor of Dr. Wang. They applied for summary judgment against the estate of Dr. Wang (he having died) and his widow. They also sought the appointment of a receiver to enforce the judgment. Judgment was entered and the receiver Christine Uta'atu appointed on 8 April 2011. Application for extension of time of the caveat was made in May 2011 and in June the respondents made application to remove the caveat.

Discussion

[10] Mr. Niu conceded that to succeed he must establish that the clause in the 1998 agreement supported the caveat. Central to that issue is the wording of section 137 of the Land Act. Subsections (1), (2) and (4) are particularly relevant. They provide as follows:

"(1) Any person claiming to be interested under any will, settlement or trust deed or any instrument of transfer or transmission or under and unregistered instrument or otherwise howsoever in any leasehold land may lodge a caveat with the Minister to the effect that no disposition of such leasehold land be made either absolutely or in such manner and to such extent only as in such caveat may be expressed or until notice shall have been served on the caveat may be expressed or until notice shall have been served on the caveator or unless the instrument of disposition be expressed to be subject to the claim of the caveator as may be required in such caveat or to any conditions conformable to law expressed therein.

(2) A caveat may be in the form contained in Schedule XI and shall be verified by the oath of the caveator or his agent and shall contain an address within the Kingdom at which notices may be served.

....

(4) So long as any caveat shall remain in force prohibiting the transfer or other dealing with any leasehold land the Minister shall not enter in the register any memorandum of any transfer or other instrument purporting to transfer or otherwise deal with or affect the land in respect of which the caveat may be lodged."

[11] The form in schedule XI assists interpretation. It requires that the document "state nature of the interest and the grounds on which such claim is founded". The Chief Justice held that this section requires that there be proof of an interest in the leasehold land and by reference to authority recorded that a caveat is merely a notice of a claim which may or may not be a valid one. We agree with these findings.

[12] Turning then to clause 7 of the 1998 agreement we note the following problems. First it refers to a caveat having been registered. It is clear that this was not the case. Nevertheless we are of the view that if the document clearly created an interest in the leasehold land a caveat could later be lodged to protect that interest. Taken literally the words used in clause 7 suggest that the registration of the caveat would secure the repayment. Clearly that is not so. There is no other provision in the agreement that would create an interest in the leasehold land. Accordingly we hold that clause 7 is not capable of creating an interest that would support a caveat.

[13] The appeal is therefore dismissed with costs to the respondent.

Burchett J
Salmon J
Moore J