Cowley v Tourist Services Ha'pai Ltd and Fund Management Ltd [2001] TOLawRp 33; [2001] Tonga LR 183 (27 July 2001)

IN THE COURT OF APPEAL OF TONGA
Court of Appeal, Nuku'alofa

CA 27/2000, 28/2000, 29/2000

Cowley

v

Tourist Services Ha'pai Ltd and Fund Management Ltd

Burchett, Tompkins, Spender JJ
18 July 2001; 27 July 2001

Land law – sub-leases contained obvious mistake – true construction valid sub-lease
Land law – buildings not fixtures – personal property

These appeals concerned the validity of two sub-leases of land in Nuku'alofa which formed part of the Royal family Estates. The head lease dated 15 June 1993 from His Majesty the King to one Dr Wang was for a term of 50 years expirying on 14 June 2043. The deed of lease contained a covenant by Dr Wang that he would not grant a sub-lease or transfer of the lease without the consent of Cabinet. On 18 December 1998 pursuant to a consent from Cabinet Dr Wang "by the ANZ Banking Group Limited as mortgagee in possession" granted a sub-lease of part of the land to Fund Management Ltd and a sub-lease of the remaining part of the land to Tourist Services Ha'apai Ltd. The term of each sub-lease was incorrectly expressed to extend "until the fourteenth day of the month of June in the year two thousand nine hundred and forty three"- 900 years beyond the expiry term of the head lease. Having become sub-lessees each respondent entered into a series of short term tenancy agreements requiring the payment of rent in respect of the respective premises. On the basis that the term of the short term tenancy agreents had expired the respondents issued eviction notices. No point was taken on appeal about the eviction notices. The grounds of appeal questioned the validity of the respondents' sub-leases and the tenancy agreements. It was contended that the sub-leases did not satisfy s 10(2) of the Land Act (Cap 132) which requires a lease of Royal Estate land to be for "projects of general public interest and benefit". It was also contended that the sub-leases were invalid because of the reference in each of them to a term of 945 years and other mistakes in the sub-lease forms. It was further contended that the sub-leases breached sections 12 and 13 of the Land Act which forbid respectively any out-and-out sale of land or any agreement for the use or occupation of land for profit other than in the manner prescribed by the Act or as approved in writing by the Minister.

Held:

1. The lease and sub-lease complied with the provisions in the Constitution and in the Land Act, and no evidence was brought by the Appellants to show otherwise.

2. The sub-leases were not rendered invalid by the reference in each of them to a term of 900 years beyond the expiry of the term of the head lease . That was an obvious mistake and the court should give effect to the true intention as it appears from the construction of the documents. The other mistakes were minor and at most they might pose a problem of construction in a case to which an incomplete or inappropriate clause might appear to apply.

3. Registered leases and mortgages remain permissable under sections 12 and 13 of the Land Act.

4. In Tonga buildings are not in general regarded as fixtures and they are treated as detachable from the land.

5. Section 13 of the Land Act has no application to ordinary short term tenancies of houses and shops.

Cases considered:

Bank of Tonga v Kolo (Ward CJ, unreported, 21 April 1995)

Cook v Shoesmith [1951] 1 KB 752

G J Coles & Coy Ltd v Commissioner of Taxation [1975] HCA 19; (1975) 132 CLR 242

Kolo v Bank of Tonga (Court of Appeal, Burchett, Tompkins and Beaumont JJ, unreported, 7 August 1998)

Mangisi v Koloamatangi (Court of Appeal, 23 July 1999)

Statutes considered:

Constitution of Tonga (Cap 2)

Land Act (Cap 132)

Counsel for appellants: Mr Tu'utafaiva
Counsel for respondents: Mr Niu

Judgment

[1] These appeals are concerned with the validity of two sub-leases of land in Nuku'alofa, forming part of the Royal Family Estates referred to in s 10 of the Land Act (Cap 132). That issue is raised by the Appellants, who are tenants of the sub-lessees in respect of buildings erected on land comprised within the sub-leases. They are appealing in proceedings brought by the sub-lessees for their eviction, in which orders were made against them.

[2] In the beginning of the matter, His Majesty Taufa'ahau Tupou IV, King of Tonga, as lessor under a deed of lease made 15 June 1993, and with the prior consent of Cabinet given under Clause 114 of the Constitution of Tonga, leased all the relevant land to one Dr Wong for a term to extend until 14 June 2043. The deed, which was registered as lease 5405, contained a covenant by Dr Wong "that he will not grant a sub-lease of, or transfer this lease without the consent of Cabinet before Land obtained" (that is to say, perhaps, the consent of Cabinet is to be got before the sub-lessee obtains entry onto the land).

[3] Dr Wong then, "by the ANZ Banking Group Limited as Mortgagee in possession", on 18 December 1998, granted a sub-lease to the Respondent Fund Management Limited of part of the land for a term expressed to extend "until the fourteenth day of the month of June in the year two thousand nine hundred and forty three". It will be observed that this is 900 years beyond the expiry of the term of the head lease. But inspection of the document, as the trial judge held, makes the explanation quite apparent. A form was used, containing the printed words "in the year one thousand nine hundred and", followed by a blank. The typist crossed out the words "one thousand" and typed below them the words "two thousand", but failed to continue the crossing out so as to delete the words "nine hundred" before typing in "forty three". It is an obvious conclusion that the words "nine hundred" have been left in the document purely by mistake. The true intention, to which the Court should give effect, was to specify the term that would be expressed if those words were not there, particularly as the written consent of Cabinet, to be mentioned, referred to a term of 45 years, not 945 years.

[4] The next thing to note about the sub-lease is that it bears an endorsement of its registration on 18 December 1998, and the signature of the Minister of Lands. The evidence shows this signature was in conformity with a Court order (made by Lewis CJ on 24 February 1998 in a proceeding brought by the Bank and Dr Wong) requiring the Minister's approval to this and another sub-lease to be mentioned. The sub-lease also received the consent of Cabinet; indeed, that was given in advance, on 11 March 1998, and in writing.

[5] Also on 18 December 1998, in the same terms and pursuant to a consent of Cabinet in the same terms, Dr Wong granted a sub-lease of the remaining part of the land to the Respondent Tourist Services Ha'apai Limited (although its name was mistakenly shown as Tourists Services Ha'apai Limited) to run for the same period (expressed by the same mistake in the same way). This sub-lease, too, bears an endorsement of its registration on 18 December 1998, and the signature of the Minister of Lands; and it was the subject of a corresponding consent of Cabinet.

[6] Having become sub-lessees, each of the Respondents entered into a series of short term tenancy agreements, being sub-lettings to the occupants of buildings that were on the lands. These tenancy agreements were expressed to require the payment of rent "in respect of the Premises", defined as meaning the particular "building and premises operated as" the business of each tenant, although the agreements recited that the "Tenant owns buildings on the Land". The appeals were argued on the footing that the Appellants had all entered into tenancy agreements so expressed.

[7] On the basis that the terms of the short term tenancy agreements had expired, the Respondents issued eviction notices to the Appellants, and to other Defendants in the original proceedings who have not appealed. No point is taken in the appeals about the eviction notices. The grounds of appeal all relate to defences which question the validity of the Respondents' sub-leases or the tenancy agreements. A number of the defences raised at trial and in the grounds of appeal were ultimately not pursued or were expressly abandoned.

[8] An argument pressed for some time was that the sub-leases required the personal consent of the King. The basis of such a requirement is not to be found in the Constitution or the Land Act, but in any case, it was pointed out that the lease from the King provides, in a clause that has been quoted, for the consent of Cabinet to a sub-lease or transfer. It would sit oddly with that to find an unexpressed obligation to obtain a different consent. In the light of this consideration, the argument was abandoned.

[9] Grounds of appeal suggesting a sub-lease of part could not be valid, or not without the personal consent of the King, were also withdrawn, on the footing that s 124(2) of the Land Act expressly contemplates a sub-lease of part only of the land in the lease, which is permissible upon ordinary principles of law (Cook v Shoesmith [1951] 1 KB 752), as is also an assignment of part (G J Coles & Coy Ltd v Commissioner of Taxation [1975] HCA 19; (1975) 132 CLR 242). No issue was raised as to whether the sub-leases to the Respondents actually took effect as deeds of assignment, no doubt because the provision in the lease for the consent of Cabinet applied to a "transfer", that is to say, an assignment, just as it did to a sub-lease.

[10] A further ground of appeal asserted that s 10(2) of the Land Act was not satisfied by the sub-leases. That subsection provides:

"(2) Notwithstanding subsection (1), His Majesty may lease for projects of general public interest and benefit any of the lands or part thereof described in Schedule II and Schedule III."

It should be pointed out that subs (2) is, by its terms, applicable to the head lease, which falls directly within the words "His Majesty may lease", but the subsection is not expressed to apply to a sub-lease granted, not by His Majesty, but by the lessee. In any case, the submission of counsel for the Respondents, Mr Niu, that a sub-lease given for the purpose of the erection of a commercial building in Nuku'alofa, making services available for utilisation in economic activities there, does come within the provision, is a submission that should be accepted.

[11] Next, counsel for the Appellants submitted that certain minor failures on the part of the parties to the sub-leases to fill in blanks, and delete superfluous printed terms, rendered the documents invalid. It was the trial judge who described these as "minor", but counsel did not point to any respect in which any of them rose above that description. At most, they might pose a problem of construction in a case to which an incomplete or inappropriate clause might appear to apply. The point is without substance.

[12] Then, it was argued that the sub-leases were rendered invalid by the reference in each of them to a term of some 945 years. But, as has been said, that was a mistake. Moreover, it was so obvious a mistake that it can, and should, be corrected upon the true construction of the documents. The alleged invalidity, therefore, falls away. What is more, Mr Niu's submission is correct that the terms of 945 years would, anyway, be ineffective as to 900 years because unsupported, to that extent, by the term of the head lease.

[13] A contention was also advanced that turned, less on a fine point of language, and more on substantial provisions of the Constitution and the Land Act. Clause 104 of the Constitution provides:

"104. All the land is the property of the King and he may at pleasure grant to the nobles and titular chiefs or matabules one or more estates to become their hereditary estates. It is hereby declared by this Constitution that it shall not be lawful for anyone at any time hereafter whether he be the King or any one of the chiefs or the people of this country to sell any land whatever in the Kingdom of Tonga but they may lease it only in accordance with this Constitution and mortgage it in accordance with the Land Act. And this declaration shall become a covenant binding on the King and chiefs of this Kingdom for themselves and their heirs and successors for ever."

Clause 110 provides for the manner of execution of leases by the Minister of Lands, adding: "and no lease or transfer will be considered valid or recognised by the Government unless registered in the office of the Minister of Lands." Clause 114 then prescribes, with a presently irrelevant proviso, that "[n]o lease, sub-lease, transfer of a lease or of a sub-lease shall be granted –

(a) without the prior consent of Cabinet where the term is ninety-nine years, or less, or

(b) without the prior consent of Privy Council where the term is over ninety-nine years, ...".

It is in this constitutional framework that sections 12 and 13 of the Land Act must be understood:

"12. Any landholder who sells or attempts to sell any land out-and-out to any other person shall be liable on conviction therefor to a term of imprisonment not exceeding 10 years.

13. Any landholder who enters or attempts to enter into any agreement for profit or benefit relating to the use or occupation of his holding or a part thereof other than in the manner prescribed by this Act or as approved in writing by the Minister shall be liable on conviction to a fine not exceeding $200 or to imprisonment for any period not exceeding 12 months or both."

[14] So the Constitution prohibits (in Cl 104) the sale of land (a prohibition supported in the Land Act by criminal sanctions), but (in the same clause) expressly permits a person to enter into a "lease ... only in accordance with this Constitution and mortgage ... in accordance with the Land Act". It follows that when s 12 of the Land Act forbids the sale of land "out-and-out", and s 13 forbids an agreement for use or occupation of land for profit "other than in the manner prescribed" by the Land Act, or "as approved in writing by the Minister", a registered lease within clauses 104, 110 and 114 of the Constitution, and a mortgage within cl 104, must remain permissible. And, indeed, the manner in which such a lease is to be granted is "prescribed by this Act" within the language of s 13 of the Land Act, for it is prescribed by ss 124 and 126 et seq (which also apply to sub-leases). In the present case, the lease and the sub-leases appear to comply with these provisions, and no evidence has been brought by the Appellants to show otherwise.

[15] Section 13 of the Land Act is a criminal provision, and it should not be extended by any loose construction. In Tonga, the law of fixtures, as understood in other Common Law countries, has been somewhat modified, so that buildings are not, in general, regarded as fixtures. They are treated rather as "chattel houses" are in Barbados — that is to say, as personal property detachable from the land: Kolo v Bank of Tonga (Court of Appeal, Burchett, Tompkins and Beaumont JJ, unreported, 7 August 1998); Mangisi v Koloamatangi (Court of Appeal, 23 July 1999); Bank of Tonga v Kolo (Ward CJ, unreported, 21 April 1995). It would be inconsistent with this approach (and destructive of ordinary weekly tenancies of houses and shops in Tonga) to treat s 13 as applicable to the short term tenancy agreements in the present case. Accordingly, these, too, although not registered, avoid any offence to s 13. That conclusion is not affected by the ownership by each of the short term tenants of his own shop building; he accepted the obligations of a tenant in respect of it, agreeing to pay rent and acknowledging his landlord's right to receive the rent. 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.

[16] For these reasons, the appeals should be dismissed with costs.