National Housing Corporation v Blandiniere Estate (Urban) Ltd [2006] VUCA 3; CAC 31-05 (1 June 2006)

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

Civil Appeal Case No. 31 of 2005

BETWEEN:

NATIONAL HOUSING CORPORATION
Appellant

AND:

BLANDINIERE ESTATE (URBAN) LTD
Respondent

Coram: Hon. Chief Justice Vincent Lunabek
Hon. Justice John W. Von Doussa
Hon. Justice Daniel V. Fatiaki
Hon. Justice Oliver A. Saksak
Hon. Justice Hamlison Bulu

Counsel: Mr. Daniel Yawha for Appellant
Mr. Felix Laumae for Respondent

Date of Hearing: 23 May 2006
Date of Decision: 01 June 2006

JUDGMENT

This is an appeal from a reserved judgment of Treston J. dated 4 November 2005 ([2005] VUSC 126) dismissing the Appellant's claim against the Respondent. The Appellant seeks the following orders:

1. That judgment appealed against in relation to striking out the claim and awarding costs against the Appellant be set aside in its entirety.
   
2. That the Appellant's claim of VT7,000,000 with interest against the Respondent be granted.
   
3. That the Respondent pay the Appellant's costs of this Court and the Court below on an indemnity basis.
   
4. Any other orders deemed just by this Court.
   

The Appellant, then Claimant, filed a claim in the Supreme Court on 22 February 2003. It claimed the sum of VT7,000,000 against the Respondent as moneys paid under a business agreement between the Appellant and the Respondent dated 20 February 2001 which the Appellant alleged was fraudulent. Particulars allege that the payment of the VT7,000,000 directed to be made by the then General Manager of the Appellant was not authorized by the Appellant and the entire contract was a fraud on the Appellant.

The Respondent, then Defendant, contended there was no cause of action against it. It pleaded that there never was a contract between it and the Appellant. The Respondent counter-claimed for unquantified damages for commencing proceedings in the Supreme court which the Appellant knew could not succeed. This novel counter-claim was struck out at trial and the Respondent has not sought to appeal against that order, either by cross-appeal in this matter or by separate appeal.

The factual events are contained in the judgment of Treston J and summarized as follows: -

Prior to 20 February 2001, one Tai Cheung Liao (who has since disappeared) had closed-door meetings with the former General Manager of the Appellant, Mr. Paul Willie (now deceased). Their conferences resulted in a purported agreement dated 20 February 2001 (the land sale agreement) which indicated that Blandiniere Estates would sell blocks of land at Tagabe to the Appellant for low cost housing at a market price for each house and land of VT3,600,000 each. The land sale agreement is reproduced below: -

"Société National de l'Habitat B.P. 992 - Port Vila Vanuatu - Pacifique Sud

NHC

National Housing Corporation P.O. Box 982 - Port Vila Vanuatu - South Pacific

________________________________________________________________

Date: 20th February 2001

AGREEMENT

National Housing Corporation Company on the 20th February 2001 reserved a block of 40 Units of low cost houses each of 56 sqm and land of 1000 sqm at Blandiniere Estates at Tagabe.

National Housing Corporation have the full right to choose any house and site from any Unreserved lots in the Estate for their clients.

The market price for each package house and land is VT3.600.000 Millions.

The normal deposit for each lot is VT600.000 but for National Housing Corporation, the deposit is VT550,000 each. The balance of VT3.000.000 Million is to be collected over 15 years plus interest at VT35.000 per month.

National Housing Corporation will collect a deposit of VT600.000 each. Therefore making a profit of VT50.000 for each house sold.

For the block purchased and reservation of 40 units at VT550.000 each, is VT22.000.000 Millions and that, this money is paid and held in National Housing Corporation's trust account for Blandinieres Estates. ( As per our letter of 15 January 2001).

It is also agreed that the present confirmed sales of 26 units made by Home Investment Enterprises and Deposit payment will be collected by Home Investment and handed to National Housing Corporation, as a back up.

Further block sales will be earned out in similar manner.

This Agreement is binding between both parties.

Sign Sign

TC LIAO P. WILLY (GM)

Blandiniere Estates National Housing Corporation"

Mr. Liao purported to sign this agreement on behalf of "Blandiniere Estates Corporation". The Appellant throughout this case has assumed Blandiniere Estates Corporation is one and the same as the Appellant and the differently named Blandiniere Estate Limited. No point has been taken by the Respondent about the different names.

The Respondent has at all times denied that Mr. Liao was acting on its behalf.

In about November 2000, Mr. Liao had contacted Mr. Douglas Reid Patterson, the agent of Mr. Dinh Van Than, inquiring whether his company had any large blocks of land available for low cost housing development. Mr. Patterson contacted his client Mr. Than and the upshot was that an agreement ('the share purchase agreement') was prepared by his office dated 20 March 2001. This document evidenced an agreement whereby Mr. Liao would purchase all the shares in Blandiniere Estate Ltd for the total price of VT125,000,000 over a period and would pay a deposit of VT7,000,000 on the signing of the agreement. Blandiniere Estates Ltd was the owner of large development blocks of land. The share purchase agreement is also reproduced below:

"AGREEMENT TO PURCHASE SHARES IN BLANDINIERES ESTATE LTD

DATE	: 20 March 2001
VENDORS	: BLANDINIERE ESTATE LIMITED
ADDRESS	:
PURCHASER(S)	: T.C. LIAO
ADDRESS	:
PRICE	: VT125,000,000
DEPOSIT	: VT 7,000,000 (seven million Vatu)
AGREEMENT	: Signed on 20 March 2001
INSTALMENT PAYMENTS	: VT5,000,000 (five million Vatu) to be paid by the Purchase on 22 April 2001; 22 May 2001; 22 June 2001, and 22 July 2001. Payments should be made on due date. Should there be any defaults in payments, the Vendor has the right to terminate this Agreement, however before doing so the Vendor must first notify the Purchaser in writing of his intention to cancel and give the Purchaser 7 (seven) days to remedy the default.
BALANCE	: VT98,000,000 (ninety eight million Vatu) to be paid in full or payment terms to be renegotiated on or before 22 July 2001.
TRANSFER OF SHARES	: Vendor to transfer shares upon receipt of full payment.
SERVICES	: Purchaser responsible for the cost of installation of all future subdivision works.
SHARES	: The Purchaser is agreeing to purchase the shares in the company Blandinieres Estate Limited and will acquire all its remaining land title assets.
SALE AGREEMENT	: The Purchaser and Vendor will sign a Sale Agreement formalising the terms and conditions of this transaction."

SIGNATURE PAGE

AGREEMENT TO PURCHASE SHARES IN BLANDINIERES ESTATE LTD.

(Sign)

The Purchaser(s) Signature __________________________

T. C. Liao

(Sign & Stamped)

______________________

In the Presence of: Witness

The Vendor(s) Signature (Sign)

_________________________

For Blandinieres Estate Limited

(Sign & Stamped)

____________________________

In the Presence of: Witness

DATE: 20 March 2001"

On 19 March 2001, the General Manager of the Appellant instructed Mrs. Tosusu, an accountant officer, to prepare a letter requesting the Appellant's bank, Banque d'Hawaii (Vanuatu) Ltd, to transfer VT7,000,000 to Blandiniere Estates. Mrs. Tosusu although unhappy about this because there had been no Board meeting, nevertheless issued the request on the instruction of the General Manager. The cheque was banked into the Blandiniere Estates' account on the same date.

The Respondent in its defence pleaded that this payment constituted the deposit required to be paid in terms of the share purchase agreement between Mr. Liao and the vendor of the shares in Blandiniere Estate Limited dated 20 March 2001. It was the only payment under the agreement and after Mr. Liao disappeared the VT7 million was forfeited when the share purchase agreement was cancelled.

In assessing the evidence before him at the trial, His Lordship preferred the evidence of the Respondent's witnesses. He found that Mr. Liao was not the agent of the Appellant in February 2001 when the land sales agreement was signed by him and the then General Manager of the Appellant. On the contrary, His Lordship was satisfied that, when Mr. Liao signed the land sales agreement, he was doing it on his own behalf in anticipation of his purchase of the shares of the Respondent which was to come to fruition under the share purchase agreement of 20 March 2001. His Lordship accepted the evidence of Mr. Patterson and Mr. Dinh Van Than that Mr. Liao was always acting on his own behalf and never as agent of the Respondent and was only entitled to manage the company, as Mr. Than, said after his payment of the deposit of VT7,000,000.

His Lordship observed that "the whole transaction reeks of a scam". We understand His Lordship in this statement to be referring to the land sales agreement and the conduct of Mr. Liao and Mr. Willie relating to the drawing of the cheque for VT7,000,000 from the Appellant's bank account, and not to the share purchase agreement entered into by the vendor of the shares in Blandiniere Estates Limited. His Lordship said he was not satisfied on the balance of probabilities that the Respondent was part of that scam but was the innocent pawn in a deeper game being played by Mr. Liao and Mr. Willie. He further found that there was no privity of contract between the Appellant and the Respondent. He said that Mr. Liao "somewhat dubiously" obtained the cheque for VT7,000,000 from the Appellant which he immediately used to pay his deposit for the purchase of the shares in the Respondent and its assets. When Mr. Liao failed to keep up payments under the share purchase agreement, the vendors became entitled to forfeit Mr. Liao's deposit of VT7,000,000.

His Lordship gave judgment for the Respondent against the Appellant together with costs in favour of the Respondent on a standard basis as agreed or as determined by the Court.

The Appellant now appeals against the judgment of the Supreme Court. The appeal is advanced on three grounds. They are set out as follows:-

"1. That his Lordship erred in law and or fact to dismiss the Appellant's claim of VT7,000,000 when there is substantial evidence that one Mr. Liao was acting as Agent of the Respondent Company.

2. Alternatively, that his Lordship erred in law and fact that in deciding that the Appellant cannot recover the sum of the VT7,000,000 from the Respondent due to the doctrine of privity of the contract when however the judge made a finding that the whole transaction was a scam which meant the Appellant mistakenly made a payment to Mr. Liao thinking he represented the Respondent and upon the ground of " mistake of fact" has the inherent power to order the money back from the Respondent to the Appellant.
   
3. Moreover, that his Lordship erred in law and fact in deciding that the Appellant cannot recover the sum of VT7,000,000 from the Respondent when the judge made a finding that the whole transaction was a scam which meant the Respondent falsely and fraudulently misrepresented himself which meant the Appellant mistakenly made a payment to Blandiniere Estates account thinking he represented the Respondent in this transaction" .
   

The grounds of appeal will be dealt with in turn.

In relation to ground 1, counsel for the Appellant submitted that Mr. Liao was an agent of the Respondent company when he signed the land sale agreement on 20 February 2001. He relied on the signature part of the land sale agreement as evidence of the existence of an agency between Mr. Liao and the Respondent company.

We have perused the land sale agreement. We do not find in it any detail of an agency relationship between Mr. Liao and the Respondent company which could be supportive of the Appellants' case. The agreement is not even on the letter head of the Respondent. The only aspect of the document that suggests an agency relationship is the name above which Mr. Liao has signed. However a person, in this case Mr. Liao, cannot unilaterally appoint himself as agent for a third party. The appointment must be made or confirmed by the third party.

The mere production of the land sale agreement provides no evidence of Mr. Liao's appointment. There needs to be evidence from another source that shows that Mr. Liao had the Respondents authority to act on its behalf, such as other correspondence from the Respondent acknowledging Mr. Liao's role as agent. Here there was no independent evidence, only the document which Mr. Liao and Mr. Willie prepared. There is no evidence that the Respondent was at any relevant time aware of the land sale agreement, let alone confirmed the arrangements stated in it. On the contrary, the evidence from the Respondent's witnesses, which His Lordship accepted, denied all knowledge of Mr. Liao's conduct and denied the alleged agency relationship.

The first ground of appeal must fail. In reality there was no probative evidence at all that Mr. Liao was acting as agent for the Respondent when he signed the land sale agreement.

Grounds of Appeal 2 and 3 are difficult to follow. However our interpretation of the Appellant's written submission in support of them, appears to raise three main arguments. The first, concerning privity of contract, is that the land sales agreement is binding on the Respondent because the Appellant reasonably believed Mr. Liao was acting as the Respondent's agent because Mr. Liao was representing himself in that capacity. This argument is no more than a restatement of the first ground of appeal in a different form. Whether the land sale agreement constituted a binding contract between the Appellant and the Respondent turns on whether there was independent evidence to establish that Mr. Liao was really acting with the Respondent's authority as its agent. As already explained there was no evidence of agency. What ever the Appellant might have believed is beside the point if Mr. Liao was not authorized by the Respondent to act as its agent.

The second argument which is made in the Appellants' submission is that if Mr. Liao was not indeed the Respondent's agent, then he was fraudulently representing himself as such. The evidence seems to support a finding of fraud, but merely to show Mr. Liao was guilty of fraud only establishes that Mr. Liao is liable to repay the VT7,000,000. Once again, to establish that the Respondent is liable to repay the amount it is necessary to show that the Respondent is in some way accountable for Mr. Liao's fraudulent conduct.

The Appellant 's submission argued that Mr. Liao represented himself as an agent, and that the law is clear that where an agent fraudulently represents himself to enrich his principal, the principal is liable, therefore the Respondent must repay the money. This argument fails for the same reason as the first ground of appeal failed. The essential requisite in the argument, namely that Mr. Liao was in fact acting as the Respondent's agent, is not established by the evidence.

A further argument put in the submission to establish that the Respondent is liable for Mr. Liao's fraud is that the Respondent has been unjustly enriched.

To make out such a claim it must be shown that the benefit which the Respondent received, the enrichment, was "unjustly" received. This requires the Claimant to show that the Respondent knew, or should have known, of Mr. Liao's fraudulent conduct that caused the Appellant to draw the cheque for VT7,000,000. It is proof of knowledge by the Respondent that the money was not being regularly paid over that makes the enrichment "unjust". Here again the evidence failed to establish such knowledge on the part of the Respondent.

In the course of oral submissions, counsel for the Appellant was at pains to establish the factual basis on which it was said the Respondent was unjustly enriched. There was evidence which was not disputed that the Appellant's banker, the Bank d'Hawaii, paid the VT7,000,000 into the account of the Respondent. There was also evidence that the payment was handed over by Mr. Liao as the deposit of VT7,000,000 for the purchase price of shares in the Blandiniere Estates Ltd. However, there was no evidence that the Respondent company was involved in any scam or was aware of the involvement of Mr. Liao in a scam.

The vendors of the shares under the share purchase agreement was entitled to forfeit and retain the VT7,000,000 as a breach of the terms of the share purchase agreement. There is no evidence of unjust enrichment on the part of the Respondent company or the vendors of the shares.

Grounds 2 and 3 of the appeal, as they were developed in the written submission, are therefore dismissed.

We finally echo the statement of the trial judge that the judgment of the Court does not deprive the Appellant of its remedies. Although Mr. Liao has disappeared, the Appellant still has an action against him if he can be located and if it is satisfied that the payment of the VT7,000,000 was unauthorized and illegal. The Appellant also had an action against Mr. Paul Willie which it may pursue against Mr. Willie's estate.

For the foregoing reasons, the appeal is dismissed and the Respondent is entitled to its costs in this Court and the Court below.

ORDER

1. The appeal is dismissed.
   
2. The costs of the appeal and in the Court below are for the Respondent company against the Appellant.
   
3. The costs are to be agreed or determined.
   

Dated at PORT VILA on 01 June 2006
BY THE COURT

Hon. Chief Justice V. Lunabek
Hon J. Von Doussa J.
Hon. Daniel. Fatiaki J.
Hon. Oliver A. Saksak J.
Hon. Hamlison Bulu J.