Kalses v Le Manganese de Vate Ltd [2005] VUCA 2; Civil Appeal Case 34 of 2003 (3 May 2005)

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

Civil Appeal Case No. 34 of 2003

BETWEEN:

KALOMUT KALSES and OTHERS
First Appellants

AND:

FREDDY KALSES and OTHERS
Second Appellants

AND:

LE MANGANESE DE VATE LIMITED
First Respondent

AND:

FORARI DEVELOPMENT COMPANY LIMITED
Second Respondent

Coram: Hon. Chief Justice Vincent Lunabek
Hon. Justice Bruce Robertson
Hon. Justice John von Doussa
Hon. Justice Oliver Saksak
Hon. Justice Hamlison Bulu

Counsels: Mr. George Boar for the Appellants
Mr. John Malcolm for the First and Second Respondents
Ms. Florence William for the Third Respondent

Hearing Date: 26 April 2005
Judgment Date: 3 May 2005

JUDGMENT

This matter has been before the Courts for sometime. On 24 October 2004 Treston J. struck out the Appellants’ claim in the Supreme Court as defective and frivolous. On 11^th June 2004 this Court set aside that Order as the Court considered that there were possible grounds upon which the claim might succeed if it were properly pleaded. The Court granted leave to the parties to replead. The Appellants substantially amended their statement of claim and the matter came on for trial before Treston J. in December 2004. On 27^th January 2005 his Lordship delivered judgment in which he:-

(1) dismissed the Appellants’ claim against the First Respondent Le Manganèse de Vaté Limited with costs against all Claimants on the standard basis;

(2) dismissed the Appellants’ claim against the Second Respondent Forari Development Company Limited with costs against all Appellants on an indemnity basis;

(3) dismissed the claim against the Third Respondent with costs against all Appellants on the standard basis; and

(4) made an order in favour of the First Respondent on a counter-claim.

The Appellants now appeal against the dismissal of their claims against the First Respondent, Le Manganèse, and against the order for costs that were awarded in favour of the Third Respondent who had taken no active part in the trial. There is no appeal against the dismissal of the claim against Forari or the costs order in their favour. There is also no appeal against the order on the counterclaim, but it is common ground that if the appeal succeeds the order on the counterclaim must be set aside.

In the Amended Statement of Claim the First Appellants alleges that they are resident land owners and lessors of leasehold title 12/0741/002 and 12/0741/003 situated in Forari on North East Efate. The Second Appellants are ni-Vanuatu from Eton Village, Efate and claim to be authorized through a power of attorney to act for and on behalf of the First Appellants.

Le Manganèse is the registered lessee of leasehold title 12/0741/002 and Forari is the registered lessee of leasehold title 12/0741/003.

The Appellants allege that in 1982 the First Appellants entered into a commercial and industrial lease agreement with Le Manganèse de Vaté SARL, a company incorporated in 1972. The Appellants allege that Le Manganèse de Vaté SARL was a totally different legal entity to the First Respondent which had become the registered lease holder of leasehold title 12/0741/002 in 1988 without the consent of the Appellants (contrary to a requirement for consent contained in the lease agreement), and that this registration was also obtained by fraud and mistake. At trial the evidence revealed that the Appellants were under a misapprehension that Le Manganèse de Vaté SARL had been deregistered in 1988. In fact, there had been a re-registration of the same entity under a new name. All the allegations made by Appellants based on the mistaken belief that the First Respondent was a different entity to the company which entered into the lease agreement were misconceived, and his Lordship held that they must fail. There is no appeal against the dismissal of those parts of the Appellants’ pleadings.

The Amended Statement of Claim went on to plead in the alternative a variety of other claims in the event that it was held that the First Respondent was the proper party to defend these proceedings. One of the alternative claims is that there had been transfers of shareholdings in Le Manganèse that had occurred without the consent of the Appellants, contrary to the requirements of the lease agreement. Treston J. did not accept evidence from the Appellants led in support of that allegation, and held that the necessary consents had been given by the Appellants. That aspect of the Amended Claim was also dismissed. There is no appeal against that finding.

The Amended Statement of Claim also raised two further topics which now give rise to issues in this appeal.

The first concerned promises allegedly made by Mr. Gerry Miles in or about 1989 and by a Mr. Jeff Fox in about 1995 to re-open the Manganèse mine and thus provide employment for the Eton people, to open a mini-township as a retirement village for millionaires and to build a vehicle assembly plant and pre-fabricated houses.

The second concerned the purported forfeiture of the Le Manganèse lease by letter dated 3^rd June 2003 on the basis that Le Manganèse was in fundamental breach of its obligations under the lease agreement, in particular to use the land for purposes involving mining.

On the first topic Treston J. held that the issues pleaded could not give rise to any remedy as the matters of complaint occurred more than six years before the commencement of proceedings, and accordingly were statute barred. On the second topic his Lordship held that the claim for forfeiture must fail, first because the Appellants’ purported notice of forfeiture, being the letter of 3^rd June 2003, did not comply with Clause 6 of the lease agreement, and, further, even if there had been a fundamental breach of the lease which otherwise would justify forfeiture, that breach was deemed to have been waived by the provisions of s. 43 of the Land Leases Act [CAP. 163].

The notice of appeal raises the following grounds:-

1. The learned trial Judge erred in law and or in fact by failing to give any or proper weight to the Claimant evidence, which established that since the execution of the Commercial and Industrial lease Agreement of 1982 (hereinafter the Agreement) in respect to 12/0741/002, the First Respondent has totally fail to undertake its obligations which goes to the root of the Agreement and that the court should hold that the Agreement is terminated.
   
2. The learned trial Judge having found that the Forfeiture Notice of 3 June 2003 was defective on the grounds that reasonable notice was not given nevertheless erred in law and in fact by failing to give any and or proper weight to the Appellant evidence which established that the Respondents breach was so pervasive and overwhelming that in the circumstances reasonable notice would not suffice and that the trial Judge should hold that the Agreement was at end.
   
3. The learned trial Judge erred in law and or in facts by strictly holding that the Appellant claim was statute barred when this was a continuing breach which was at the date of trial hearing of this action remain unperformed by the Respondents.
   
4. The learned trial Judge having found that the Appellant has accepted rent until August, 2003 nevertheless erred in law and fact by failing to given any or further weight and considerations to the Appellant evidence which established that since the Agreement of 1982, the First Respondent has failed and never perform its obligations under the Agreement for period of well over 22 years to the date of trial hearing of this matter which considerations out weight any other considerations such as rent and that his should bear much upon the trial Judge decision.
   
5. The learned trial Judge erred in law and fact by holding that the Appellant pays costs to the Third Respondent when the Third Respondent has never ask for costs nor was he participated in the proceedings of the whole case but simply to abide the court decisions.”
   

Grounds 1, 2 and 4 relate to the question of forfeiture. Ground 3 relates to the limitation point, and ground 5 challenges the order for costs made at trial in favour of the Third Respondent, the Attorney General.

We take these three matters in turn.

The forfeiture question

Clause 4 (a) of the Le Manganèse lease agreement provides:-

“Clause 4 (a) The demised land is to be used for the purposes of undertaking the processing of mineral and/or substrate and for any other industrial or commercial activity and support activity related to same that might be decided by the lessee provided that these land uses comply with the Government of Vanuatu’s Environmental and Health guidelines and laws. The Lessor further agrees with the lessee to permit the lessee to make any structured additions or alterations that will be make necessary by the future industrial and commercial activities of the lessee.”

There are also obligations imposed by the lease agreement on the lessee to repair and keep and leave clean and in good tenantable repair order and condition all buildings presently in useable conditions, and also other fixtures and improvements on the land.

The Appellants contend that since the commencement of the lease agreement Le Manganèse has not used the land as required by clause 4 (a) and has not maintained the fixtures and improvements. By letter dated 3^rd June 2003 four of the lessors wrote to Le Manganèse and others as follows:-

“The Custom Land Owners

Eton Village

PO Box 200

Port Vila

Le Manganese de Vate Limited

Forari Development Company Limited

Regent Limited

Satellite Holdings Limited

C/- Geoffrey Gee & Partners

Barristers & Solicitors

PO Box 782

Port Vila.

3^rd June 2003

Dear Sir,

Re: Purported Lease of Eton Lands at Forari

We hereby given notice of immediate termination of the purported leases over our land in Forari.

Despite repeated requests from us, you have consistently failed to comply with you responsibilities under the leases. You have abandoned the properties and they are now in a state of total disrepair of such magnitude that it is now impossible to remedy the many breaches, all of a fundamental nature.

Le Manganèse de Vaté Limited has consistently been in breach of its covenants contained in Clauses 4 (a), 4 (e), 4 (j) and 4 (k). It would also appear that the requirements of Clause 4 (1) of the purported lease were not complied with when your solicitor wrote to the Lands Department 28^th March 1989 stating that “Mr. Gerry Miles and Mr. Tom Alcock are beneficial owners of Le Manganese de Vate Limited”.

Forari Development Company Limited is similarly in breach of all its covenants contained in its lease (possibly with the exception of its covenant to pay rent).

We have re-entered upon the demised lands in an effort to mitigate the substantial losses we have incurred as a result your continued failure to meet you obligations.

Yours faithfully,

Richard Kalses “R. KALSES”

Bob Kalsoapa “B. KALSAOPA”

David Bani “DAVID BANY”

Kalo Kalses (President Epuen Trust) “Kalo Kalses”

(As duly authorized representatives of the Custom Landowners and Eton Community)”

At trial evidence was led by the applicants to establish the alleged breaches of the lease conditions. Findings on these questions were not made, as Treston J. found that the letter of 3^rd June 2003 could not operate to terminate the lease even if the alleged breaches had occurred.

Clause 6 of the lease agreement provides:-

“The Lessor shall not determine the lease or re-enter upon the demised land in the event of a breach of the lessee or any of the conditions, covenants or obligations imposed on the lessee hereby other than for rent reserved unless the lessor first serve notice on the lessee specifying the breach and giving him reasonable time to remedy such breach, and the lessee fails to remedy the breach within the specified time.”

The letter of 3^rd June 2003 failed to specify the breaches of the lease agreement relied on, and failed to give any time at all, let alone reasonable time, to remedy any alleged breach. Further, Treston J. held that the attempted forfeiture of the lease faced another insurmountable hurdle in s. 43 of the Land Leases Act which provides:-

“LESSOR’S RIGHT OF FORFEITURE

43 (1) Subject to the provisions of section 45 and to any provision to the contrary in the lease, the lessor shall have the right to forfeit the lease if the lessee commits any breach of, or omits to perform any agreement or condition on his part expressed or implied in the lease.

(2) The right of forfeiture may be –

(a) exercised, where neither the lessee nor any person claiming through or under him is in occupation of land, by entering upon and remaining in possession of the land; or

(b) enforced by a reference to the Referee.

(3) The right of forfeiture shall be taken to have been waived if –

(a) the lessor accepts rent which has become due since the breach of the agreement or condition which entitled the lessor to forfeit the lease or has by any other positive act shown an intention to treat the leases as subsisting; and

(b) the lessor is, or should by reasonable diligence have become, aware of the commission of the breach;

provided that the acceptance of rent after the lessor has commenced a reference to the Referee under subsection (2) shall not operate as a waiver.”

Rental under the lease agreement was payable half yearly in January and July. There was no dispute that at the date of the letter rental payments were up to date, that is the last payment had been made and received in January 2003, and the next rental payment was not due until the following August. Treston J. held that the lessor had therefore waived the right of forfeiture.

We agree with the conclusions of Treston J. The terms of clause 6 of the lease agreement, and s. 43 (3) are clear. The acceptance of a rental payment in January 2003 waived the breaches of the lease agreement, however serious the breaches may have been, up to that date. The most that the lessors could rely upon would be a failure to fulfil conditions of the lease from that date until 3^rd June 2003. That is a short period, and, as a matter of fact, had a proper notice duly specified breaches, and given a reasonable time for them to be remedied compliance may have been possible.

Be that as it may, clause 6 of the lease agreement requires the breaches must be specified, and a reasonable time must be allowed for the breaches to be remedied. If such a notice had been given, and there were fundamental breaches of the lease which were truly incapable of being remedied, at the expiration of the reasonable time nominated, the lessors could then move to forfeit the lease. However they could not do so in the manner asserted in the letter of 3^rd June 2003.

Grounds 1, 2 and 4 of the notice of appeal must therefore fail.

The time limitation issue

This ground of appeal misunderstands the finding of Treston J. made in relation to certain aspects of the claim being statute barred. His Lordship did not hold that continuing breaches were statute barred. His Lordship held that claims based on any promises that may have been made by Gerry Miles in 1989 or by Mr. Jeff Fox in 1995, or at the time that the leases were entered into in 1982 were statute barred. In so far as causes of action were alleged arising out of specific events that occurred more than six years before the commencement of the proceedings, those causes of action were undoubtedly barred by s. 3 (1) of the Limitation Act No. 4 of 1991. This ground of appeal must also fail.

Costs against the Attorney General

It is correct, as the Appellants contend, that the Attorney General did not play an active part during the ultimate trial of these proceedings. However the Attorney General was named as a necessary party to the claims based on fraud and mistake. It was necessary for the Attorney General to obtain advice as to the role that he should play in the proceedings. It was necessary for his advisors to keep track of the progress of the litigation. Following the decision of the Court of Appeal on 11^th June 2004 the statement of claim was substantially amended. It would have been necessary for the Attorney General to again receive advice about the implications of the amendments. It was entirely in accordance with the practice of the court, and the law, for the order for costs to be made in favour of the Attorney General. The fact that the Attorney General played only a minor role in the course of litigation, and did not appear during the trial, means only that the amount of the costs that will be payable to the Attorney General will be considerably less than the costs incurred by each of the more active parties.

Ground 3 of the notice of appeal must also fail.

For these reasons the present appeal is dismissed. The Appellants are ordered to pay the costs of and incidental to this appeal at the standard rate to Le Manganèse and the Attorney General.

The order made on the counter-claim granted consent to the transfer of the leasehold interest by Le Manganèse to Vanuatu Project Management Limited, such consent having been unreasonably withheld by the Appellants. This order is not affected by the outcome of this appeal, and remains in full force.

DATED at Port Vila, this 3^rd day of May 2005.

BY THE COURT

Hon. Vincent Lunabek CJ.
Hon. Bruce Robertson J.
Hon. John von Doussa J.
Hon. Oliver A. Saksak J.
Hon. Hamlison Bulu J.