National Bank of Vanuatu v Joli [2003] VUCA 28; Civil Appeal Case 03 of 2003 (7 November 2003)

IN THE COURT OF APPEAL OF
THE REPUBLIC OF VANUATU
(Appellate Jurisdiction)

CIVIL APPEAL CASE No. 03 of 2003

BETWEEN:

NATIONAL BANK OF VANUATU
Appellant

AND:

DANIEL & PATRICIA JOLI
First Respondent

AND:

ASSET MANAGEMENT UNIT
Second Respondent

Coram: Justice Bruce Robertson
Justice John von Doussa
Justice Daniel Fatiaki
Justice Oliver Saksak
Justice Patrick Treston

Counsels: Mr. Mark Hurley for the appellant
Mr. John Malcolm for the first respondent
Mr. Juris Ozols for the second respondent

Date of hearing: 4th November 2003
Date of judgment: 7th November 2003

JUDGMENT

This is an appeal from a decision of the Chief Justice delivered in the Supreme Court at Port-Vila on 10 February 2003 with reasons dated 22^nd September 2003.

The appeal seems to have a life of its own which is rather divorced from any sensible reality.

On 20^th July 1995, the first respondents, Mr. and Mrs Joli purchased the leasehold interest in lease No. 12/0634/008 for 3 million Vatu from Trevor and Judie Hannam.

The un-contraverted evidence is that this transfer was registered on the 24 August 1995 prior to which Mr. and Mrs. Joli had searched the Registrar and found the property was registered in the name of the Hannams’ free of any charges.

The Jolis then made arrangements to borrow funds from the Bank of Hawaii to develop the property. When the Bank of Hawaii mortgage was registered on 21^st February 1996 no other rights, charges or interests were on the register.

On 11 June 1996, the appellant lodged a caution over the property which was registered on 12^th June 1996. The central question is whether that caution was lawful, and if it was not, were the appellant and/or the second respondent liable for breach of tortious or statutory duty in respect of the losses which have been suffered by Mr. and Mrs Joli as a result of the lodging of the caution.

Mr and Mrs Hannam owned a substantial block of land which they were subdividing. They had been receiving financial assistance from the appellant in that process. There are speculations as to whether the arrangements between the Hannams and the appellants should have led to a registered mortgage being on all of the Hannam’s titles but that is not relevant or material to the narrow issue which is before this Court.

At trial the first respondents called evidence from Mr Joli, Mr Hannam and Henry Nin who was at the relevant time the Manager of Lending for the present appellant.

There is nothing really of substance which is in conflict with the three witnesses.

The Hannams treated the land they were selling to the Jolis as free and unencumbered. The Hannams acknowledged that they owed substantial money to the appellant. When the Hannams were paid for the sale of the leasehold interest to the Jolis the proceeds were paid in reduction of their debt to the appellant. It is perhaps unusual in this case that the Bank was so integrally involved in the transaction as it was Mr. Nin who actually witnessed the signatures of both the Hannams and the Jolis in the transaction and the appellant received the total proceeds.

There is a great deal of argument about whether steps should have been taken to protect the Bank’s position earlier. That is not relevant. It is important to simply focus on the position which existed on 11 June 1996 when the appellant lodged a caution on the Jolis’ title and had it registered on 12 June 1996.

There is no suggestion that the Jolis owed to the appellant anything. They had had no dealing with the Bank and were not indebted to it in any relevant way. There must be serious doubt in those circumstances of the appellant having a caveatable interest at all in the Jolis’ title notwithstanding the existence of a head lease.

The NBV asserts on that date the Hannams owed them substantial money and that the charge was lodged and registered because of that indebtedness which they thought they had been protected.

In our judgment the correct starting point is to enquire whether the Hannams as at the middle of June 1996 had any right or interest which could have been the basis to lodge and register a caution over the land which they had sold to the Jolis. The answer to that is simple. They had been paid for what they had transferred. They had ceased to have any interest of any sort in the land.

Section 93(1) of the Land Leases Act [CAP. 163] is relevant and it provides:

“93. (1) Any person who-

(a) claims any interest in land under an unregistered instrument or otherwise;

(b) claims a benefit under a trust affecting a registered interest;

(c) claims a licence affecting a registered interest; or

(d) has presented a bankruptcy or winding up petition against the proprietor of a registered interest;

may lodge with the Director a caution in the prescribed form forbidding the registration of any person as transferee of, or any instrument affecting, that interest, either absolutely or conditionally.”

It was common ground both at trial and at the appeal hearing that paragraphs (b), (c) and (d) were of no relevance. So the sole question is what 93(1)(a) means in this context.

We return to the issue of the Hannams. They had no interest in this land under an unregistered instrument or otherwise. They had previously had an interest but they sold the land and had been paid. When the Register was checked it showed that the title was free of encumbrance.

It may be that some mistakes were made by others for that to occur. If so, the appellant may have some rights of action against others. But it was fundamentally wrong, when the appellant knew that the title which was on its face had no encumbrances on it, had been sold and it had received the total money which the vendor was paid, to later place a caution on the title. Just as the Hannams had no interest which they could have cautioned, the appellant whose only interest was derivative from the Hannams could not have any interest either. The term “or otherwise” must be treated objectively and on the facts it could not be a ground or justification here.

The other limb of the argument advanced by the appellant in the Court below and now agitated before us centres on the provisions of Section 97 of the Land Leases Act of [CAP. 163] which provides in subsection 5:

“Any person lodging any caution with the Director or allowing any caution to remain without reasonable cause shall be liable to pay such compensation as the court thinks just to any person who sustains damage or who has incurred costs or expenses thereby.”

It is argued that the appellant was not acting “without reasonable cause” because it believed there should have been an encumbered title when the land was in the Hannams’ name as the Hannams still owed money to the Bank.

All that may be correct but it totally avoids the critical issue. The reasonableness of its action in cautioning the title which it knew was no longer in the Hannams’ name is the question.

The Hannams had disposed of their interest. The appellant had received the total funds which the Hannams had been paid when they sold.

It defies logic to suggest that the appellant in those circumstances could have had any “cause” let alone a “reasonable cause” for attaching what was then registered as the Jolis’ property. There was, and never could have been any cause for putting the caution there or for maintaining it. Accordingly the Bank could not avail itself of that protection.

We have been referred to a number of cases but this is an appeal which turns on uncontraverted facts. The findings of fact which were made by the Chief Justice in the Supreme Court are not seriously attacked (as they could not be) as they flowed inevitably from the evidence which was given.

We reach no conclusions about what rights of action the Bank may have against other people. But the appellant had no business to involve the Jolis who were totally innocent in anything which might have occurred in the past. The appellant having chosen that course of action undoubtedly and unquestionably is liable to them for the losses which they have sustained during the period that this caution was an impediment to the Jolis’ rights of use and enjoyment of their land.

The written submissions of Mr. Ozols for the second respondents and Mr. Malcolm, for the first respondents, supported the trial Judge’s findings of the lack of ”reasonable cause” and in the intransigence of the Bank in blocking the Jolis once the caution was in place.

It has not been argued that the trial Judge was incorrect when he found that there was no liability on the part of Asset Management Unit and dismissed it from the proceeding.

On the facts, the Asset Management Unit, which is a statutory body created to acquire the bad debts of the National Bank of Vanuatu, the Vanuatu National Provident Fund and the Development Bank, has a duty to attend to the collection of debts and the transfer of proceeds to the Government of Vanuatu. The fact that the National Bank of Vanuatu had some debts owed by the Hannams in no way implicated the Asset Management Unit in the consequences of this misconceived and fundamentally flawed process which was adopted by the National Bank of Vanuatu.

Clearly the Bank felt aggrieved that as a result of what they perceived as wrongful acts and omissions of others, it was left in an unenviable position with regard to the recovery of the Hannam’s debts. Asset Management Unit may have had a statutory responsibility with regard to pursuing a debtor, but no one had a right to attach the properly acquired interest of the Jolis. Even without the direct personal knowledge which the Bank and its officers had, none of this should have occurred. It was a bold action indeed, considering the direct involvement of the Bank in the Hannams-to-Jolis transfer and after its receipt of the entire consideration for the sale, for the appellant to assert it had reasonable cause to interfere with property of the involved third party.

The decision reached in the Court below is not shown to be wrong. The Bank must face the consequences of its fool-hardy procedure which was adopted and maintained with resolution and determination over a lengthy period of time.

The appeal is dismissed. The appellant will pay costs to both the first and second respondents in respect of the hearing in this Court as well as the costs orders made against them in the Court below.

The file should be remitted to the Supreme Court for an urgent hearing in respect of the quantum of the loss to which the Jolis are clearly entitled. We hope that common sense and pragmatism will at this stage lead to the Bank facing its clear responsibility for the damage it caused to the Jolis. This would be wiser than aggravating the matter even further by putting the Jolis through a further trial on quantum.

DATED at Port-Vila this 7^th day of November 2003

BY THE COURT

J.B. ROBERTSON J.
von DOUSSA J
D. FATIAKI J
O.A. SAKSAK J
P.J. TRESTON J