Yang v Manoa [2014] TOLC 3; LA 11 of 2013 (6 June 2014)

IN THE LAND COURT OF TONGA
NUKU'ALOFA REGISTRY

LA 11 of 2013

BETWEEN:

1. YUZHEN YANG
2. ZHUFU WEI
Plaintiffs

AND:

1. 'OLIONI MANOA
2. MATELITA MANOA
Defendants

L.M. Niu S.C. for the Plaintiffs
Mrs P. Taufaeteau for the Defendants

DECISION

1. The First Defendant is the registered owner of a town allotment at Haveluloto Tohi 376 Folio 39, having an area of 759.6 square meters. According to paragraph 2 of an affidavit sworn by him on 19 June 2013 the First Defendant built a retail shop measuring approximately 10 x 20 feet with a small room above it at the front part of his allotment abutting Niumeitolu Road. He continued to live in his house on the allotment but operated a retail business from the shop and a taxi business from the room above.

2. According to the First Defendant, in 1998 he was approached by one Meng Sen Tsay who wanted to rent the shop which by then had apparently been extended. Exhibit B to the affidavit is a copy of a "Tenancy Agreement" apparently entered into between the First Defendant and Tsay on 29 June 1999. According to the agreement, its term runs from 2 June 1999 to 1 June 2008. The "premises" are described as follows:

"The Landlord is desirous of renting out a retail store at the frontage of land at Haveluloto opposite to Vaiola Hospital to the tenant for the purpose of retail store".

Under the heading "use of premises" the agreement provides:

"6. The tenant agrees:

6.1 not to use the premises or cause or permit the premises to be used for any illegal purpose; and

6.2 not to cause or permit a nuisance; and

6.3 not to use the premises for any other purpose than a retail store".

Under the heading "Alterations and additions to the premises" the agreement provides:

"9.1 Not to attach any fixture or renovate, alter or add to the premises without the landlord's permission;"

3. In paragraph 6 of his affidavit the First Defendant stated that in about 2005 the First Plaintiff telephoned him in the USA:

"She sought my permission with proposal to build on top of the retail shops for her own business as diners and restaurant ... I did not want her involved in my agreement with Mr Tsay however I finally agreed to let her build as long as it does not affect the tenancy downstairs. I had never agreed for her to assign or sublet to third parties".

4. In paragraph 7 the First Defendant stated:

"On 20th October 2007 the First Plaintiff entered into a renewal agreement without my knowledge between my wife, agent and heir and they were not privy to the contract of 2005".

A copy of the 2007 agreement was Exhibit D.

5. In paragraph 8, the First Defendant stated that in May 2010 he returned to Tonga. He discovered that "the First Plaintiff lived upstairs and there was no diner or restaurant business".... "She even let downstairs as a retail shop operated by Second Plaintiff".

6. In paragraphs 12 to 16 the First Defendant stated that neither of the Plaintiffs had a business license as required by the Business License Act 2002, that their activities at the premises were accordingly illegal, that the First Plaintiff used the premises for illegal gambling and that "the agreement is invalid and the continuation of the Plaintiff to open the building for business is not proper for they have no business licenses to operate over the shop and my allotment".

7. This affidavit was filed by the First Defendant in response to an application by the First and Second Plaintiffs to restrain the Defendants from locking them out from the shop and the premises above it. The writ was issued on 13 June 2013. In paragraph 22 of the Statement of Claim it was pleaded that:

"The tenancy agreement of 20 October 2007 is valid and binding and in the circumstances it should be specifically performed and in accordance with its provisions until 9 June 2013". (It is possible that the date should read 9 June 2023).

In addition to the injunction, the Plaintiffs also sought damages and costs.

8. In her affidavit filed in support of the injunction application the First Plaintiff gave an account which differed in several important respects from that given by the First Defendant. According to her, after Tsay rented the First Defendant's shop:

"He enlarged it at great costs to him to about 230 square metres". "In the year 2000 Mr Tsay sub-let the whole enlarged store to me. It had bedroom and accommodation facilities in it as well. I paid rent to Mr Tsay and he paid his rent to the Defendants. The Defendants were aware of that and agreed to it. Mr Tsay's tenancy was to end in June 2008."

"In 2005 the Defendants asked me to rent the store directly from them when Mr Tsay's tenancy would end, for 5 years i.e. from June 2008 to June 2013 for a total sum of $16,500."

According to the First Plaintiff, she paid the $16,500 to the Defendants "there and then" for the period June 2008 to June 2013. Meanwhile, she continued to pay Tsay for the remaining three years of his tenancy.

A copy of the 2005 agreement was Exhibit A to her affidavit. The tenant is named as Yuzhen Yang. Under the heading "Alterations and additions to the premises" the agreement provides:

"5. The landlord agrees:

5.1 to attach any fixture or renovate, alter or add to the premises to 230 square metres" (sic).

In paragraph 6 of her affidavit the First Plaintiff stated that in October 2007 she and the Defendants entered into a further agreement to run from June 2013 to June 2023. A copy of that agreement is Exhibit B to her affidavit. Under the heading "alterations and additions to the premises" paragraph 5.1 of the 2005 agreement is repeated. A new Clause 2 was however included as follows:

"Possession of the Premises.

2. The landlord agrees:

2.1 The tenant has the right and freedom to transfer this tenancy to a third party during the period of the tenancy".

10. According to paragraph 8 of her affidavit, in June 2009 she "sublet the retail store and accommodation facilities downstairs to the Second Plaintiff and he moved in with his family and lived in it and carried on his retail business there".

11. It appears that the First Defendant returned to Tonga in about July 2010. He approached the First Plaintiff, claimed that she had breached their agreement and demanded money to remedy the breach. There then followed several exchanges between the parties and their lawyers. Mr Niu demanded assurance that the Plaintiffs would not again be harassed. He did, however, agree that the First Plaintiff would remove her ducks from the Defendant's land. Mrs Taufaeteau demanded payment of $3500 which the Defendants claimed to be owed pursuant to the 2007 Agreement failing payment of which "evacuation of the premises" was demanded by no later than 9 June 2013.

12. By about 11 June 2013 the situation had deteriorated to the point that the First Defendant locked up the premises. The shop could not be operated by the Second Plaintiff and the First Plaintiff could not get upstairs.

13. In a supporting affidavit the Second Plaintiff stated that on 1 June 2013 he signed a Tenancy Agreement with the First Plaintiff to run for five years from 1 June 2013. A copy of the Agreement was Exhibit A to his affidavit. At paragraphs 4, 5 and 6 the Second Plaintiff described how the First Defendant had demanded that he and his family move out of the premises and how the First Defendant came and chased his customers away and locked the Second Plaintiff inside the shop. After the police were called the shop was opened but was then locked again. As a result of these actions the Second Plaintiff averred that he was losing "no less than $170 per day profit" and was unable to pay his creditors, including the First Plaintiff.

14. On 20 June 2013 the application for the injunction came before me. Just prior to the hearing a notice of opposition was filed by Mrs Taufaeteau. It sought refusal of the application on the following grounds:

"(a) Reliance on O.2 Rule 2 Land Court and pursuant to Order 13 Rule (2)(b) Supreme Court Rules 2007.

(b) The Respondent is the lawful holder of the allotment where the dispute was issued upon.

(c) The Applicants agreement of October 2007 is invalid and unlawful pursuant to S13, S14 and S15 of the Land Act Cap 132.

(d) The second applicant is a stranger and interim injunction should not be granted for it is unlawful to sue for property which has been in the undisputed possession of the Defendants as ownership of more than five years.

(e) Further ground stated in supporting affidavit."

15. At the hearing Mrs Taufaeteau indicated that the Defendants would not resist an order permitting the First Plaintiff to continue residing upstairs at the premises until disposal of the action but she opposed the reopening of the shop. I could find no benefit to be derived by any party from keeping the shop closed and therefore granted an interim injunction ordering the Defendants to remove the corrugated iron and plywood sheets which had been nailed across the doors and windows of the shop and to refrain from further obstructing the Plaintiffs from the use of the premises. In my ruling I emphasized the need to have the action brought on for trial as soon as possible.

16. Unfortunately, the Second Defendant did not comply with my order. After several further hearings the First Defendant was fined $500 in default 30 days imprisonment. He refused to pay the fine. On 21 November, after he told me that he would rather go to prison then pay the fine the First Defendant was committed for 28 days. He was released on same day after the fine was paid for him. After his release and several other applications for his re-committal, the First Defendant very wisely left Tongatapu and no further disturbances have been brought to my attention since January 2014.

17. On 11 July 2013 a Defence and Counterclaim were filed. Numerous grounds of defence were advanced including misrepresentation, want of consideration, illegal trading, and "immoral and unbecoming behaviour" including playing poker on the Sabbath. In paragraph 4 of the Defence it was claimed that the "arbitrary terms" of the agreement between the parties "deprived the landlord of his rights to his building and his land without a lease in accordance with the Land Act and therefore is invalid and not enforceable". The Defendant's Counterclaim sought general damages for trespass, special damages arising from unpaid rent and an order for eviction. A detailed Reply and Defence to the Counterclaim was filed on 26 August 2013.

18. On 3 October 2013 the Defendants filed an application to strike out the Plaintiff's claim "under Order 8 Rule 8" of the Supreme Court Rules 2007. It was supported by an affidavit of the First Defendant. In this affidavit the First Defendant denied having any contractual relationship with the Plaintiffs and stated that they were trespassing on his land. He suggested that the Land Court had no jurisdiction to punish him for contempt and that the committal was unconstitutional. In paragraph 9 he stated:

"It is just and proper for an order stating that the case be struck out against myself in the Land Court being the registered land owner and owner of the retail shop, as well as any other order in place".

19. On 17 October 2013 a further affidavit was filed by the First Plaintiff. At paragraphs 12, 20 and 21 she revealed that the Second Plaintiff "decided he could no longer wait to continue his business there and has decided to and did sell his stock to one You Libin and moved out of the store altogether"... "now even You Libin is not paying rent to me while the store is closed". Exhibit B to her affidavit was a receipt purportedly issued by the Second Plaintiff to You Libin "for the transfer of the stock and goods today" amounting to $20,700.

20. On 17 January 2014 an application was filed by the Defendants "to vary the injunction order dated 20 December 2013 and application for jury trial especially the remedy sought for injunction and damages". The grounds advanced in support of this application did not significantly differ from those filed on 3 October 2013.

21. On 20 January 2014 a further application was filed by the Defendants. With respect, the meaning of the application is not easy to discern but it seems that the Defendant's claimed:

(1) That the Land Court had no jurisdiction to commit for contempt;

(2) That the Plaintiff's action was statute-barred by virtue of Section 16(1) of the Supreme Court Act; and

(3) That the Land Court had no jurisdiction to entertain the Plaintiff's claim.

After hearing both counsel I explained to Mrs Taufaeteau that if the legality of the committal was to be further contested then she would have to raise the matter in the Court of Appeal. It was also pointed out that Section 16(1) does not apply to the Land Court which has its own limitation provision (Section 170). After further discussion with counsel it became clear that the principal contention by the Defendants was that the Land Court had no jurisdiction to deal with the Plaintiff's claim to have a valid tenancy of the shop premises. It is a pity that this objection to the jurisdiction of the Court was not raised earlier, given the nature of the Plaintiffs' claim and in particular paragraph 22 (see paragraph 7 above). Unfortunately, the obstinacy and aggressiveness of the First Defendant were such as to divert all concerned from the principal issue which is the validity of the tenancy claimed by the Plaintiffs. I asked for written submissions.

22. On 7 May 2014 I heard further argument. Mrs Taufaeteau relied on my own Decision in 'Unuaki 'O Tonga Royal University of Technology and Anr. v Kingdom of Tonga LA 16 of 2013 in which I declined to follow Tonga Industries Traders Limited v Shell Pacific Islands Limited LA 2 of 2005, preferring Maka v Kainga [2006] To LR 43.

23. Mr Niu filed a written submission which was admirably brief and to the point and for which I am grateful. He referred to Clause 90 of the Constitution:

"90 – The Supreme Court shall have jurisdiction in all cases in Law and Equity arising under the Constitution and Laws of the Kingdom (except cases concerning titles to land which shall be determined by a Land Court subject to an appeal to the Privy Council in matters relating to hereditary estates and titles or to the Court of Appeal in other land matters) and" etc (not relevant).

In Mr Niu's submission this is a case where the central issue is whether the Defendants have the right to enjoy the full use of their land unfettered by the Plaintiffs' occupation of part of it or whether, by entering into a valid tenancy they had voluntarily surrendered that right.

He described the dispute as:

"One which concerns the title to the allotment namely the right of the title holder to possession occupation and use and to exclude all others".

He referred to Section 149(1)(b) of the Act which gives the Land Court Jurisdiction:

"(b) to hear and determine all disputes claims and questions of title affecting any land or any interest in land ... and in particular all disputes claims and questions of title affecting any tofi'a, tax or town allotment or any interest therein;"

He might also have referred to Section 149(1)(e) which gives the Land Court Jurisdiction:

"(e) To hear and determine any question or amount of damage, loss, compensation, mesne profits, rent or claim in respect of any allotment, lease, sub-lease, permit or interest of any kind in land".

In his submission, a dispute, claim or question which may affect the unrestricted right of title to land can properly be said to be a case "concerning title to land" within the meaning of Clause 9.

24. I have considerable sympathy with Mr Niu's submission: as it seems to me, the reality is that the First Defendant is faced with a situation in which substantial premises erected on approximately 1/3 of the land to which he has title are being used and occupied by a series of different persons with some of whom he had no prior dealings. It is plain that the fact of the occupation of the shop premises amounts to a curtailment of his right to enjoy the whole of his land. The problem however, is that the courts have usually, but not always, held that buildings erected on land are not part of the land and therefore, by what seems to me, with respect to be something of a legal fiction, do not encroach upon the title to the land upon which they are located.

25. Mr Niu suggested that a review of the current legal position was now desirable. I agree, as did the Royal Land Commission which in its report dated 30 March 2012 recommended:

"83 – that the interest over land shall include interest over fixtures of the land (including dwellings).

84 – that the Land Act is amended to recognise tenancy agreements and their registration."

26. In these circumstances, it may be helpful if I briefly set out some of what I take to be the most important considerations and authorities which have led to the present position.

27. The earliest reference to this question which I have been able to find is Bank of Tonga v Paea He Lotu Kolo SC 1019/92 and 701/93 in which the central question for determination was whether a writ of distress encompassed a dwelling house. At page 4 of his judgment Ward CJ wrote:

"I accept the reasoning of Dalgety J in Bank of Tonga v Vaka'uta 19/41 that properties such as houses and fixtures which cannot be subject to distress in England because they accrete to the land are considered severable from the land under our law and are properly described as goods and therefore subject to distress."

28. In a later judgment in the same year and in the same case Hampton CJ referred to the differences of opinion on the question of whether a "house" is a fixture on Tongan land or not:

"On the one side Nakao v Fua 6/88 and Tu'ipulotu v Ma'afu 721/94 and on the other side such as Bank of Tonga v Kolo 1019/92 and 701/93 and Bank of Tonga v Vaka'uta 19/91".

29. In Kolo v Bank of Tonga [1997] To L.R. 181, 183 (actually heard on 4 and 7 August 1998). The Court of Appeal said:

"Of more significance was an argument that the house forms part of the land to which it is attached and thus falls within the jurisdiction of the Land Court under Section 149 of the Land Act so as to be excluded from the jurisdiction of the Supreme Court by Clause 90 of the Constitution."

"Clause 90 of the Constitution reserves to the Land Court and on appeal to the Privy Council "cases concerning title to land". Thus the Appellant's argument raises a Constitutional question of great importance. The Constitution directs attention to "titles to land" rather than the incidents of the possession of land. In commercial practice that is how the Constitutional limitation has been understood. Buildings, as Ward CJ pointed out [in Bank of Tonga v Kolo] ... have been regarded as items of personal property rather than as forming part of the reality. Because of the Constitution of Tonga and because of Tonga's traditions the intricate law of fixtures and accretions to land which applies elsewhere is not wholly appropriate in Tonga.

Although all the implications have not yet been worked out and their working out should be left to the process of development of the law of Tonga case by case we think that the broad proposition stated by Ward CJ should be accepted. That means it was open to Mr Kolo to pledge his house to the Bank as an item separate from the land on which it stood".

The Court distinguished Nakao v Fua in which it found "nothing which is contrary to this conclusion". In that case Martin CJ had found "as a fact that [the buildings] are fixtures – they cannot be moved and therefore form part of the land". The basis of the distinction was apparently that the declaration that the buildings on the land were comprised in the lease was made in the Supreme Court and the question of the buildings being "involved in a question of title to the land" was not raised.

30. In Cowley v Tourist Services etc [2001] To. L.R. 183 the Court of Appeal reaffirmed Kolo v Bank of Tonga and stated:

"In Tonga the law of fixtures, as understood in other common law countries has been somewhat modified so that buildings are not, is general, regarded as fixtures. They are treated rather as "chattel houses" are in Barbados – that is to say personal property detachable from the land".

Although the focus of the appeal was on the legality of certain sub-leases, it appears that the legality of tenancies was also considered. The Court concluded:

"It would be inconsistent with this approach (and destructive of ordinary weekly tenancies of houses and shops in Tonga) to treat Section 13(a) [of the Act] as applicable to the short term tenancy agreements in the present case ... accordingly these, too, although not registered, avoid any offence to Section 13 ... Whoever built a shop or house, it may be the subject of a short term tenancy from a lessee or sub-lessee of the land on which it is situated".

31. In 2006 the Land Court again revisited the matter. The dispute concerned the right to evict shopkeepers from a shop they had erected on the Plaintiff's land. The Court, after referring to Mangisi v Koloamatangi [1999] TOCA 9; CA 11 of 1998 held that the contract to operate the shop conferred no interest of any kind in the land and accordingly the Land Court had no jurisdiction in the matter (Maka v Kainga [2006] TO L.R. 43). The Court distinguished Tonga Industries etc v Shell Company LA 2/2005 on the ground, apparently, that "the subjects of the tenancy agreement are described in it as buildings on the land together with the use of land adjoining the buildings. For the reasons given by me in 'Unuaki 'O Tonga (above, paragraph 22) I do not accept that Tonga Industries was correctly decided.

32. The question again came before the Court of Appeal in L. Niu and Ors v Tapealava AC 15/12: -

"14 – The relevant exclusion from the jurisdiction of the Supreme Court flows only from Section 90 of the Constitution and it relates to "cases concerning titles to land". Accordingly, the issue in the appeal depends on whether the proceedings ... concerned "titles to land".

"20 – Actions for trespass to land and trespass to goods protect lawful possession, not title as such".

"24 – The right of a lawful occupier to undisturbed possession until the Land Court makes an order requiring him to vacate is another aspect of the right conferred by lawful possession of the property and the house".

"The power [of the Land Court] will be exclusive if the dispute concerns titles to land but is not expressed to be exclusive (of the Supreme Court) in other land cases such as the present, where title is not in issue".

33. Finally, the question was again considered by the Court of Appeal in Westpac Bank of Tonga v Fonua [AC16/13]:

"11 – The application should have been made in the Supreme Court, rather than the Land Court ... because the client was only seeking possession of the building, which under Tongan law is not part of the land.

"13 – The position in relation to securities on buildings is much clearer. In Tonga they are not part of the real estate and may be dealt with separately from the land on which they stand ... the jurisdiction of the Land Court does not extend to them."

"14 – A dispute regarding [buildings] is not one "affecting any land or any interest in the land" and so is beyond the jurisdiction conferred on [the Land Court] by Section 149 of the Land Act".

34. Apart from the question whether buildings are part of the land on which they stand, there is the second question which is the exact nature of "tenancies" in Tonga.

35. The general nature of tenancy in English Law is explained in Halsbury 4th Edition paragraphs 1 – 16:

"Paragraph 1 - The relationship of landlord and tenant was originally one of contract only but from early times the contract conferred an estate in land on the tenant without losing all its contractual characteristics".

"Paragraph 16 – A tenancy may be granted of land of any part of land .... tenancies may be granted of ... building or any part of a building".

"Paragraph 6 – In determining whether the agreement creates between the parties the relationship of landlord and tenant or merely that of licensor and licensee, the decisive consideration is the intention of the parties ... primarily the Court is concerned to see whether the parties to the agreement intend to create an arrangement personal in its nature or not ... so that ... the grantor's capacity to grant a lease will ... be relevant ... in assessing the nature of the interest created by the transaction".

36. The Land Act makes no mention of the "ordinary weekly tenancies of houses and shops" referred to in Cowley still less of the type of tenancy being propounded in this case, transferable and of up to ten years in duration. The creation of leases and sub-leases is permitted by Division II and apparently by Section 19(3), however these are not effectual to pass or confer any interest in land until duly registered (Section 126) and must be in the form specified by Section 124.

37. It seems to be the generally accepted view that "permits" referred to in Section 124 apply only to permits issued to aliens pursuant to Section 14 (see e.g. Royal Land Commission Report page 96). Section 125 however refers to two distinct forms of permits embodied in the different Forms 2 and 6. The Commission suggested that permits be removed from the Land Act altogether and be replaced by tenancy agreements. At present such agreements are simply not recognised by the Act by that name but there seems no good reason not to regard them as unregistered Form 6 permits. They would then unarguably be within the purview of the Court and the requirement for them to be registered would then tend to reduce the scope for troublesome ambiguities in their drafting.

38. In the present case, as has been seen:

(a) The 2005 agreement purportedly allowed the tenant to extend the shop from its original 10 x 20 feet area onto 230 square metres of the First Defendant's land;

(b) The Defendants wish to argue that the occupation by the Plaintiffs or their agents of part of their land exposes them to criminal prosecution for breach of Section 50 of the Land Act; and

(c) Counsel for the Plaintiffs himself contends that a central issue in the case is whether the right to the unfettered occupation of the land has been voluntarily surrendered by the Defendants.

39. In my respectful opinion it is not at all easy to determine, on the basis of the authorities, how precisely the rule is to be formulated and the present uncertainty seems to give rise to several difficult questions as yet unanswered. For example, are buildings "in general" not to be regarded as fixtures? Is the ruling in Kalo merely a "broad proposition" or has that proposition been modified by Fonua? If it is "open" to a mortgagee to pledge the buildings separately, is it also open to pledge them as part of the land? Can buildings be found "as a matter of fact" to be affixed to the land and if so, what considerations are to be taken into account in arriving at that conclusion? Given that most buildings can only be reached by passing over the land on which they stand, does the grant of a tenancy of such a building also involve the grant of a license to cross the land to reach it? If so, what would the consequence be of the revocation of such a license? If a building only is mortgaged, but not the land upon which is stands or which surrounds it, how could the mortgagor derive any benefit from exercising the powers of sale of the building, following default?

40. Section 149 of the Land Act clearly confers a much wider jurisdiction on the Land Court then Clause 90 of the Constitution. In cases such as the present, involving, as it appears, both land and contract questions, dealing with them separately in different courts leads to confusion, duplicity and considerable additional expense.

41. In my opinion "the process of the development of the law in Tonga" relating to what are called "tenancies" (an increasingly common form of right of occupation) is being hampered by the uncertainties which I have attempted to outline. Meanwhile, I hold myself bound by authority and rule that this action is beyond the jurisdiction of the Land Court and must accordingly be dismissed.

DATED: 6 June 2014.
PRESIDENT

N. Tu'uholoaki
6/6/2014