Radiance v Hungalu [2010] TOSC 16; CV 6 of 2010 (30 June 2010)

IN THE SUPREME COURT OF TONGA
CIVIL JURISDICTION
NUKU'ALOFA REGISTRY

CV 6 of 2010

BETWEEN:

1. CHANDRA RADIANCE
2. HAFIZ HEARTSUN
3. HOMEAWAY @ HOUMELEI CO. LTD.
Plaintiff

AND

SIOAPE HUNGALU
Defendant

BEFORE THE HON. JUSTICE ANDREW
Land Assessor: FOTU

Counsel: Mr Niu for the Plaintiff AND
Mr. S. T. Taufateau for the Defendant

Dates of Hearing: 12th and 13th May, 2010
Dates of Written Submissions: 24 May, 2010
Date of Judgment: 31 May 2010

JUDGMENT

[1] THE PLAINTIFFS CLAIM

[a] That the Defendant lawfully sold his 2 storey dwelling house (at Vava'u) and lawfully leased his town allotment in which the house is situated to the Third Plaintiff Company.

[b] That the Third Plaintiff Company had agreed that the Defendant would use the downstairs part of the house when he would come from OFU island where he lived to Neiafu from time to time but that the Defendant without the knowledge or consent of the Plaintiff, took over and occupied and used the whole of the downstairs part of the house on a full time basis, and;

[c] That the Plaintiff Company had notified the Defendant to vacate the said downstairs part of the house but the Defendant has refused to do so and he has claimed that he is still the lawful owner of the house;

[d] The Plaintiffs claim that they have paid a sum of $40,000 to the ANZ Bank in full and final settlement of a debt of $55,716.44 of the defendant to that bank in consideration of sale by the Defendant of the house and lease of the allotment to the Third Defendant Company for 30 years, both in respect of which the said bank was mortgagee and the Defendant was mortgagor.

[3] The Plaintiffs further claim that they have further expended substantial sums in renovations and extensions to the home in addition to the payment of the $40,000 and the defendant has not paid back or offered to pay back the $40,000 or the costs of the renovations and extensions.

THE DEFENCE

[4] The defence of the Defendant is that;

[a] He did not sell the house at all to the Plaintiffs and that he is still its lawful owner up to now;

[b] He let the home to the Plaintiffs by way of a Tenancy agreement for 50 years for which the Plaintiffs paid the sum of $40,000 and a monthly rent of $100 under which;

[i] he was entitled to occupy the downstairs part of the house;

[ii] he was obliged not to terminate the tenancy except for breach by the Plaintiff and;

[iii] if the Plaintiffs terminated the tenancy, the Plaintiffs were to vacate the house and were not entitled to refund of the $40,000 and the monthly rent paid.

[5] The Defendant says that he leased the allotment to the Third Plaintiff Company for 30 years at an annual rent of $1,200 which rent was in addition to the rent of $100 per month for the house.

[6] The Defendant also says by way of defence that the Plaintiffs are estopped from denying that the Defendant is the lawful owner of the house became the said tenancy agreement confirmed that he was and is the owner of the house.

THE FACTS

[7] The Plaintiffs had come to Vava'u and wished to live there and they had met the defendant who had a house on a town allotment at Neiafu. This was a town allotment of 761.5m² of LOT 18 PLAN 5521.

[8] The Defendant was the lawful holder of the town allotment (the allotment) and was the lawful owner of the house situated therein.

[9] There is no dispute that he had borrowed various sums of money from the ANZ Bank and previously from WESTPAC Bank.

[10] In February 2005 he mortgaged both the allotment and the house to the ANZ Bank for a loan of $45,850 with which he paid off a load of $29,759 which he had taken out in 2004 from the WESTPAC Bank of Tonga with which he had finished off construction of the upstairs part of the house with the balance of the loan of $45,850.

[11] By the 1st of December, 2008 the balance of the loan was, together with the arrears and interest and fees and costs, $55,715.44.

[12] The Defendant had no assets or means by which he could re-pay the loan. In an affidavit dated 15 December 2008 he acknowledged that he was unable to make any further payments to reduce his indebtedness'. The Bank was going to repossess the property. The Defendant was about to lose his property at Neiafu.

[13] I accept the evidence and the submissions of the Plaintiffs that at this time the Defendant was living with his family at his parent's town allotment at OFU (an island off the coast of the main island of Vava'u). He had his plantations and crops on his father's tax allotment at OFU as well. He only visited and stayed in the house on the allotment at Neiafu from time to time.

[14] The first and second Plaintiffs were visiting Vava'u at the time and were going to New Zealand and then back to their own country (the USA). He had visited OFU and met the Defendant and his wife and they learned of the problem of the Defendant with his home and the allotment and the debt to the ANZ Bank.

[15] There is no dispute that the Defendant and the Plaintiffs discussed and agreed with the ANZ Bank that if the Plaintiffs paid $40,000 to the ANZ Bank, the bank would cancel all the indebtedness of the defendant to the bank and would discharge its mortgage over the allotment and the house.

[16] I accept the Plaintiffs evidence that they discussed with the defendant and agreed with each other that the Plaintiffs would form the 3rd Plaintiff Company which would then own the house and the Defendant would lease the allotment to that Company for 30 years for residential and business purposes at an annual rent of $1,200.

[17] The evidence is clear enough and is not disputed that what happened next is that the Plaintiffs would continue on to New Zealand as they had planned and whilst there would acquire ship material and equipment for the renovation of the house and for the business of the company they proposed to operate.

[18] The company needed to be incorporated.

[19] Once incorporated the company would apply for the lease of the allotment which would require obtaining of Cabinet approval, and surveying and preparing of the deed of lease. All of which would take time.

[20] The bank needed to be paid right away.

[21] From this point on what happened next in contentions.

[22] I should say at this point that I found both the Plaintiffs to be scrupously honest persons who made every effort to maintain good relations with the defendant although they may have been commercially naive. I accept without any reservation all of their evidence. The defendant on the other hand I found to be irascible and volatile and one who wanted to have his cake and eat it too, to put it in plain terms. Thus whilst he was happy to accept the $40,000 which saved him from losing his house he wants to have the continued use of the house. His evidence could not be supported by documentary evidence.

[23] Accepting the Plaintiff's evidence as I do I am satisfied that the parties agreed to have an interim agreement until the company could be incorporated and the lease duly registered in its name.

[24] Then (as submitted) on 19th December 2008 the Defendant and the Plaintiffs signed a tenancy agreement which required the Plaintiffs to pay the agreed $40,000 to the ANZ Bank forthwith to clear the Defendants loan account there in full and to pay a monthly rent of $100 to the land office which in a year would be $1,200. That was the agreed rent of the lease of the allotment by the Third Plaintiff Company.

[25] The parties had sought legal advice from Mr. Vaipulu in Neiafu. I am satisfied that the tenancy agreement was only ever intended to be an interim arrangement pending the registration of the lease. I am satisfied that legal counsel had advised the Plaintiffs that the tenancy agreement would give them some security as they had just paid $40,000 to clear the defendant's debt. That is, some security pending the registration of the lease. The tenancy agreement allowed the Plaintiffs both residential and commercial use.

[26] The tenancy agreement also allowed the defendant to continue to occupy the lower floor of the building. I am satisfied that this was agreed to out of the inate kindness of the Plaintiffs. They were going to be away in New Zealand, the Defendant would be coming across from OFU island from time to time.

[27] The fact that this was only ever meant to be a temporary arrangement was that at the time of the signing of the tenancy agreement, legal counsel was paid to incorporate the Third Defendant Company and to collect the deed of grant of the allotment from the ANZ Bank and to lodge the application of the Third Defendant Company for the lease of the allotment. It does not make sense that the Plaintiffs would pay $40,000 to obtain a tenancy agreement that could be easily terminated. It was always the intention of the parties that the Plaintiffs were paying the Defendants debts in return for the lease of the town allotment.

[28] The Plaintiffs duly went to New Zealand where they obtained building material and various boating equipment for their business. When they returned some three months later the company had not been incorporated and the lease application had not been lodged. They themselves then attended to the incorporation of the Company and it was registered on the 23rd March, 2009. They also had a new lease application form signed by themselves for the company and by the Defendant as grantor. This was lodged at the Land Office on the 25th May, 2009. The Plaintiffs found, upon their return on the 21st March, 2009, that the Defendant and his family had moved into and were living full time in the downstairs part of the house. Again they let them stay there out of their inate kindness until the lease was registered.

[29] The Plaintiffs were unable to store the equipment and building materials they had brought in the downstairs part of the house as had been their intention. They then commenced renovating the house and I accept the evidence that they expended some $45,000. The Defendant did not interfere with any of this work.

[30] In July 2009 the Defendant and his family left Vava'u and went to Tongatapu. The Plaintiffs then moved the equipment and building materials into the downstairs part of the house.

[31] On the 1st July 2009, Cabinet approved the lease application of the Third Plaintiff Company. I accept the evidence that there was a clerical error in the documents and the annual rent stated to have been approved was only $100. The Defendant was informed of this by the Plaintiff and he went there and had it corrected in about late July 2009 and (as submitted) the correct annual rent, the one agreed upon in the lease application form of $1,200 was duly noted.

[32] In September 2009 the Plaintiffs went to the US. When the Defendant found out about this he and his family moved back into the house and moved the Plaintiffs equipment and material out.

[33] The Defendant next took steps to have the lease application cancelled. He wrote to the Governor saying that the Plaintiff had tried to cheat him over the rent being stated at $100 and not $1,200. This is clearly untrue as there had simply been a clerical error which was corrected. The Defendant of course in his endeavors to cancel the lease had never offered or proposed that he should return the $40,000. It was the Registrar of Lands who found that there was a clerical error and it was not caused by the Plaintiffs as the Defendant has claimed.

[34] The Governor did not accept the Defendants request to cancel the lease.

[35] It appears that notification of the Cabinet approval on 17th July 2009 was not made known to the Plaintiffs for some time. In any event the lease of the allotment was registered by the Minister of Lands on the 25th February, 2010.

[36] On the same day the Defendants were notified in writing that the lease had been registered and that the interim tenancy agreement was at an end and that he was to vacate the home within 8 days. The tenancy agreement provided for termination by the Plaintiff and they accordingly terminated it forthwith. The Plaintiffs insured the house in their names. The annual rent of $1,200 was immediately paid. There was to be no separate rental for the house. That correction had been initialled. That has been received by the Defendant.

[37] Section 56 of the Land Act provides that the registered holder of a town on tax allotment may grant a lease over the whole or part of his town allotment provided that:-

....[v] No mortgage is in force in respect of the allotment or part thereof

That was complied with;

[38] Section 57 (2) and (3) provide:-

...Section (2). The amount of rental which shall be payable in respect of a lease of a town allotment shall be as agreed between the parties thereto.

(3) The Minister shall collect the rents for all allotments or parts thereof leased in terms of the foregoing section and shall pay the same into the Treasury and shall issue a voucher in favor of the holder of the tax or town allotment for that amount of rent less ten per centum thereof

That was complied with;

[39] Section 126 provides:-

".....Section 126, No lease, sub lease, transfer or permit until registered in the manner hereinafter prescribed shall be effected to pass or affect interests in land...."

[40] The Deed of Lease which has been granted to the Third Plaintiff contains the same wording and provisions of Schedule 14 of the Land Act (see FORM 3 in the schedule - the form of the Deed of Lease). That means that the lessee is the lawful owner of the building and improvements on the land. If he fails to pay the required rent the buildings may be seizer and sold by the lessor. But that is not the case here as rent has been paid.

[41] The Plaintiffs paid $40,000 to own the two storey house and to lease the town allotment in which it is located for 30 years by their company, the Third Plaintiff, for residence and business. All provisions of the Land Act were complied with. That was the agreement between the parties. The Defendant cannot rely on the tenancy agreement which was only ever intended as a short gap to give the Plaintiff some security for his $40,000 pending the registration of the lease. In any event the tenancy agreement has been concluded.

[42] The Defendant should (again in the vernacular) be thanking his lucky stars that his house and allotment were not re-possessed by the Bank. He was saved by the Plaintiff so that the property is not lost forever to his family and heirs.

[43] He must now vacate the property in these circumstances.

[44] The order I make is as follows:-

1. I make an order declaring that the dwelling house situated on the Land of Lease No. 7794 is the lawful property of the Plaintiffs.

2. I make and order directing that the Defendant and his wife and children are to immediately vacate and remove all their belongings from the dwelling house which they presently occupy on the Land of Lease No. 7794.

3. Costs are awarded to the Plaintiffs as agreed or taxed.

JUDGE

Date: 31 June 2010