Naflak Teufi Ltd v Kalsakau [2005] VUCA 15; Civil Appeal Case 07 of 2004 (18 November 2005)

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

Civil Appeal Case No. 07 of 2004

BETWEEN:

NAFLAK TEUFI LIMITED & KALMAN KIRI MANLANGAI
Appellants

AND:

JOSHUA KALSAKAU
First Respondent

AND:

THE GOVERNMENT OF THE REPUBLIC OF VANUATU
Second Respondent

Coram: The Hon. Chief Justice Vincent Lunabek
The Hon. Justice Bruce Robertson
The Hon. Justice Daniel Fatiaki
The Hon. Justice Oliver A. Saksak
The Hon. Justice Hamlison Bulu

Counsels: Mr. Willie Daniel for the Appellants
Mr. John William Timakata for the First Respondent
Mr. Dudley Aru & Ms. William-Reur for the Second Respondent

Date of Hearing: 11 November 2005
Date of Judgment: 18 November 2005

JUDGMENT

This case concerns an unsuccessful claim by the Appellants for a lease over a piece of land in which a competing claimant, the First Respondent is alleged to have obtained the lease in priority to the Appellants by means of fraud and mistake. The Appellants seek rectification of the lease in terms of Section 100 of the Land Leases Act [CAP. 163] and/or alternatively damages.

The Appellants’ action was originally commenced by way of an Originating Summons dated the 7th of June 2002 in which the Appellants sought five declarations, the fifth of which read:-

“For a declaration that in all the circumstances in the present claim by the Plaintiffs justify that:-

(a) The Minister of Lands be directed to grant the Plaintiffs the lease over land lease title 12/0633/411 as modified; or

(b) The register in relation to titles which are mentioned be rectified by the Court under the terms of section 100 of the Land Leases Act [CAP. 163] in favour of the Plaintiffs.”

That was plainly a claim for the lease(s) to be granted to the Appellants as part of the rectification.

On 27th June 2003 an Amended Supreme Court claim was filed by the Appellants in which they made some similar claims and assertions. However, their particular claim that they should be declared the successful lessees and the leases be registered in their names appears to have been withdrawn.

Then on the 9th March 2004, a second Amended Supreme Court claim was filed in which the Appellants reinstated their earlier demands that the leases should be granted to them together with an order for damages for the amount of potential economic losses allegedly suffered by the Appellants in not getting the leases at the outset together with interest and costs.

The First Respondent filed a defence denying the claim on the basis that he was unaware and had no knowledge of the various assertions and allegations of mistake and fraud that had been advanced in the Amended Statement of Claim.

For its part without filing a defence, the Second Respondent through the State Law Office made an application on 18th March 2004 to strike out the Appellants' claim on the ground that it disclosed no cause of action or, alternatively, that the Appellants were not entitled to the particular relief they sought in their claim. Comprehensive submissions were filed by counsel from the Attorney General’s Chambers and by the Appellants' counsel in reply.

In a judgment delivered on 6th May 2004, the Supreme Court upheld the Attorney General’s application on the ground that the Appellants' claim failed to show a reasonable cause of action. Costs were ordered in favour of the First and Second Respondents.

The primary judge in his decision noted that a reasonable cause of action means, “A claim with some chances of success when the allegations in the pleadings are considered.” He then sets out section 100 of the Land Leases Act [CAP. 163] and section 6 of the Land Reform Act [CAP. 123].

The judge's relevant findings are contained in the following two passages in his judgment:

"FINDINGS

I agree that there is a fundamental flaw in the Claimant’s case in that on the basis of the facts alleged in the statements of case it has no right to lease over the land. Having no right to a lease, it is clear that it cannot have the register rectified to make it the registered lessee. It is clearly neither the custom owner nor does it have any other entitlement to the land such as an alienator and under the legislation it is clear that simply because the Claimant was a registered negotiator does not give it any automatic right to a lease. The discretion as to who obtains the lease is vested in the Minister as lessor in the case of disputed land. It is not a case of first in first served. The Claimants simply does not have any legal status to bring the action.

I also agree that allegations of fraud or misrepresentation do not go to vitiate the Minister’s decision to grant the First Defendant a lease. There is no suggestion that the Minister could not lawfully have issued the lease over the land in the relevant titles and in relation to the allegations about the misrepresentation concerning the Marope land case all that led to was a conclusion that the Minister had management and control over the land and could grant a lease over it. The Claimant simply does not have the status to claim that the leases between the Minister and the First Defendant must be set aside and that is a condition precedent to its claim for compensation. I cannot find any basis in the claim itself which could found a cause of action. The Claimant did not obtain a lease over the period that it held a certificate of registered negotiator between 6 August 1997 and 6 August 1999. As to the claim for compensation itself, that is largely based on mere speculation. As the Claimant failed to secure any lease itself, it cannot establish on the pleadings what its prospective or potential loss might have been.”

In essence, the judge found that the Appellants, despite being the holder of a registered negotiator's certificate in relation to the subject land, did not have any legal standing to bring the action. In the primary judge's own words:-

“(the Appellants) having no right to a lease, it is clear that it (the Appellants) cannot have the register rectified to make it the registered lessee......It is clear that simply because the (Appellants) has a registered negotiator does not give it any automatic right to a lease.”

Unfortunately, the primary judge appears to have become distracted by the Appellants' excessive claim to be substituted as the registered lessee of the disputed land. There was in our view an error in the question asked by the Court. It is not who should ultimately be granted the lease, rather, the question is who can apply for rectification?

The judge recorded that the discretion as to who obtains a lease over disputed land is vested in the Minister as lessor and is not to be had or granted necessarily on a case of "first come first served". He also found that the Appellants' allegations of fraud and misrepresentation did not go to vitiate the Minister’s decision to grant the First Respondent the lease, there being no suggestion that the Minister could not lawfully have issued the lease over the land to the First Respondent.

It is common ground that at the time that the ruling was made no evidence or sworn statements had been filed by any of the parties to the case nor had the Second Respondent filed a defence to the Appellants' claim.

The Appellants now appeal on two grounds. First, that on an analysis of the Appellants' claim, assuming that all factual assertions could be proved, there was a reasonable cause of action in the Claimant to challenge the registration of the First Respondent's lease and/or to invoke the provisions of section 100 to rectify the lease. Secondly, there was a number of factual issues which had to be determined as between the Appellants and the Respondents. Particularly, in regard to the nature of the mistakes and fraud that had been pleaded and/or were alleged by the Appellants in its claim.

We are grateful for the comprehensive submissions both written and oral which we received from counsel which have greatly assisted us. We note however, that much of the Appellants’ submissions are devoted to an application to adduce and to include in the Appellants' claim, a large number of new facts pertaining to the fraud and mistake which are alleged against the Respondents.

These new facts and allegations were not contained in the original or amended pleadings and counsel for the Second Respondent objects to leave being granted to the adducive of such additional evidence in this appeal. We uphold the objection and accordingly refuse to include this additional evidence in our decision.

Having said that, however, we recognize that although the Appellants' pleadings have been amended at least once, it may well be that these additional factual allegations regarding the mistakes and fraud alleged by the Appellants may well need to be included in a further Amended Statement of Claim and for that purpose, and in order to ensure that all relevant and necessary allegations are placed before the Court we see no proper reason to refuse the Appellants leave to so amend its pleadings should such an application be made.

The Court’s power to strike out pleadings are not in doubt. It is to be exercised in plain and obvious cases where the pleadings do not disclose a reasonable cause of action. In considering such an application the Court is obliged to accept that the Claimant will be able to adequately establish all allegations and facts that it has advanced in its pleading. In other words, the Appellants' allegations in paragraphs 4 to 8 of its amended claim must be accepted as being capable of being established when considering whether or not the claim, in its entirety, raises a reasonable cause of action. The question is; was this such a 'plain and obvious case' on the face of the Appellants pleading to warrant its summary dismissal?

In our view, the meaning of section 100 of the Land Leases Act CAP163 is not in doubt. We are satisfied that the object of the section is to ensure that the land register and the processes leading up to the registration of any instrument or interest is free of any mistakes, fraud or possible fraudulent activities. In other words, its purpose is to secure the integrity of the register and the internal processes culminating in registration. The section, in its terms, is one which empowers the Supreme Court where it is satisfied that any registration has been obtained, made, or omitted by fraud or mistake, to order rectification of the register by directing that any registration may be cancelled or amended. We note without comment, the disjunctive nature of the rectification power.

We endorse what was said by this Court in Civil Appeal Case. 25 of 2004, [2005] VUCA 5, Jone Roqara & Ors v Noel Takau & Ors about section 100: -

"For a party seeking rectification under s. 100 of the Land Leases Act, it is not sufficient to prove that a mistake occurred in the course of a transaction which ultimately concluded in registration of the interest which is sought to have removed from the register. In terms of s. 100, the Court must be satisfied that the "registration has been obtained, made or omitted by fraud or mistake". The section imposes a causal requirement. The mistake must lead to the impugned registration being made. The onus is on the party seeking rectification not only to establish a mistake, but also to satisfy the Court that it caused the registration to occur.."

The particular aspect of section 100 that requires clarification in this appeal, is the question of who may make the application or who may invoke section 100 of the Land Leases Act?

The answer to the question is not immediately apparent as the section itself does not speak about Applicants or Claimants; it is purely an empowering section for the Supreme Court. That is not to say that no one may apply to invoke section 100 outside the Court itself.

We are satisfied on a consideration of the object and purpose of the section that, at the very least, a person seeking to invoke section 100 must include a person who has an interest in the register entry sought to be rectified and which it is claimed was registered through a mistake or fraud. Not only must there be proof of mistake or fraud but also that such mistake or fraud caused the entry to be registered. Furthermore it has to be proved that the mistake or fraud was known to the registered proprietor of the interest sought to be challenged or was of such a nature and quality that it would have been obvious to the registered proprietor had he not shut his eyes to the obvious or, where the registered proprietor himself caused such omission, fraud or mistake or substantially contributed to it by his own act, neglect or default. We use the word 'interest' in the widest possible sense although accepting it may have in appropriate circumstances be distinguished from a mere busy body.

We are satisfied from the pleadings that the Appellants in this case had a legitimate interest to seek rectification of the register pursuant to section 100 of the Land Leases Act [CAP 163]. Not only was the Appellants the holder of a registered negotiator's certificate in respect of the disputed land, but also, they were the Applicant first in time to seek a lease over the subject land. Plainly the Appellants were a competing Applicant for the land in question and on any sensible test, have a sufficient interest to seek rectification of the First Respondent's registration. We do not and can not put it any higher than that. As it is not relevant for the appeal we make no observation as to the quality of the allegations of mistake and fraud which caused the First Respondent to become registered as the lessee of the land in dispute.

In light of the foregoing and our interpretation of section 100 of the Land Leases Act, we are satisfied that an Applicant for rectification of a register does not have to be able to show a right to be registered by way of substitution. In other words, a successful application pursuant to section 100 of the Land Leases Act can lead to rectification by way of cancellation or amendment of an entry in the register not necessarily in the registration of the person who initiates the challenge. The suggestion in our view that an Applicant for rectification must have a personal or legal right to be registered in place of the interest being challenged places an unwarranted gloss on the plain words of section 100.

In similar vein, the question of whether or not the Minister had the power to grant the First Respondent the lease over the disputed land asks the wrong question. No one doubts the right or power of the Minister to grant the First Respondent the lease over the disputed land but, that is not the issue in the case nor is it raised by section 100. The issue is not the power of the Minister to grant the lease to the First Respondent (which is accepted) rather, the issue is whether or not the First Respondent's registration was obtained as a result of fraud or mistake which may be raised by an applicant with a legitimate interest.

The Appellants in all the circumstances must be treated as having a sufficient interest. The allegations made, if proved, could amount to fraud or mistake which might justify cancellation of the current registration in favour of the First Respondent. There is accordingly an issue to try and the proceedings should not have been pre-emptively struck out.

If the existing registration is cancelled the normal statutory processes will need to follow in respect of anyone (including the Appellants and the Respondent) who wishes to acquire a lease and obtain registration.

For the foregoing reasons, the appeal is allowed. The case is remitted to the Supreme Court to continue on its normal course. Costs are reserved.

DATED at Port Vila, this 18th day of November 2005.

Hon. Vincent Lunabek, CJ
Hon. Justice Bruce Robertson
Hon. Justice Daniel Fatiaki
Hon. Justice Oliver A. Saksak
Hon. Justice Hamlison Bulu