Turquoise v Kalsuak [2008] VUCA 22; Civil Appeal Case 21 of 2008 (4 December 2008)

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

CIVIL APPEAL CASE No.21 OF 2008

BETWEEN:

TURQUOISE LIMITED
Appellant

AND:

PHILIP KALSUAK
First Respondent

AND:

ALBERT SOLOMON
Second Respondent

AND:

MINISTER OF LANDS AND NATURAL RESOURCES
Third Respondent

AND:

DIRECTOR OF LAND RECORDS
Fourth Respondent

Coram: Chief Justice Vincent Lunabek
Justice John von Doussa
Justice Oliver Saksak
Justice Ronald Young

Counsel: Mr Robert Sugden for the Appellant
Mr Edward Nalyal for the First Respondent
Mr Daniel Yawha for the Second Respondent
Mr Ari Jenshel for the Third and Fourth Respondents

Date of hearing: 27th November 2008
Date of Judgment: 4th December 2008

JUDGMENT

This is an appeal against the judgment of Tuohy J who ordered that the register for leasehold title 12/0512/002 ("the lease") be rectified pursuant to s.100(1) of the Land Leases Act [CAP.163] by cancellation of the lease standing in the name of the appellant Turquoise Limited ("Turquoise") on the ground that the registration was obtained by mistake on the part of the Minister of Land. The Order for rectification was directed to the Director of Land Records.

At the outset we note a procedural irregularity in the way this appeal was instituted. The Minister of Lands and the Director of Land Records were defendants at trial, but were not named as respondents to the appeal when it was instituted. They have since been joined on direction of this Court as they are necessary parties to the appeal, and counsel on their behalf has been given the opportunity to address this Court on the issue of law which concerns them, namely the proper instruction of s.8(2)(b) of the Land Reform Act [CAP.123].

On 18 April 2006 the Minister of Lands, acting under s.8 of the Land Reform Act, granted the lease to Turquoise and the lease was registered on 20 April 2006. The subject of the lease (the land) was the northern tip of Lelepa Island comprising some 20 hectares including the area known as Filtoka beach.

The validity of the registration of the lease was challenged in two separate proceedings commenced in the Supreme Court. In each case the defendants were Turquoise, the Minister of Lands and the Director of Land Records. In the first case, Civil Case 163 of 2006, the second respondent to this appeal, Albert Solomon, (Solomon) sought rectification and cancellation on the basis that he had a relevant interest as the holder of a Registered Negotiator Certificate issued to him by the previous Minister of Lands on 18 October 2005. That Negotiator Certificate named Naroe Kalsuak and Kalsau Naparo as custom owners. Since 1998 Solomon had been conducting the business of Lelepa Island Tours on the land. Solomon alleged that the registration of the lease had been made by fraud or mistake. First he alleged that the Minister had been guilty of fraud or mistake in issuing another Registered Negotiator Certificate (the second Negotiator Certificate) to Turquoise on 23 November 2005 which named Chief Jack Tugulumau, Billy Tavman, G.K. Manalapa and John Kaloroa as the custom owners. Secondly, he alleged that the Minister had accepted a substantial cash bribe from Turquoise to grant the lease. Thirdly, he alleged that Turquoise had by fraud or mistake obtained the lease and its registration by disregarding decisions of the relevant Village and Area Land Tribunals which resulted in the Area Land Tribunal declaring Philip Kalsuak (Kalsuak) as the custom of the land, by obtaining the second Negotiator Certificate and by using a survey plan which had been prepared on Solomon’s instructions.

In the second Supreme Court proceeding, Civil Case 29 of 2007, Kalsuak sought rectification and cancellation of the lease. Kalsuak pleaded that he was the custom owner of the land, having been declared as such by the North West Efate Area Customary Land Tribunal on 29 December 2005. He identified in his pleadings letters sent by the Acting Coordinator of Land Tribunals to the Minister of Lands on 6 February 2006 advising the Minister that Kalsuak was the declared custom owner, and letters from his solicitors to the Director of Lands and the Director General of the Ministry of Lands dated 11 January 2006 and 21 March 2006 respectively advising the Government that any dealing in the lands required the consent of Kalsuak. A further letter dated 14 March 2006 to the Attorney General from Kalsuak’s solicitor was also identified. This letter requested the Attorney General advise the Minister of Lands that no lease of the land should be granted without Kalsuak’s prior consent. (At trial the Minister of Lands in his evidence conceded that he had seen this letter before granting the lease to Turquoise.)

Kalsuak’s pleadings in his Amended Statement of Claim continued:

"8. On or about April 2006, the Second Defendant (Minister of Lands) without due consideration of the Efate Tribunal’s decision and the correspondence between parties approved lease title number 12/0512/002 (the Lease) over the Property and the registration of the lease in favour of the First Defendant (Turquoise)...

9. Further to paragraph 8 above, the first Defendant have (sic) at all material times never sought the consent of the Claimant for negotiations as required by the Land Reform Act [CAP.123].

10. The Second Defendant issued the Lease in breach of the provisions of Section 8(2)(b) and (c) of the Land Reform Act [CAP.123].

11. In any event the lease registered in favour the First Defendant was obtained by fraud and/or or mistake which was a result of fraudulent misrepresentations by persons purporting to be custom owners of the Property...."

The particulars to paragraph 11 gave details of the second Negotiator Certificate and of the alleged bribery constituted by the payment of money to the Minister to secure the granting of the lease. The particulars of the alleged bribery repeated the substance of the similar allegation made by Solomon in his proceedings.

The two proceedings were tried together over 9 days before Tuohy J.

It was common ground that the details of the two Negotiator Certificates and the decisions of the Village and Area Customary Land Tribunals were correctly pleaded. Nareo Kalsuak named as one of the custom owners in the Village Land Tribunal as the elderly father of Kalsuak who had by the time of the Area Tribunal decision, taken over as custom owner. Evidence established that following these Tribunal decisions, two unsuccessful parties had lodged an appeal against the decision of the Area Land Tribunal with the Efate Island Land Tribunal. This appeal had not been heard at the date of the trial.

Ultimately the trial Judge held that fraud had not been established, but that the grant of the lease, and therefore its registration, had been obtained by mistake on the part of the Minister of Lands.

Much evidence was received at trial about the alleged bribe paid to the Minister, including evidence from a former, but since dismissed ministerial staffer who claimed to have witnessed the payment. Both the Minister and officers of Turquoise strongly denied that any bribe had been paid. The learned Judge was not satisfied that the claimant had discharged the onus of establishing the alleged bribe.

Before this Court, Solomon and Kalsuak have accepted this finding and accordingly nothing more need be said about the unproved allegations that a cash bribe was paid.

The trial Judge considered the allegations in the pleadings of fraud and mistake connected with the grant of the two Negotiator Certificates. He held that there had been nothing irregular in two Negotiator Certificates being issued, although there was mistake in the issue of certificates in the names of different custom owners. However he held that neither this mistake, nor the issue of either of the Negotiator Certificates led to the grant of the lease by the Minister. Further he held that the use of the survey plan prepared on the instructions of Solomon did not cause the grant of the lease as Turquoise could have obtained another survey plan from another source.

The outcome of the trial therefore turned on the allegation of mistake by the Minister of Land in granting the Lease. During the trial Kalsuak conceded that as there had been an appeal against the decision of North West Efate Area Customary Land Tribunal it followed that there was still a live dispute as to the custom ownership of the land. This enlivened the power of the Minister to act under s.8 of the Land Reform Act to grant the lease. However the trial Judge held that the Minister, in exercising the power under s.8, should have consulted with Kalsuak, and had regard to his wishes. His failure to do so constituted a mistake in the performance of his duties which led to the grant and registration of the lease.

Subsection 8(1) of the Land Reform Act provides that the Minister shall have the general management and control over all land where custom ownership is disputed. Subsection 8 (2) provides:

"(2) Where the Minister manages and controls land in accordance with subsection (1) he shall have power to –

(a) consent to a substitution of one alienator for another;

(b) conduct transactions in respect of the land including the granting of leases in the interests of and on behalf of the custom owners;

(c) take all necessary measure to conserve and protect the land on behalf of the custom owners.

Subsection 8(2)(b) qualifies the Minister’s power by requiring that its exercise be "in interests of and on behalf of the custom owners".

In Ifira Trustees Limited v. Kalsakau & ors [2006] VUCA; CAC 5 of 2006 (6 October 2006) the Court of Appeal said:

"When Parliament grants a power to make decisions, the decision maker must undertake the task conscientiously and independently weighing all matters which are relevant and ignoring those which are irrelevant and the decision maker must faithfully apply fair and proper process and procedures.

Section 8, as an example, is not a licence for a Minister to make any decision that he likes about the care and control of disputed land pending the resolution of that dispute. A Minister exercising this power can only reach a proper and lawful conclusion after he has weighed and assessed all matters which are relevant."

In the circumstances of this case, where there was a recent decision of the Area Land Tribunal in favour of Kalsuak, and where there was advice from Kalsuak’s solicitor and Government officials identifying him as a person who claimed to be entitled to be consulted by the Minister, the conclusion of the trial Judge appears to be in accordance with the requirements of s.8(2)(b) as construed by the Court of Appeal, and entirely predictable.

However Turquoise in its grounds of appeal, and in submissions to this Court claimed that the trial Judge’s findings were not open on the pleadings, and were the consequence of the Judge raising an unexpected issue in the course of the trial which so ambushed counsel for Turquoise that the trial process became unfair.

We say immediately that we consider this contention to be completely unfounded and without merit.

The ambush is said to have happened because Kalsuak in his pleadings had not raised the failure of the Minister to consult him. This is an extraordinary assertion. The central thrust of Kalsuak’s pleadings is that he was the person who the Minister should consult; he had brought this to the attention of many officers of the Government as well as the Minister; yet the lease nonetheless was granted. The clear implication from the pleadings is that he was not consulted, and this is the plain import of both paragraphs 8 and 10 of the Amended Statement of Claim.

It is hardly surprising that the trial Judge asked Kalsuak when he was in the witness box:

Question: Did the Minister of Lands ask for your views whether you wanted the land leased to Turquoise the 75 years?

Answer: No.

Question: If you had been asked what would you have said?

...

The surprising thing, perhaps, is that the questions had not been asked by counsel as Kalsuak’s attitude to a grant of the lease was of importance. It was relevant to know the attitude he would have expressed to the Minister had he been consulted; for example about the duration of the lease, the terms of the lease including the premium to be extracted from the lessee, and the intended use and purpose of the lease. It was relevant to know Kalsuak’s attitude to these matters because ultimately the reasons which motivated the Minister had to be considered against the interest of the putative custom owners, in this case Kalsuak in particular as the person presently holding the declaration of the Area Land Tribunal.

Turquoise also argued that the trial process was unfair because the trial Judge decided to enquire whether the Minister of Land had made an error in the exercise of his power under s.8, and in pursuit of this enquiry had called a witness late in the trial, namely the person who had been the Acting Director of Land Records at the time the Turquoise lease was issued. We consider this submission is also without merit. The proper exercise of the power under s.8 by the Minister was the very issue raised by paragraph 10 in Kalsuak’s Amended Statement of Claim. The witness was called by the Judge at the request of counsel for Solomon to prove from the official file the chain of documents and processes within the Land Records Department that led up to the grant of the lease. This evidence should have been tendered to the Court in pre-trial statements filed on behalf of the Minister and the Director of Land Records, but was not. The Judge formally called the witness so each counsel could cross-examine him. The evidence given by the witness was formal in nature. In our view the process followed by the Judge,, ensured the fairness of the trial and was entirely proper.

Turquoise also contends that if the pleadings had given clear notice that the proper exercise of the power under s.8 was an issue, Turquoise could have led additional evidence. However no application to lead additional evidence was made before this Court and the content of the "additional evidence" has not been identified. Counsel for Turquoise has not been able to identify how additional evidence could have caused the outcome of the trial to be different in any material way. In summary, we consider the appellant’s grounds of appeal based on alleged inadequacy in the pleadings and on the trial process to be without merit and must fail.

We consider that the finding that the registration of the Turquoise lease was obtained by mistake was amply established by the evidence. The mistake occurred because the Minister considered that in the circumstances the grant of the lease by him was a proper exercise of his powers and duties under s.8.

Mr Jenshel presented an argument that a mistake by the Minister in the manner of exercise of power under s.8 is not the kind of mistake which is contemplated by s.100(1), and does not empower the Court to order rectification. He argued that the mistake must be in relation to the title particulars and suggested that the type of mistake that enlivens the power in s.100(1) includes the matters described in s.99(1) but probably does not go much further.

In ordinary use the concept of "mistake" is a broad one that includes mistake of law as well as mistake of facts.

We are unable to accept that s.99(1) imposes any limitation on the otherwise broad scope of "mistake". Section 99(1) empowers the Director to take steps to rectify the register where the register "does not truly declare the actual interest to which any person is entitled under this Act or is in some respect erroneous or imperfect". This is a very wide power. If the Minister makes an error in the exercise of power such that the Minister’s decision should he set aside on administrative law principles, and if the product of that decision remained on the register, the register would not truly declare the interest of the registered proprietor, and should be erroneous. In our view, the wide scope of the power in s.99(1) supports an interpretation of s.100(1) which includes within "mistake" on improper exercise of power of the Minister under.8.

In any event the mistaken exercise of power in this case was not just that a Minister did not consult with Kalsuak, though that was a serious and mistaken departure from his duty. A reading of his evidence discloses that he understood, in November 2005, that the people named in the second Negotiator Certificate as custom owners were in fact the custom owners, and he continued to hold this view even though just before the granting of the lease he discovered that there was a dispute over custom ownership which entitled him to proceed under s.8. On this understanding he believed that the custom owners had approved the development proposed by Turquoise and that the custom owners had agreed to the premium of VT12,000,000 for the grant of the lease. When cross-examined about why he granted the lease without consulting Kalsuak, and in disregard of the correspondence and advice from Kalsuak’s lawyers and the Department of Land Records officers, he said he did so because he considered the development proposed by Turquoise to be for the benefit of Vanuatu and beneficial to tourism and the development of Lelepa Island. These considerations are not necessarily consistent with the best interests of the custom owners as required by s.8(2)(b). Consultations with those people who are identifiable as the contesting custom owners is necessary to ascertain their positions and to give due regard to them.

As the Court of Appeal pointed out at the Roqara v. Takau [2005] VUCA 5, it is not sufficient for a party seeking rectification under s.100 of the Land Leases Act simply to prove that a mistake occurred in the course of a transaction which ultimately concluded in the registration of the interest sought to be 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". This causal requirement must also be established.

In the present case, the mistaken exercise of power by the Minister plainly led to the Minister granting the lease, and in turn to its registration. However counsel contends that the mistake was not relevantly the cause of registration, as the Minister would have granted the lease even if he had properly consulted with Kalsuak. We have difficulty drawing that conclusion from the evidence of the Minister, but even if that were the situation, it is clear from the Minister’s evidence that he would have so proceeded because of his view that it was for the benefit of Vanuatu and the development of tourism to grant a long term lease over the land to Turquoise. For the Minister to believe that this was a proper exercise of his power in the absence of consultation with Kalsuak would be a mistaken view of his duty under s.8. Accordingly, we consider that the requirement of causation is made out.

The power in s.100 under the Land Leases Act for the Court to order rectification is subject to the limitation imposed by s.100(2) which provides:

"(2) The register shall not be rectified so as to affect the title of a proprietor who is in possession and acquired the interest for valuable consideration, unless such proprietor had knowledge of the omission, fraud or mistake in consequence of which the rectification is sought, or caused such omission, fraud or mistake or substantially contributed to it by his act, neglect or default."

The trial Judge held that Turquoise was not in physical possession of the land, and for that reason that s.100(2) did not restrict the power of the Court in this case.

Turquoise contends that the trial Judge erred in this conclusion, first because the words "in possession" mean only that the registered proprietor must have the immediate right to possession, and secondly, because as a matter of fact by the time of trial Turquoise had taken physical possession because it had erected a fence around part of the land, and erected signs forbidding entry.

The trial Judge held that Solomon was still in a physical possession of those parts of the land on which he conduct his business, and was using buildings he had erected. Turquoise on the other hand had only taken limited action in relation to the fence and signs. Those actions by Turquoise were equivocal; they might only indicate attempts to gain possession by restricting the continuing activities of Solomon on the land. We consider the Judge’s finding on the question of fact was open on the evidence and should be upheld.

The limitation on the power of the Court contained in s.100(2) appears to have its genesis in s.82(3) of the law of Property Act 1925 (UK) which limits the power of a Court to order rectification of the land register so as not "to affect the title of the proprietor who is in possession" unless, among other things, "the proprietor is a party or privy or has caused or substantially contributed, by his act, neglect or default, to the fraud, mistake or omission in consequence of which such rectification is sought".

The United Kingdom Courts have interpreted the words "in possession" in s.82(3) to mean actual physical possession of the land: see Chowood Limited v. Lyall (No. 2)[1930] 2CH156 and Epps v. Esso Petroleum Co. Ltd [1973] 1WLR 1071. In Chowood v. Lyall at 166 Lord Hanworth MR (Lawrence and Romer LJJ agreeing) said of s.82(3):

"When once it has been determined that the person claiming rectification is in a possession that subsection does not apply and does not limit the power of registration".

A similar interpretation has been adopted in Scotland in respect of legislation which also has its geneses in s.82 of the United Kingdom Legislation. In Safeway Stores PLL v. Terco Stones Ltd [2003] Scot CS 171 Lord Hamilton (with whom Lord Kingarth expressed his agreement) said at [77]-[78]:

"[77] In my view it is necessary, in the circumstances of this case, to make some attempt to divine what the legislature had in mind by a proprietor "in possession" who ex hypothesi does not "truly" have the right accorded to him on the register but whose possession (and registered proprietorship) is nonetheless, as a matter of policy, not to be disturbed. In my view the term "in possession" in this statutory context imports some significant element of physical control, combined with the relevant intent; it suggests actual use or enjoyment, to a more than minimal extent, of the subjects in question as one’s own. It is a "proprietor" who has, on the faith of the register, had such enjoyment or use who is protected against rectification. A "proprietor" who has not had such enjoyment or use is not so protected and may required to seek his remedy, if any, in the form of indemnity. Where the issue of possession relates only to part of registered subjects, the matter for determination will be whether the "proprietor" is in possession of that part, either directly itself or as an integral element of the registered subjects viewed as a whole. The existence of physical features on the ground, including natural physical boundaries, and the activities of the "proprietor" within or beyond such features may be material to what inference may properly be drawn as to the extent of his possession.

[78] In many cases it may be a nice question whether a registered proprietor is "in possession" in that sense. The resolution of that question will turn on the particular circumstances; the issue may be one of the fact and degree. Because "possession" involves the dual requirements of "an act of the body" (by physical detention or holding) and "an act of the mind" (for one’s own use, otherwise than in circumstances which, in the case of moveables, would infer theft) – Stair – Institutions II.1.17 - these elements, which are interrelated, will both be relevant to the resolution of the question. "Possession" in the relevant sense is ‘the having or holding a thing within the possessor’s control, with the intention of holding it as his own property..." (Rankine – Land-Ownership pp.3-4).’"

The interpretation placed on s.100(2) by the trial Judge was correct. There may be difficulties, as counsel for Turquoise has argued, in applying the notion of being "in possession" to a mortgage or restrictive covenant that could be registered in respect of a leasehold interest. However that is not a difficulty that needs be addressed in this case. The registered proprietor of a leasehold interest is capable of taking physical possession of the land, and s.100(2) can be applied meaningfully without difficulty.

In the present case the trial Judge found that at the time of trial Turquoise was not in possession. An interesting question would arise if the erection of the fencing and signs by Turquoise had given it possession. Those events occurred after a caution had been placed on the register challenging the registration on the ground of fraud or mistake. It seems to us that to ensure s.100(2) appropriately balances the competing interest of a registered proprietor and a party claiming rectification of a registration obtained by fraud or mistake, the relevant date for deciding if the registered proprietor is relevantly "in possession" would be the day when the issue of fraud or mistake was first asserted against the registration. In this case that would have been when the caution was registered or, if not then, at the latest when proceedings were issued claiming rectification.

For these reasons, we consider the grounds of the appeal fail, the Orders of the trial judge should be confirmed, and the appeal is dismissed. There will be an order that the appellant pay the costs of each of the respondents to the appeal and costs be determined failing agreement.

DATED at Port-Vila this 4th of December 2008

BY THE COURT

Hon. Vincent LUNABEK CJ
Hon. John von DOUSSA J
Hon. Oliver SAKSAK J
Hon. Ronald YOUNG J