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Court of Appeal of Vanuatu |
IN THE COURT OF APPEAL OF THE REPUBLIC OF VANUATU
(Civil Appellate Jurisdiction)
Civil Appeal Case No 06/2011
BETWEEN
PETER COLMAR
Appellant
AND
ROSE VANUATU LTD
First Respondent
AND
DINH VAN THAN
Second Respondent
AND
MINISTER OF LANDS
Third Respondent
AND
JOHN TARI MOLBARAV,
SAMSON LIVO, JOSEPH
SAVA, ROY MOLIVALELE,
JOSEPH WARI AND BEN MATA
Fourth Respondents
AND
ALJAN (VANUATU) LTD
Fifth Respondent
Hearing : 14 and 20 July 2011
Coram: Hon Chief Justice V Lunabek
Hon Justice J von Doussa
Hon Justice O Saksak
Hon Justice D Fatiaki
Hon. Justice R Spear
Hon Justice P Heath
Counsel: N Morrison for Appellant
F Laumae for First and Second Respondents
F Gilu for Third Respondent
No appearance by or on behalf of Fourth Defendants
M Hurley for Fifth Respondent
Judgment: 22 July 2011
JUDGMENT OF THE COURT
[1] Mr Colmar, as trustee of the Valele Trust (Valele Trust), appeals against the Supreme Court's dismissal of his claims against Aljan (Vanuatu) Ltd (Aljan): Colmar v Rose Vanuatu Ltd [2011] VUSC 19 (10 March 2011). The Trust's action arose out of a series of transactions into which Aljan entered and which had the ultimate effect of defeating Valele Trust's prior acquisition of the leasehold title (the 001 lease) to Aese Island, off Espiritu Santo. The appeal raises issues about the indefeasibility of a registered leasehold interest in land under the Land Leases Act [Cap 163] (the Act), the circumstances in which a registered interest can be successfully challenged and the nature of any remedy that might be ordered.
[2] Aljan cross-appeals against the trial Judge's order that costs were to lie where they fell. Aljan complains that it was not heard on the question and that it ought to have been awarded costs on its successful defence. Costs are sought on a standard basis up to 29 January 2010 (when Aljan's solicitors sent a "without prejudice, save as to costs" letter to Mr Colmar's lawyers) and on an indemnity basis thereafter.
The Issues
[3] On or about 21 June 2007, Aljan agreed to purchase the 001 lease from Rose Vanuatu Ltd. A transfer of the lease to Aljan was registered on 14 August 2007. At that time, Valele Trust believed that it had a caution registered against the relevant title to protect its interest under an earlier agreement, whereby it had contracted to buy the leasehold interest from Rose Vanuatu. Valele Trust seeks rectification of the register. The first question is whether, for the purposes of s 100 (2) of the Act, Aljan was a bona fide purchaser for value of the 001 leasehold interest, without notice of the Trust's prior claim.
[4] If Valele Trust were successful on the first issue, questions of remedy arise. They are complicated by two events that occurred after 14 August 2007. On 13 June 2008, Aljan surrendered the 001 lease and registered a new lease (the 003 lease) in its favour, over the same land. In any event, the 001 lease was to expire by effluxion of time: 30 July 2010. That date has passed. Is Valele Trust entitled to a remedy that would have the effect of rectifying the register, in respect of the 003 lease? If not, are any other remedies available to it?
[5] Mr Laumae, for Rose Vanuatu and Mr Than entered a belated appearance after the appeal had begun to advise the Court that his clients did not wish to be heard. Thereafter, Mr Laumae's attendance was excused. Mr Gilu, the Acting Solicitor-General, appeared for the Minister of Lands to advise that the impugned registrations were effected in good faith. Otherwise (unless any orders for costs were sought against the Minister), no substantive submissions on the appeal were made. No appearance was entered by the custom owners, whom we treat as abiding the Court's decision.
What happened?
[6] As at 5 June 2004, the registered owner of lease 001 was Rose Vanuatu Ltd. It had acquired the lease from the heirs of Peterson-Stuart. During the latter's term of ownership, a memorial was entered on the register identifying "Taitus Kuru, Molivatole, Morris Molidoro, Timothy Molbarav/Saraoutu and the Livo family (Mavea)" as the custom owners. That was registered on 23 February 1988.
[7] On 5 June 2004, Valele Trust entered into an agreement to purchase the 001 lease from Rose Vanuatu. The land was purchased for VT 3,600,000 and 200 heifers. Despite payment of the purchase price, the vendor refused to settle the transaction.
[8] Mr Colmar brought a claim, in the Supreme Court, against Rose Vanuatu and Dinh Van Than (its principal) seeking specific performance of the agreement of 5 April 2004. Rectification of the land register was also sought, in order to substitute Mr Colmar's name as proprietor for that of Rose Vanuatu. On 12 May 2005, Valele Trust lodged a caution against the 001 lease, to protect its interest under the agreement for sale and purchase. The caution was not registered until 17 January 2007.
[9] Valele Trust's proceeding was heard by Saksak J, in July 2006. In a judgment delivered on 12 February 2007, his Lordship dismissed the proceeding: Colmar v Rose Vanuatu Ltd [2007] VUSC 90.
[10] Having failed in its specific performance claim, Valele Trust could not take any immediate steps to enforce its agreement. However, its caution remained in place. A third party may only seek to remove a caution from the register on application to the Director of the Department of Lands, Survey and Records, under s. 97 of the Act. The legislation contemplates notice being given to the cautioner and an opportunity to provide a copy of any extant proceedings relating to the interests claimed before any steps adverse to its interests are taken: see ss. 97(2) and (3) and 98 of the Act.
[11] Valele Trust appealed against the Supreme Court's decision. On 20 March 2007, Bulu J made an order staying the Supreme Court orders, while the appeal was progressed. Rose Vanuatu and Mr Than were not represented at the stay hearing. It was not until 18 July 2007 that solicitors for the Valele Trust wrote to those acting for Rose Vanuatu and Mr Than to advise them of Bulu J's orders and making it clear that there should be no dealings in the land until the Court of Appeal had ruled on Valele Trust's appeal.
[12] In mid June 2007, Mr Alan Cort, a director of Aljan, attended a meeting at Bokissa Private Island Resort with Peter Bouchart and Mr Than. Mr Cort's father was also present. During the course of that meeting the possibility of Aljan acquiring Rose Vanuatu's interest in the 001 lease was discussed. Mr Cort was aware that there had been proceedings in the Supreme Court at Santo between Mr Colmar and Mr Than. Mr Cort asked Mr Than whether the proceeding was over, to which Mr Than responded: "yes, I won the Court and its all finished a long time ago."
[13] Mr Cort arranged a further meeting, to be held at the offices of Aljan's solicitors, Geoffrey Gee & Partners. The meeting was held on 21 June 2007. Mr Than was present. While there are minor differences between the accounts given by Mr Cort and Mr Gee of this meeting, it seems likely that Mr Gee was given instructions to draft an agreement for sale and purchase at its conclusion. It is also clear that Mr Gee enquired of Mr Than whether Mr Colmar's proceedings had been resolved, to which he received an affirmative answer. While, at the time of this meeting, interests associated with both Mr Cort and Mr Than were clients of Mr Gee's firm, that firm had not represented the Rose Vanuatu's interest in the Supreme Court.
[14] An agreement for sale and purchase of the 001 lease was drawn and signed. It is dated 21 June 2007, though it is likely to have been prepared and signed soon after that date. Once the agreement was in place, it was necessary for consent to be obtained from custom owners. The evidence indicates that was a task entrusted to Mr Robinson Toka, a former officer with the Department of Lands, Survey and Records. Mr Toka is based in Santo. By 28 June 2007, Mr Toka had procured custom owners' consents not only for the transfer of the 001 lease to Aljan but also for its surrender and replacement with (what became) the 003 lease. The relevant evidence, in relation to Mr Toka's role, is discussed later.
[15] On 14 August 2007:-
- The Colmar caution was removed from the Land Leases Register.
- Two other cautions (lodged on behalf of the Rad Family and Titus Karu) were removed from the register
- A transfer of the 001 lease from Rose Vanuatu Ltd to Aljan was registered.
As a result, Aljan became the registered proprietor of the 001 lease, with all the protections afforded by the Act.
[16] Although Valele Trust's caution had, in fact, been removed on 14 August 2007 (to facilitate registration of the transfer to Aljan), it was not until 17 August 2007 that the Director of Lands, Survey and Records wrote to Mr Colmar about lease 001. The Director sought to withdraw the Colmar caution, purportedly in reliance on the Supreme Court orders of 12 February 2007. The Director concluded his letter by saying that the "caution is now withdrawn from the register". Not only did the form of purported withdrawal of the caution post-date registration of Aljan's claimed interest as lessee but also it was defective and unlawful: it did not comply with s. 97 (2) and (3) of the Act.
[17] Valele Trust's appeal was heard on 17 August 2007, after registration of the transfer of the lease to Aljan had been effected. The Court of Appeal was not advised of that event, by counsel for Rose Vanuatu and Mr Than. Further, Mr Cort received a letter from a representative of Valele Trust (dated 20 August 2007) which made reference to suggestions in the market that Aljan had been involved in some dealings with Rose Vanuatu in respect of the lease. Mr Cort was put on actual notice that an appeal against the Supreme Court's decision had been heard on 17 August 2007 and judgment was expected on 24 August 2007. Mr Cort accepts that he received this letter on 21 August 2007. Mr Cort did nothing to convey that notice to the Director or the Court of Appeal.
[18] In a judgment delivered on 24 August 2007 (Colmar v. Rose Vanuatu Ltd [2007] VUCA 18) the Court of Appeal allowed Valele Trust's appeal, saying "that there is no reason not to order [specific] performance". Because of the need to obtain consents to the transfer from custom owners, the Court of Appeal declined to make any order itself, remitting the claim to the Supreme Court "to give effect to [its] conclusions". The Court of Appeal added, at para 48:
"[Rose Vanuatu] has agreed to transfer to Valele Trust all the interest in the land it owns either legal or equitable. It will be for the parties and the Judge in the Supreme Court to resolve what form the final orders should take based on our conclusions."
[19] The proceeding came back before Saksak J on 2 November 2007. This hearing focussed on the terms on which the specific performance order should be made; in particular the custom owners from whom written consents to any transfer were required. In making an order for specific performance, on 12 November 2007, the Court specifically identified six persons from whom custom owner consents were required.
[20] Valele Trust was dissatisfied with the terms of the order made by the Court. It appealed. The appeal was heard on 23 October 2009, with judgment being given on 30 October 2009: Colmar v Rose Vanuatu Ltd [2009] VUCA 40. The appeal concerned the terms on which consent was required to be obtained from custom-owners. The Court of Appeal (at para 54) set aside the orders, holding that, once it became clear that there was a dispute about the identity of relevant custom owners, the Supreme Court had no jurisdiction to decide the issue. The Court held (at para 53) that such issues were for either the Customary Lands Tribunals or Island Courts to determine.
[21] It was at the October 2009 hearing that the Court of Appeal first learnt of the agreement of 21 June 2007 between Rose Vanuatu and Aljan. The Court expressed concern that the transfer had not been brought to its attention earlier.
[22] On 10 December 2007, Mr Colmar was able to persuade the Director (or one of his officials) that the transfer to Valele Trust should be registered, even though custom owners' consents had not all been obtained. This situation pertained until 13 June 2008 when Aljan registered contemporaneously a surrender of the 001 lease and the new 003 lease.
[23] Aljan had acquired the 001 lease in June 2007 for VT 25 million. At that time the lease had a little more than 3 years to run. The purchase price can be explained by the fact that the new lease was, in fact, negotiated at the same time. The new lease was entered into with the custom owners, each of whom was paid VT 360,000. Yet, the new lease was considerably more valuable than the old. Not only was the 001 lease to expire by effluxion of time on 30 July 2010 but also it was for agricultural rather than commercial purposes. The new lease was for commercial purposes and a term of 75 years.
The present proceedings: the Supreme Court's decision
[24] Fresh proceedings were issued by Mr Colmar in 2008. Rose Vanuatu Ltd, Mr Than, the Minister of Lands, 6 custom owners and Aljan were each joined as parties. The proceeding was heard over 3 days in October 2010, before Macdonald J. Judgment was delivered on 10 March 2011: Colmar v Rose Vanuatu Ltd [2009] VUSC 19.
[25] For present purposes, it is necessary to deal only with those findings made by Macdonald J which relate to Valele Trust's claim against Aljan. Mr Hurley, for Aljan, places much reliance on Macdonald J's findings of fact, particularly in the (unfortunate) absence of the Judge's notes of evidence.
[26] The four findings on which Mr Hurley places reliance are:-
a) Aljan was a bona fide purchaser for value without notice of Mr Colmar's claim to the 001 lease, between 14 August 2007 and 9 December 2007. Mr Hurley submits that qualification is important because Aljan's interest was removed from the title at Mr Colmar's request on 10 December 2007 and not reinstated until 13 June 2008.
b) The 001 lease was to expire by effluxion of time on 30 July 2010.
c) Valele Trust never complied with Saksak J's orders of 12 November 2007, in relation to the obtaining of custom owners' consents. Given the time that Valele Trust was on the register, between 10 December 2007 and 13 June 2008. Mr Hurley submits that the Trust was unable to obtain the required consents to perfect its title to the lease.
d) The terms and duration of the 003 lease were substantially different from those of the 001 lease.
[27] After setting out a chronology of relevant events, Macdonald J considered the evidence put before him. He referred to uncontested evidence and also made relevant findings of fact:
a) Mr Livo, one of the custom owners, confirmed that Mr Toka acted as agent for Aljan and Mr Alan Cort in late June or July 2007. He described Mr Toka as "trying hard to get [Mr Livo] and others to consent to the purchase of Aese Island from Mr Than."
b) The sum of VT 360,000 was paid to Mr Livo by Mr Cort in July 2007; a time that is confirmed by the date on which the agreement to enter into lease 003 was made, 18 July 2007.
c) Mr Cort became aware of Valele Trust's challenge to Saksak J's judgment upon receipt of a letter from Mr Colmar, dated 20 August 2007. We observe that this date fell between the hearing of the first appeal (17 August 2007) and the date on which judgment was expected (27 August 2007). Realising that Valele Trust was seeking specific performance of its contract with Rose Vanuatu, Mr Cort sought to ascertain the attitude of custom owners to determine whether there was any possibility that the title acquired on 14 August 2007 was at risk. Having made enquiries, Mr Cort found that custom owners were all "unfavourably disposed towards Mr Colmar."
d) While there were several factors supporting a conclusion that Aljan was complicit in the steps taken by Rose Vanuatu Ltd and Mr Than to defeat the Trust's interest in the 001 lease, Macdonald J was not prepared to make a finding to that effect. Nevertheless, his Lordship did say:
[28] Macdonald J was not satisfied ("albeit with some reservations") that Aljan was complicit in the actions of Rose Vanuatu and Mr Than and therefore, dismissed the Trust's claim.
Appellate jurisdiction
[29] We say something about the jurisdiction of this Court, on appeal, as Mr Hurley submitted strongly that we ought not to go behind findings of fact and inferences drawn by the trial Judge. While there are practical limitations on our ability to make different findings on questions of credibility or disputed evidence (given the absence of the notes of evidence and the fact that we have not heard or seen the witnesses), we are still entitled to review such matters.
[30] Section 48 of the Judicial Services and Courts Act [Cap 270] sets out the appellate jurisdiction of this Court. Section 48 (3) provides:-
"(3) For the purpose of hearing and determining an appeal from the Supreme Court, the Court of Appeal:
(a) may exercise such powers as may be prescribed by or under this Act or any other law; and
(b) has the powers and jurisdiction of the Supreme Court; and
(c) may review the procedure and the findings (whether of fact or law) of the Supreme Court; and
(d) may substitute its own judgement for the judgement of the Supreme Court."
[31] We are in as good a position as Macdonald J was to draw inferences from facts found by the trial Judge or uncontested in the Court below. We are entitled to substitute our own view on such questions, if we consider that to be appropriate.
Was Aljan a bona fide purchaser for value?
[32] Section 100 of the Act states:
"(1) Subject to subsection (2) the Court may order rectification of the register by directing that any registration be cancelled or amended where it is so impaired by this Act or where it is satisfied that any registration has been obtained, made or omitted by fraud or mistake.
(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."
[33] While it is common ground that rectification cannot be ordered (because the 001 lease has ceased to exist) it remains necessary to consider whether Aljan's presumptive indefeasible title can be impeached. That requires reference to the test set out in s 100 (2).
[34] Mr Toka's role is critical in determining whether s 100 (2) protected Aljan's initial registered interest in the 001 lease. Macdonald J did not review the evidence fully in his judgment, though it is clear that he was aware of the material evidence to be weighed. We consider that a full review of relevant primary facts must be undertaken to determine what inferences can be drawn about Mr Toka's conduct and whether any dishonest acts can be imputed to his principal, Aljan.
[35] From the first meeting at Bokissa Island, Mr Cort was aware of court proceedings involving a disputed claim by Valele Trust to the 001 lease. He elected to rely on Mr Than's assurances that he had "won" the case. The practical division of responsibilities to obtain custom owners' consents and to perfect registration of Aljan's title must be viewed from that starting point. Surprisingly, Mr Cort said nothing, in his sworn statement, about Mr Toka's role. In very coy terms, Mr Cort referred to "Aljan [arranging] for necessary consents to be obtained from custom owners." In light of other evidence, we consider that Mr Cort was attempting to insulate Aljan from any involvement by Mr Toka as its agent in the transaction.
[36] We are satisfied that Mr Toka's authority to deal with custom owners extended to assistance in the registration process. Mr Toka was a former lands officer who had knowledge of the legislative framework and experience in the registration process. We infer from Mr Toka's background that he was fully conversant with the proper processes for the negotiation of custom owners' consents and the removal of cautions from the register. There was also evidence that Mr Toka had left the Department's employ under a cloud of concern about his prior work performance: see, generally, Toka v Public Service Commission [2009] VUSC 56, a case to which Mr Cort made reference in his sworn statement.
[37] There is evidence not only that Mr Toka obtained signatures of custom owners consenting to the proposed sale of the lease to Aljan, but also that he identified some of the custom owners to officers of the Land Records Office. We refer to executed consents of the transfer to Aljan, which are dated at Luganville on 28 June 2007 and witnessed by Mr Toka. The documents also contain Mr Toka's certificate of identification of the lessors, on 18 July 2007. The documents also indicate, on their face, that consent was being given to the transfer of both the 001 lease and the proposed new lease. For example, the consent signed by Ben Mata provided consent to:
"Surrender title 04/2624/001 and re-execute a new Rural Commercial/Tourism for a term of 75 years replacement and (sic) Agricultural."
[38] The scope of Mr Toka's authority can also be inferred from the limited instructions provided to Mr Gee, as Aljan's solicitor. Mr Gee's evidence (not contradicted by Mr Cort) was that his instructions were limited to preparation of the agreement for sale and purchase and undertaking title and related searches at the Department of Lands, Survey and Records. Mr Cort, on behalf of Aljan, was to arrange separately for custom owners' consents to be obtained and for the registration process to be completed. As we have stated, those tasks were delegated to Mr Toka.
[39] This division of functions is both unusual and, on the facts of this case, suspicious. Mr Gee is based in Port Vila. Mr Toka lives on Santo. While the custom owners were based on Aese Island, close to Santo, the Land Records Office is situated in Port Vila. Why would Mr Gee (or someone from his firm) not deal with land registration issues?
[40] When Mr Gee undertook an initial search of the register, he discovered that the file could not be located. On 9 July 2007, he sent an email to Mr Cort indicating that it was preferable for a clear search to be obtained before money changed hands, to ensure there were no unknown charges or cautions on the title. Mr Gee suggested that someone go to the Land Records Office to demand the file and to say that a pending transaction was held up through inability to access relevant searchable documents.
[41] There is no evidence about who made those sorts of inquiries but, subsequently, Mr Gee obtained searches of the property, proprietorship and encumbrances sections of the Land Lease Register. None of those documents referred to any live registered caution. However, on or about 17 July 2007, Mr Gee did obtain (through whom we do not know) copies of 2 cautions against the leasehold title. They were lodged on behalf of James Rad and Titus Karu. The Rad caution queried whether the true custom owners had given consent while Titus Karu's caution alleged that he was a custom owner. Correspondence took place between Mr Gee and the Director whereby the Director was asked to remove the caution. There is no record of any reply. While the Rad and Karu cautions were inappropriately lodged (custom owners cannot use the caution procedure for their own purposes: see Ratua Development Ltd v Ndai [2007] VUCA 28) they could not be removed until proper process had been followed under s 97 of the Act.
[42] Among the documents produced by consent at trial was a letter from Mr Saniel of the Land Records Office to Mr Colmar, dated 5 September 2007. Mr Saniel reported on involvement in the transaction by Mr Toka, in light of information that had come to his attention about the continuation of Valele Trust proceedings in the Court of Appeal. This was at the time registration of the Aljan transfer was effected on 14 August 2007. Mr Saniel advised:-
a) Mr Toka attended at the Lands Office in mid July 2007 regarding a proposed transfer of the Aese Island lease to Aljan.
b) Mr Toka showed Mr Saniel a copy of Saksak J's judgment, saying that Mr Than had won the case. This must be a reference to the judgment of 12 February 2007, in which his Lordship decline to grant specific performance.
c) Mr Toka informs Mr Saniel that he could, " use this judgment to remove the caution in place". He added that he wanted the "transfer and its registration done quickly" so that he could collect it and return to Luganville.
[43] Mr Saniel's letter is consistent with contemporary documents. Mr Toka had obtained custom owners' consents by mid July 2007; we refer in particular to the consent documents (dated 28 June 2007) on which he provided a certificate of identification of the lessors on 18 July 2007. The reference to using Saksak J's judgment to "remove the caution in place" must refer to the caution of Mr Colmar. The judgment was not relevant to any other. We observe that Macdonald J took a similar view with regard to Mr Toka's knowledge of the existence of Mr Colmar's caution.
[44] Evidence of one of the custom owners, Mr Livo, on whom Macdonald J appears to have placed some reliance, is also consistent with the evidence to which we have referred. He described Mr Toka as acting as agent for Aljan and Mr Cort in late June or July 2007 and said that Mr Toka was "trying hard to get me and others to give consents to them purchasing Aese Island from Mr Than".
[45] As Macdonald J observed, the speed with which the transfer was ultimately registered was "unprecedented": (we add) at least in light of the time which it had taken the Lands Office to deal with many other documents lodged in respect of this particular lease. By way of example, we refer to the delay between lodgement of Mr Colmar's caution on May 2005 and its ultimate registration on 17 January 2007.
[46] We return to our comments about the division of roles, as between Mr Gee and Mr Toka. On the basis of Saksak J's judgment there was no need for undue haste in the registration process. There was only a need for haste if there were (at least) some concern that Valele Trust was pursuing an appeal against Saksak J's judgment. Valele Trust's claim for specific performance had been dismissed. It would have been a simple task for one of Mr Gee's employees to go the Land Records Office, lodge the transfer and to seek, formally, removal of the cautions under s 97 of the Act. Indeed, during the hiatus (a person whose caution is challenged in this way has 30 days within which to produce a copy of any relevant Court proceedings: s 97 (3)) it would have been possible to ensure that the transfer of the 001 lease, the surrender of that lease and the (to be drafted) new 003 lease were all registered at the same time. Maximum efficiency would have been achieved.
[47] We infer that the transfer of the 001 lease was lodged at the same time Mr Toka requested withdrawal of the Colmar caution, around 18 July 2007. Registration followed on 14 August 2007. It is clear that the surrender of the 001 lease and the new 003 lease were not lodged for registration in July or August 2007 as the former (at least) bears a 2008 application number.
[48] In drawing inferences from those proved facts, there are two additional principles that apply. One is that all evidence must be weighed accordingly to the proof which it was within the power of one side to have produced and the other to have contradicted:- Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 (HL) at 46, para 13. The other, which Mr Morrison, for Valele Trust, urged upon us, is that, in limited circumstances, it is permissible to draw an inference from the absence of a witness who could have given evidence to clarify a material fact. That principle has been adopted in Vanuatu: see Barrett & Sinclair v McCormack [1999] VUCA 11. The Court of Appeal said:
"The unexplained failure by a party to get evidence or to call witnesses may, although not necessarily must, in appropriate circumstances lead to an inference that the uncalled evidence would not have assisted the party's case. The failure may also be taken into account in deciding whether to accept any particular evidence that relates to a matter on which the absent witness could have spoken, and entitles the trier of fact the more readily to draw any inference fairly to be drawn from other evidence that could have been explained had the opposing party chosen to do so by calling the absent witness."
[49] Valele Trust had always averred that Mr Toka had acted as Aljan's agent, with knowledge of Mr Colmar's caution. In those circumstances, it is clear that evidence from Mr Toka could have assisted the trial judge significantly in determining the actual tasks entrusted to Mr Toka and what he actually did to perform them. Any doubts about exactly what Mr Toka knew or did could readily have been clarified by him. However, Aljan elected not to call its own agent. With respect to Macdonald J, Aljan's failure to call Mr Toka should not have been treated as if it were to its advantage on the basis that allegations of dishonesty had to be put to Mr Toka for a response. The applicable principle is that adverse inferences may (not must) be drawn from the failure to call a material witness on an issue that is within his or her exclusive knowledge.
[50] As there is an evidential foundation for Mr Toka's participation in the registration process, with knowledge of the existence of Mr Colmar's caution, we consider that his absence as a witness (in conjunction with Mr Cort's own reluctance to explain the true position voluntarily) assists us to draw an inference that he was acting in that role with that knowledge. For an example of the drawing of such an inference in a comparable case, see Loke Yew v Port Swettenhem Rubber Company Ltd [1913] UKLawRpAC 11; [1913] AC 491 (PC) at 503-504.
[51] Before making relevant findings of fact, we refer to Mr Hurley's submissions about the requisite standard of proof. Because fraud is alleged, Mr Hurley submitted that a finding on a mere balance of probabilities was inappropriate. He referred us to Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 (HCA) at 362-363, in which Dixon J said that such an allegation must be proved "clearly" "unequivocally" or "with certainty". It is clear that despite the application of the civil standard of proof, regard must be had to the gravity of the allegation of fraud. See Z v Dental Complaints Assessment Committee [2008] NZSC 55; [2009] 1 NZLR 1 (SC) at paras [98] – [102] (McGrath J for himself and Blanchard and Tipping JJ) and Re H (Minors)(Sexual Abuse: Standard of Proof) [1996] AC 563 (HL) at 586-587 (Lord Nicholls, with whom Lord Goff and Lord Mustill agreed). We apply those principles in reaching our own view of the relevant facts surrounding Mr Toka's involvement.
[52] We find:-
a) Mr Toka was entrusted to obtain custom owners' consents to the transfer of the 001 lease and to obtain agreement from them for the new 003 lease, in late June and July 2007.
b) Mr Toka was entrusted with the task of obtaining registration of the Aljan transfer as quickly as possible. He had knowledge of what was required to be done from his previous experience as a senior lands officer.
c) Mr Toka had actual knowledge of the existence of the Colmar caution and the terms of Saksak J's judgment of February 2007. The need for speed in the registration process was to get Aljan on the title before anything happened that might adversely affect its interests. Given the more orthodox way in which an innocent registration process may have been undertaken through Mr Gee's firm, the inference that Mr Toka had (at least) real concerns that an appeal was being pursued is irresistible.
d) In endeavouring to obtain prompt registration of the Aljan transaction, Mr Toka did so with actual knowledge of Mr Colmar's caution and, the need for proper processes to be undertaken (on notice to Mr Colmar) before the caution could be legitimately removed: s 97 (2) and (3) of the Act.
[53] We emphasis that the events that we have described are inter-connected. They must be viewed in combination and in a realistic way, in light of undoubted local knowledge or speculation about competing claims to Aese Island. To do otherwise is to approach the question of Mr Toka's role from an artificial perspective. In our judgment, the cumulative effect of all of the circumstantial evidence leads to an irresistible inference that Mr Toka's efforts were being directed to procuring early registration of Aljan's interest in lease 001 to ensure that any remaining steps that Valele Trust may be pursuing to obtain registered title to the lease would be defeated.
[54] The remaining questions are whether Mr Toka's acts were dishonest and whether, if so, they can be imputed to his principal, Aljan. In common with legislation adopting the Torrens system in both Australia and New Zealand, there are limited circumstances in which a registered interest can be attacked. This is known as the principle of indefeasibility, discussed in some detail in Frazer v Walker [1967] NZLR 1069 (PC). Under Australian and New Zealand law, the interest is subject only to a fraud exception, under which it is necessary to establish actual dishonesty on the part of a party: see Assets Company Ltd v Mere Roihi [1905] UKLawRpAC 11; [1905] AC 176 (PC).
[55] In that case, the Privy Council referred to "fraud" as meaning actual dishonesty, though the Board did not exclude proof of deliberately refraining from making inquiries that an honest purchaser would make, as coming within that rubric: Assets Company Ltd v Mere Roihi, at 212. While the Vanuatu Legislation is wider in its scope than the Australia and New Zealand legislation, applying to omissions or mistakes that would not amount to actual dishonesty (s.100 (2) of the Act), Mr Morrison, for Valele Trust, accepted that dishonest conduct must be established, in the circumstances of this particular case, if a remedy were to be available.
[56] In Nathan v Dollars & Sense Ltd [2008] NZSC 20; [2008] 2 NZLR 557, the Supreme Court of New Zealand reviewed authorities dealing with the circumstances in which a principal will be liable for unlawful act committed by its agents, in the context of the completion of documents for land registration purposes. In that case, Dollars & Sense Ltd had agreed to advance monies to Mr Rodney Nathan, on the faith of a mortgage to be given by his mother and father over their property. As it happened Mr Nathan was authorised by the solicitors for Dollars & Sense Ltd to take the documents to his parents for their signatures. The document was signed by his father but Mr Nathan forged the signature of his mother. The Supreme Court accepted that Dollars & Sense Ltd did not play any role in obtaining of the mother's signature fraudulently. The contest was between Dollars & Sense Ltd (as an innocent mortgagee) and Mrs Nathan (as a defrauded mortgagor).
[57] After reviewing the authorities in detail, Blanchard J, for the Supreme Court, held (at para [32]) that there were two questions to be considered in determining whether a principal in a position of Dollars & Sense Ltd could be fixed with knowledge of dishonest actions on the part of its agent:
- What acts has the principal authorised the agent to do?
- Were the agent's acts so connected with what he or she was required to do that they can be regarded as a mode by which the delegated tasks were performed?
[58] We have considered whether there is any policy reason not to apply the Dollars & Sense Ltd decision in Vanuatu. There is, of course, a difference between the application of the Torrens system in Vanuatu, as compared with other countries because of its limitation to leasehold interests. That is due to the paramountcy accorded to the interests of custom owners under the Constitution. Such issues were discussed by this Court in Valele Family v Touru [2002] VUCA 3 and do not require repetition.
[59] Consistent with views taken in New Zealand in respect of issues involving Maori land, the Vanuatu Parliament has elected to apply the Torrens indefeasibility principle to leasehold interests. Those interests fall to be addressed in terms of the Act and relevant common law or equitable principles. On the other hand, custom owners' disputes are left to be resolved as between themselves by Customary Land Tribunals or Island Courts: Colmar v Rose Vanuatu Ltd [2007] VUCA 40.
[60] By way of illustration of the New Zealand position, from (at least) 1905 (see 197–198 of Assets Company v Mere Roihi), to both Housing Corporation of New Zealand v Maori Trustee [1988] 2 NZLR 662 (HC) at 671-678 and Registrar-General of Land v Marshall [1994] NZHC 791; [1995] 2 NZLR 189 (HC) at 198-199, the indefeasibility provisions of the Land Transfer Act 1952 (NZ) have been held to override provisions that apply to procedural aspects of the alienation of Maori land by (what was then) the Maori Affairs Act 1953 (NZ). Similar views would now be taken in respect of current legislation: Te Ture Whenua Maori Act 1993 (NZ). In each of the more recent cases, the High Court held that a failure to meet a requirement that the Maori Land Court endorse a consent on an instrument over land under its jurisdiction was insufficient to impeach the registered interest. A similar approach is justified in Vanuatu, for the reasons given in those decisions.
[61] We see no reason not to apply Nathan v Dollars & Sense Ltd in Vanuatu. The decision was reached by the highest court in New Zealand after a full review of relevant authorities. There is nothing, from a policy perspective, that mandates a different result.
[62] We turn to the specific questions, posed by Dollars & Sense, in light of our findings about Mr Toka's conduct.
[63] We have already determined the scope of Mr Toka's authority. He was entrusted with the task of gaining custom owners' consent and ensuring prompt completion of the registration process. He undertook both of those tasks, succeeding in both. However, his mode of performing his instructions was dishonest. On our findings, Mr Toka knew of the Colmar caution and put improper pressure on the Director to remove it otherwise than in compliance with s. 97 of the Act. We have also found that he had real concerns about the possibility of Valele Trust pursuing an appeal and took steps to obtain prompt registration of Aljan's interest to defeat Valele Trust's claim. No independent inquiry (i.e. other than of Mr Than) as to whether an appeal had, in fact, been brought was made by any person acting for Aljan.
[64] Mr Toka's knowledge of the land registration process and his concern that an appeal might be being pursued against Saksak J's judgment meant that he must have known that, had notice been given in accordance with s. 97 of the Act, any extant appeal proceeding would have been brought to light; if not the judgment of the Court of Appeal itself.
[65] On that basis, the dishonest actions of Mr Toka are imputed to Aljan. It follows that Aljan cannot be regarded as a bona fide purchaser for value of the 001 lease without notice of Mr Colmar's interest, in terms of s 100 (2) of the Act.
Relief Issues
[66] We record Mr Hurley's submission that relief based on a claim for breach of a constructive trust went beyond the settled pleading. While not pleaded expressly we are satisfied relief of the type sought was raised before Macdonald J (albeit in non-specific terms) and was known to be in issue at first instance. No complaint has been made of prejudice due to the inability to call evidence. We adjourned the hearing to receive full submissions on relief. In those circumstances, we are satisfied that the claim is live and ripe for determination.
[67] Although Aljan registered title to the 001 lease was as a result of its agent's (Mr Toka) dishonest actions, it is not possible to restore the position in relation to rectification of the register for that lease. Nevertheless, the absence of a rectification claim for the 003 lease does not necessarily leave the Valele Trust without a remedy. While the Torrens system is based on indefeasibility of title, personal claims that can be brought in equity or at common law are not excluded. In Frazer v Walker [1967] NZLR 1069 (PC)[1] at 1078, Lord Wilberforce said:
"[The principle of indefeasibility] in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam founded in law or in equity, for such relief as a court acting in personam may grant. That this is so has frequently, and rightly, been recognised in the Courts of New Zealand and of Australia ..."
The same observations apply in relation to Vanuatu law although, as previously indicated, its scope is limited to registered leases.
[68] The Privy Council's advice in Attorney-General for Hong Kong v Reid [1994] 1 NZLR 1 (PC) is instructive on the question of principle. It adopted the approach set out in Keech v Sandford (1726) Sel Cas T King 61 which concerned the renewal of a lease. In that case, a landlord had refused to renew a lease to a trustee for the benefit of an infant. The trustee took a new lease for his own benefit. The new lease had not formed part of the original trust property. The infant could not have acquired the lease from the landlord. The trustee acted innocently believing that he had committed no breach of trust. The Lord Chancellor said:
"I must consider this as a trust for the infant; for I very well see, if a trustee, on the refusal to renew, might have a lease to himself, few trust estates would be renewed to cestui que use; though I do not say there is a fraud in this case, yet he should rather have let it run out, than to have had the lease to himself. This may seem hard, that the trustee is the only person of all mankind who might not have the lease: but it is very proper that rule should be strictly pursued, and not in the least relaxed; for it is very obvious what would be the consequence of letting trustees have the lease, on refusal to renew to cestui que use."
[69] Keech v Sandford is directly on point. The only issue is whether it can be applied in the indefeasibility regime. The authorities have consistently stated that personal claims based on constructive trust must remain consistent with the Torrens legislation. We consider that the principle is readily applicable to leasehold interests registered under the Vanuatu legislation.
[70] On the facts of this particular case, Mr Toka was intimately involved not only in obtaining custom-owners consent to the 001 lease but also in negotiating the 003 commercial lease at the same time. Although the contract that formed the 003 lease was signed in July 2007, it was not registered until the following year. In our view, the activities of Mr Toka in relation to the 001 and 003 leases are so closely bound together that they cannot sensibly be separated for the purposes of determining whether creation of the 003 lease brings the case within the Keech v Sandford principle.
[71] While an existing fiduciary relationship between the parties is not necessary in every case (see Barrett & Sinclair v McCormack), there can be no doubt that once a constructive trust comes into existence, the legal owner of the property is in a fiduciary relationship with the beneficial owner. While dealing with bribes being paid to a public official, we consider that Lord Templeman's remarks in Attorney-General for Hong Kong v Reid, at 4, are apposite:
"The false fiduciary who received the bribe in breach of duty must pay and account for the bribe to the person to whom that duty was owed ... As soon as the bribe was received it should have been paid or transferred instanter to the person who suffered from the breach of duty. Equity considers as done that which ought to have been done. As soon as the bribe was received, whether in cash or in kind, the false fiduciary held the bribe on a constructive trust for the person injured. ... The authorities show that property acquired by a trustee innocently but in breach of trust and the property from time to time representing the same belong in equity to the cestui que trust and not to the trustee personally whether he is solvent or insolvent. Property acquired by a trustee as a result of a criminal breach of trust and the property from time to time representing the same must also belong in equity to his cestui que trust and not to the trustee whether he is solvent or insolvent."
[72] A similar approach was taken by Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v Islington London Borough Council: [1996] UKHL 12; [1996] AC 669 (HL) at 716:
"I agree that the stolen moneys are traceable in equity. But the proprietary interest which equity is enforcing in such circumstances arises under a constructive, not a resulting, trust. Although it is difficult to find clear authority for the proposition, when property is obtained by fraud equity imposes a constructive trust on the fraudulent recipient: the property is recoverable and traceable in equity. Thus, an infant who has obtained property by fraud is bound in equity to restore it..."
[73] We begin our analysis of what remedy is most appropriate by reference to what ought to have happened had each of Valele Trust and Aljan acted innocently throughout. Which party would have been entitled to register title to the 001 lease?
[74] The Valele Trust's acquisition of the lease was first in time. Its interest under the agreement of sale and purchase was protected by a registered caution. From 17 January 2007, at the latest, Aljan had deemed notice of the existence of the caution for that date, by virtue of s 18 of the Act.
[75] Leaving aside "deemed" knowledge, Aljan entered into its contract on 21 June 2007. Having gained appropriate consents promptly, it was in a position to register its transfer by 18 July 2007. Alternatively, it could have lodged its own caution immediately after the contract was signed, to protect its position.
[76] If proper process had been followed, Aljan would have made a formal application to the Director to remove Valele Trust's caution: s 97 (2) of the Act. The Director would have given notice of that to the Trust. Undoubtedly, a copy of the appeal and the stay orders would have been supplied to the Director within 30 days of notice being given: see s. 97 (3). Had that been done the Court of Appeal would have been aware of the competing claims when it heard the first appeal on 17 August 2007.
[77] Once the Court of Appeal had given its judgment, Valele Trust's claim would have been paramount. No time limit exists for custom owners' consents to be obtained, though, in practical terms, the Trust faced the possibility that the lease would expire in July 2010 if consents had not been obtained. At this stage, Aljan would have been left to pursue a claim for damages against agent Rose Vanuatu and, possibly, Mr Than for purporting to sell the lease without equitable title.
[78] What actually happened was the reverse of what ought to have happened. Aljan gained registration of the 001 lease and had the presumptive benefit of indefeasibility of title. Once the Court of Appeal had decided that specific performance of the contract between the Valele Trust and Rose Vanuatu should be ordered by the Supreme Court, as a matter of law Aljan held the title to the 001 lease as a constructive trustee for the Trust. It had no power to deal with the land for any purpose, even though Mr Colmer's caution had been (wrongly) removed without notice being given under s 97 (2).
[79] Mr Hurley placed weight on Mr Colmar's actions in procuring the substitution of the Trust as registered owner on 10 December 2007. While that episode reflected poor judgment by Mr Colmar, events were overtaken by the Director's decision (under s 99) on 13 June 2008, to rectify the register of his own volition, by re-registering the transfer of lease 001 to Aljan, and registering both the surrender of that lease and the new lease 003. Thereafter, there was nothing that Valele Trust could practically do to protect its position. Lease 001 was no more.
[80] We do not consider that what occurred between 10 December 2007 and 12 June 2008 affected the legal position. Valele Trust remained the true owner of lease 001 until it was replaced by lease 003. Once the new lease was registered, any remedy lay in the hands of the Court. There was nothing more that the Trust could do.
[81] We have decided that orders should be made to restore the position that ought to have pertained had documents evidencing the Aljan transactions not been registered. As Lord Templeman remarked in Attorney-General for Hong Kong v Reid, at 4: "Equity considers as done that which ought to have been done." Can a remedy be fashioned legitimately to allow Valele Trust to step into Aljan's shoes on the 003 lease?
[82] On the authority of Keech v Sandford, we consider that relief can be crafted to confer ownership of the 003 lease on the Trust. That ancient case, decided as long ago as 1726, was expressly approved in Attorney-General for Hong Kong v Reid. The principle laid down by the Privy Council in Reid, at 4, applies:
"When a bribe is accepted by a fiduciary in breach of his duty then he holds that bribe in trust for the person to whom the duty was owned. If the property representing the bribe decreases in value the fiduciary must pay the difference between that value and the initial amount of the bribe because he should not have accepted the bribe or incurred the risk of loss. If the property increases in value, the finding is not entitled to any surplus in excess of the initial value of the bribe because he is not allowed by any means to make a profit out of the breach of duty."
[86] In the present case, the fraudulent conduct of Aljan's agent placed Aljan in the position of a fiduciary, as trustee of a constructive trust in favour of the Valele Trust. The principle is that Aljan should not be entitled to retain the fruits of its (imputed) fraud against Valele Trust. Aljan will receive reimbursement for any outgoings it has incurred in obtaining and maintaining the 003 lease but Valele Trust is entitled to take its benefit. What will happen allows Valele Trust the opportunity to fulfil its earlier ability to negotiate a lease on the same terms as did Aljan. It lost its earlier opportunity as a result of adverse (but ultimately unsuccessful) claims to its title: first from Rose Vanuatu and then from Aljan. Thus, its loss of opportunity is converted into something that is (at least) reasonably possible to attain, after negotiation.
[87] Whether consents will be forthcoming from custom owners is a different issue. But, Valele Trust should be allowed the opportunity to deal with them without interference from Aljan or any of its agents.
[88] To provide for the possibility that custom owners' consents will not be forthcoming, we propose to leave the lease registered in Aljan's name, as constructive trustee for Valele Trust, and to restrain any dealings by Aljan, pending further order of the Supreme Court, if consents are not given. The constructive trust will come to an end if consents are not obtained. However, it will then be open for Valele Trust to elect to pursue a claim for an account of profits or equitable compensation, in lieu of an order directing Aljan to transfer the lease to the Trust. In any event, there will need to be an accounting to ensure all proper outgoings paid by Aljan are not inappropriately used by Valele Trust for its own benefit.
Cross-appeal
[89] As the appeal will be allowed, the cross appeal becomes academic. While we do hold that the Judge erred in declining to make a costs order without hearing from counsel for Aljan, we dismiss the cross-appeal as being moot.
Result
[90] We allow the appeal and set aside Macdonald J's dismissal of Trust's claim against Aljan. In lieu thereof, we grant relief as follows:
a) Declarations that
i) On 14 August 2007, Aljan obtained a registered title as proprietor of the 001 lease by fraud.
ii) At all times while it remained the registered proprietor of lease 001, Aljan held its registered interest as a constructive trustee for Peter Colmar, in his capacity as trustee of the Valele Trust.
iii) Surrender of the 001 lease and registration of Aljan's interest as proprietor of the new 003 lease on 13 June 2008 occurred at a time when Aljan had knowledge of Valele Trust's prior claim to the 001 lease. In consequence, Aljan holds the new 003 lease as a constructive trustee for Peter Colmar, in his capacity as trustee of the Valele Trust.
b) Pursuant to s 100 (1) of the Act, the Director shall amend the Land Lease Register to record that the capacity in which Aljan holds the registered title to the 003 lease is as "a trustee for Peter Colmar, in his capacity as trustee of the Valele Trust".
c) Aljan, its directors, its agents, its employees and its assigns are each forbidden from interfering with any part of the process whereby Valele Trust seeks custom owners' consents to the transfer of the 003 lease, in terms of Declaration (a) (iv) above.
d) Aljan is forbidden from dealing, in any way, with lease 003, pending further order of the Supreme Court.
e) Leave is reserved for any party to apply to the Supreme Court for further directions. Any application shall be made in writing and on notice to allother parties who may be affected by any order sought.
[91] We remit the proceeding to the Supreme Court to finalise outstanding issues and to resolve any other aspects of this proceeding that remain before it as a result of Macdonald J's judgment of 10 March 2011. For the purpose of that remission, we make the following directions arising out of this appeal:
a) On or before 4 November 2011, counsel for Valele Trust shall file and serve a memorandum outlining the steps taken to obtain custom owners' consents and the outcome of those negotiations. Counsel shall also identify any orders that are sought from the Supreme Court to give effect to this judgment. These shall include the formulation of a mechanism to determine the amount payable to Aljan for its outgoings. The memorandum shall be supported by a sworn statement from Mr Colmar that provides a full and accurate explanation of the processes followed, annexes all consents given and recites any other relevant primary facts.
b) On or before 18 November 2011, counsel for Aljan shall file and serve a memorandum (supported by a sworn statement from a duly authorised agent of Aljan on any material primary facts) indicating Aljan's responses to the position taken by Valele Trust and the orders sought. On the question of reimbursement of Aljan's outgoings, it would be open to put a list before the court verified by sworn statement.
c) The Supreme Court shall allocated a conference date before a Judge on the first available date after 25 November 2011, so that the Judge can consider what orders can be made or whether a further hearing is required. The conference shall extend to any other issues arising among all parties to the proceeding that remain live following Macdonald J's judgment.
[92] While not encouraging any further disputes in this protracted litigation, we indicate some specific areas that could arise that counsel may need to consider. First, if custom owners' consents were not available, Valele Trust will need to elect whether to withdraw its claim to title and pursue a claim for an account of profits or equitable compensation against Aljan. Second, if there were any issues about consents being unreasonably withheld, some argument may be required on whether owners are entitled to withhold consent unreasonably. We did not hear full argument on this issue and are not prepared to deal with it in this judgment.
[93] The cross-appeal is dismissed.
[94] Costs on the appeal are awarded in favour of Valele Trust against Aljan on a standard basis, to be agreed or determined. Valele Trust is entitled to its costs in the Supreme Court, on the same basis. No orders for costs are made on the appeal in respect of other parties.
[95] We thank Mr Morrison and Mr Hurley for the quality of their respective arguments which have enabled us to give judgment today.
DATED at Port Vila this 22nd day of July, 2011
BY THE COURT
Hon. Chief Justice V LUNABEK
Hon. Justice J von DOUSSA
Hon. Justice O SAKSAK
Hon. Justice D FATIAKI
Justice R SPEAR
Hon. Justice P HEATH
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