Reid v Fiso [2001] WSCA 4 (23 November 2001)

IN THE COURT OF APPEAL OF SAMOA
HELD AT APIA

BETWEEN

LEALA PETER E REID, JUNIOR
of Pago Pago, American Samoa, Businessman
for himself and as Attorney of the Trustees of the Estates of
ERNEST J. REID, RICHARD F. REID, CECIL W. REID
and BLANCHE H. REID
Appellant

AND

ATIIFALE FISO
of Mataututai, Workman
Respondent

Coram: The Hon. Sir Ian Barker, (presiding)
The Rt. Hon. Sir Ian McKay
The Hon. Justice Robertson

Hearing 20 November 2001

Counsel: T K Enari for Appellant
T R S Toailoa for Respondent

Judgement: 23 November 2001

JUDGEMENT OF THE COURT DELIVERED BY SIR IAN McKAY

Background

The respondent, who was the plaintiff in the Court below, brought his claim under that part of the law of restitution which is based on unjust enrichment.

The relevant facts as found by the Judge were set out in the following passage of the judgment:

The defendant is the owner and registered proprietor of land at Matautu-tai being land which faces onto Beach Road and overlooks Apia Harbour and upon which has been constructed inter alia a night club called Margrey-Ta's and a store.

The plaintiff and his family have occupied the said land with the consent of the original owners for many years, and the occupation continues up to the present day. I find that over a period of many years the plaintiff has continued to look after the said land without any assistance from the defendant and has spent time and money and has performed labour in reclaiming the said land and constructing improvements thereon.

I further find that the said reclamation and improvements have been done over the years by the plaintiff and his family and without any interference from the defendant.

I find that the said reclamation and improvements included clearing and filling the said land and swampy areas thereon, construction of permanent homes and nightclub facilities and amenities etc.

The claim, as amended by leave at the commencement of the hearing in the Supreme Court was for ST$1,961,000. It comprised two items:

Value of fill ST$1,433,000

Buildings, including bar facilities and ST$ 528,000

amenities

The appellants had counterclaimed for ST$1,580,000 for rent for the respondent's use of the land for 62 years, but this was not pursued. The case was heard in the Supreme Court in April 1999, and judgment was delivered on 30 June 2000. The Judge held that the plaintiff had established his claim, and gave judgment for ST$728,000.

The appellant seeks to have the judgment set aside, and to have judgment entered for the appellant, or alternatively an order for a new trial. The grounds of appeal, as set out in the Notice of Appeal and developed by Mr Enari in his submissions, comprised four alleged errors of law and four alleged errors of fact.

There is no cross-appeal by the respondent.

The Judge's Approach

The Judge summarised the evidence given by the respondent and his five supporting witnesses, and by the appellant, Peter Reid. He concluded that there was very little in dispute in reference to the evidence of the lay witnesses. The appellant could not dispute the oral testimony as to the respondent's use of the land and the work done on the land. The appellants did not call any expert valuation evidence to challenge that given by the respondent's valuer. While accepting that it was for him to assess the valuer's evidence, which it was open to him to reject in whole or in part, he saw no sufficient reason to do other than accept it "regarding the cost of the improvements". He referred to various details in the evidence relating to the history of the land., and assessed the respondent to be an honest witness.

He then turned to the relevant law. He said there was no doubt that the equitable doctrine of unjust enrichment was part of the law of Samoa, and referred to cases in the Supreme Court where it had been so held. Counsel accepted before us that the doctrine was part of the law of Samoa. What was in doubt, said the Judge, was the basis upon which compensation for unjust enrichment should be assessed. He referred to statements in judgments in England, Samoa, Canada, Australia and New Zealand. These referred variously to "the value of the improvements", "to disgorge from a defendant unjust benefits and ill gotten gains and restore them to the plaintiff who has suffered a countervailing deprivation", "benefit gained" and "corresponding detriment sustained", "the sums expended" and "the amount of money ... expended", the duty of the Court to "determine how in all the circumstances justice requires that ... equity be satisfied", "to compensate for loss caused", and "the market cost of the work done and expenses incurred":

Many of the statements are, as the Judge said, equivocal. We do not think there is one simple method of assessment which can be applied to all cases. It is a question of the amount which in the circumstances of the particular case will satisfy the requirements of equity. In some cases the value of the benefit may be the appropriate guide. In other cases the cost incurred by the plaintiff may be a better measure.

The Judge then turned to the application of the law to the facts of the present case. The respondent's claim for "value of fill" was ST$1,433,000. The Judge said that this claim was supported by the only valuation evidence that was produced, but it was not the proper basis at law for assessing the compensation to which the respondent was entitled for unjust enrichment. He said the respondent was "not entitled to anywhere in the region of ST$1 million compensation under this heading. The proper basis at law, he said, was "to have regard to the evidence, albeit incomplete, as to the actual cost of the fill as expended by the (respondent) and his family". Adopting what he termed a "broad axe" approach, he assessed the actual cost at ST$200,000 He referred to "the presumption against wrongdoers", in this case the respondent, and the fact that the respondent carried the onus of proof. The Judge did not accept, as a matter of law, the submission of counsel for the respondent that the assessment should be based on the "market value" as opposed to actual cost.

If he was held to be in error in rejecting market value, he said, the figure of ST$1,433,000 would have to be discounted by perhaps 70% to 80% on account of the fact that a great deal of the reclamation work was done free of commercial cost, and that which was done in the period 1940 to 1974 "at a cost of much less than the inflationary sum of ST$65 per load". He did not explain why voluntary work of reclamation by the respondent and his family should not be recognised, nor why expenditures 30 or more years ago should be reimbursed at their nominal amount without recognising that restitution would be paid in the depreciated currency of today.

He accepted the valuer's evidence as to the value of the buildings constructed on the land by the respondent, which totalled ST$528,000. That value had been arrived at on the basis of the cost of replacement less depreciation. His total assessment was thus ST$728,000.

Alleged Errors of Law

(i) [A]ccepting hearsay evidence from the plaintiff that his solicitor advised him that he could rely on adverse possession to claim title to the land;

The respondent's evidence refers to his having sought and obtained legal advice in 1988, and proceeding with the building of a shop in reliance on the advice received. He said it was his lawyer's approval that enabled him to build the houses. Mr Enari said that his objection to this evidence had not been recorded in the Judge's Notes. Nor did the Judge make any reference to the evidence in his judgment. It does not appear to have had any influence on his decision.

In any event, it was not hearsay. The respondent was giving direct evidence of advice given to him by his lawyer. It could only be relevant, however, as bearing on the respondent's state of mind when he decided to proceed with building.

We are satisfied that there was no error of law in respect of this evidence,
and no basis for setting aside the judgment on this ground.

(ii) [I]n not considering the question that the plaintiff himself carried out the filling and the improvements on his own initiative without the knowledge or approval of the defendant:

The Judge summarised the evidence of each of the witnesses in some detail. The reclamation had been started by the respondent's father, and he had assisted from the age of 10. This would have been about 1938. He did not suggest that the appellants had known or approved of either the reclamation or the buildings.

Mr Enari relied on the fact that the work had been done without knowledge or approval of the appellants when he addressed the Judge at the conclusion of the evidence. The Judge did not, however, make any express mention of the point in his judgment. It was not a matter of difference between the parties, but it might have been of significance in its legal consequences. One cannot assume that the Judge did not consider it, but it would have been appropriate for him to have discussed its possible implications. In the event, we do not think the point was critical.

Mr Enari submitted that the necessary ingredients of the respondent's cause of action were (a) that the appellants had gained a real benefit; (b) that this had been at the expense of the respondent; and (c) that it was a benefit which it would be unfair for the appellant to retain. He took this analysis from two judgments of the Chief Justice, Elisara v Elisara and Anor (unreported, DIV 21/93; judgment 22 November 1994, pp. 17-19) and Public Trustee v Brown & Ors (unreported, CP 393/93; judgment 24 January 1999, pp. 21, 41). He submitted that a fourth element must also be established, namely that the defendant to the claim knew that the plaintiff was expending money on the land. If he is correct in this submission, then the present respondent's claim should have failed.

We do not accept that this fourth element is a necessary requirement for a successful claim. It is clear that in many cases it has been present, and has been referred to in judgments that have upheld claims for unjust enrichment. We have been referred to no case, however, that states it as an essential prerequisite. The cases show that the essential requirements are the deriving of a benefit by the defendant at the cost of or detriment to the plaintiff, in circumstances in which it would be unfair for that benefit to be retained by the defendant. The ultimate test is the unfairness of allowing the benefit to be retained by the defendant. Where the defendant has known of the situation, and has either encouraged or knowingly allowed the plaintiff to continue to provide it, this is clearly a relevant factor which may demonstrate the unfairness of allowing the defendant to retain the benefit. It has therefore been an important consideration in cases where this has happened. We were not referred to any case where it was stated to be an essential element in every case in order to establish unfairness. There are, on the other hand, statements of high authority as to the requirements for a successful claim which do not refer to it. It is sufficient to refer to the decisions of the Supreme Court of Canada in Rathwell v Rathwell [1978] 2 SCR 436, Pettkus v Becker [1980] 2 SCR 834 and Sorochan v.Sorochan [1986] 2 SCR 38, where the essential requirements were stated to be "an enrichment, a corresponding deprivation and absence of any juristic reason for the enrichment". Essentially the same test is stated in the leading English text, Goff & Jones The Law of Restitution 3 ed. p 16:

[Unjust enrichment] presupposes three things: first, that the defendant has been enriched by the receipt of a benefit; secondly, that he has been so enriched at the plaintiff's expense; and thirdly, that it would be unjust to allow him to retain the benefit.

Lord Wright in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour, Ltd [1942] UKHL 4; [1943] AC 32 at 61, 62, expressed the principle in the following terms:

It is clear that any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep. Such remedies in English law are generically different from remedies in contract or tort, and are now recognised to fall within a third category of the common law which has been called quasi-contract or restitution.

Lord Mansfield CJ, in a familiar passage in Moses v Macferlan [1760] EngR 713; (1760) 2 Burr. 1005, 1012, sought to rationalize the action for money had and received, and illustrated it by some typical instances.

Lord Mansfield does not say that the law implies a promise. The law implies a debt or obligation which is a different thing. In fact, he denies that there is a contract; the obligation is as efficacious as if it were upon a contract. The obligation is a creation of the law, just as much as an obligation in tort. The obligation belongs to a third class, distinct from either contract or tort, though it resembles contract rather than tort. This statement of Lord Mansfield has been the basis of the modern law of quasi-contract, notwithstanding the criticisms which have been launched against it.

(iii) [I]n not considering the submission by the defendant that he did not request the "improvements" nor did he want them and wanted the plaintiff to take his improvements with him;

This ground is essentially the same as ground (ii). The cases show that where a defendant has requested the expenditures which are the basis of the plaintiff's claim, or has shown a desire for them, this can be a clear demonstration of the unfairness of allowing the defendant to retain the benefit. The cases do not suggest that these are the only circumstances which are capable of creating unfairness. The Judge did not discuss this in his judgment, because it was not a question in issue in this case. The respondent had not raised any such allegation to support his claim to unfairness. We are not prepared to assume that the Judge did not consider this part of the evidence. It is clear that he found unfairness to be established. His basis for doing so could have been articulated more clearly. We do not regard his failure to refer to the absence in this case of a non-essential feature, relied on successfully in other cases where it was present but not relied on in this case, as being an error of law.

It is true that the appellant claimed that he did not want the improvements carried out on his land by the respondent and wanted the respondent to take his improvements with him. We do not regard this as the test. The first requirement is a benefit to the owner of the land. This is a question of fact, and is not dependent on whether or not the defendant wanted it. There was clear evidence of benefit in the uncontroverted evidence of the valuer. His first valuation, limited to the land fronting Beach Road, assessed the cost of the fill at ST$1 million. In his evidence, he stated that this cost was in excess of the value of the benefit accruing to the appellants as owners. He put the land value at the date of his report at "close on ST$800,000". The value assuming the land was in its original state as swamp land he assessed as ST$200,000. The transformation from swamp land to flat, solid land 3 metres higher and 2 metres above the water table, capable of providing a foundation for buildings, was clearly a substantial benefit. The land at the rear he assessed as having a market value at the time of his report of about ST$430,000, compared with a value at that time if it had been in its original condition of ST$250,000.

We accept that objectively assessed market values do not necessarily demonstrate the value of the benefit to the particular land owner. The owner may have his own plans for development of the land, and these may be frustrated or rendered impractical by the unwanted improvement carried out by the plaintiff. There was no evidence to suggest anything of this kind in the present case. The appellants had shown almost total disinterest in the land for over 60 years.

(iv) [I]n not considering that the plaintiff has lived rent free on the defendant's land and raised his family and ran a business there for many years

It was not in dispute that the respondent and his family had occupied the land rent free for over 60 years. This was obviously a benefit to them, and a proper matter to be brought into account in assessing the appropriate amount to be awarded for restitution. The Judge did not refer to it in arriving at the amount of his judgment.

The appellants had raised this issue in their statement of defence and counterclaim. In their statement of defence, they had asserted that any improvements by the respondent "would be regarded as recompense for rent on the land". There was no evidence that either party had ever so regarded them. The respondent, and his father before him, had occupied this land, more than half being swamp, free of charge for over 60 years.

In their counterclaim, the appellant claimed ST$1,500,000 for rent for 62 years. This is an average of over ST$25,000 per year over that period. The counterclaim was not pursued No evidence was given in support either of the counterclaim or the value of the defendant's licence to live on the property free of rent.

One can readily accept that this licence was of some value to the respondent. The land is on Beach Road, which follows the coast in Apia harbour It is a central residential location close to the amenities of Apia, including the schools attended by the respondent and his family. This can be contrasted with the birthplace of the respondent's father, and presumably of the respondent himself, at remote Taelefaga, Fagaloa.

It is clear that in assessing the value of the benefit which the respondent's work conferred on the appellant's land, credit should be given for any countervailing benefit. The question had been raised by way of counterclaim, but was not pursued by the appellant. No evidence was called to enable any such benefit to be quantified. There was no evidence, for example, of the rental value of the land, more than half of which was accepted to have been swamp, over the 60 year period. The matter was not pursued either as a counterclaim or as a benefit to be taken into account in assessing the amount of restitution to which the respondent was entitled. The Judge did not assess the amount of restitution on the basis of the benefit received by the appellants, but on the basis of the cost to the respondents. Any benefits received by the respondent from the free use of the land were given voluntarily by the appellants, and involved no cost and no expenditure by them.

We do not consider that the Judge erred in law in not taking into account a matter that, although pleaded, was not pursued at trial, and on which no evidence was offered to enable value to be attributed. If such evidence had been provided, the value could have been offset against the benefits conferred by the respondent. Any benefit to the respondent, however, had involved no cost to the appellant which could be offset against the costs incurred by the respondent.

Alleged Errors of Fact

(i) [A]ccepting the valuations of the buildings on the land;

The valuations of the buildings on the land were as follows:

Report of 18 April 1994

Value of Improvements (including VAGST)

a) Bar $89,000

b) Toilets/Bathroom 18,000

c) 6 Samoan fales 3,000

d) Shop 38,000

e) Part-European House 8,000

f) European House 109,000

Total Value of Improvements $265,000

(Two Hundred Sixty Five Thousand Tala)

Report of 4 September 1995

Valuation (as at date of inspection, i.e. 31 August 1995)

i) Bar $38,000

ii) Stage 150,000

iii) Dressing Room 42,000

iv) Shop Extension 21,000

v) Concrete Dance Floor 12,000

$263,000

(Two Hundred and Sixty Three Thousand Tala)

Total of both valuations ST$528,000.

Mr Enari did not enlarge on his submission that the Judge made an error of fact in accepting the valuer's figures. The valuer had not been shown to be wrong in cross-examination . There was no other valuation evidence. The valuer said he had based his assessment on the cost of replacement less depreciation. The Judge was entitled to accept this evidence, and he did so. He has not been shown to be wrong.

We were concerned at a point which was not expressly raised by the appellant, but would seem to be within this broad ground of appeal. There was produced in evidence a letter sent to the respondent by the solicitor for the appellants, dated 9 April 1992. This purported to require the respondent to stop and desist forthwith from the concrete block construction on the property. We were told that this referred to the "European House" valued at ST$109,000. We do not know what stage this building was at when the letter was sent. If it had not been completed, then it was completed thereafter. The letter also required the respondent to vacate the property by 8 May 1992. The letter was eventually followed by proceedings against the respondent for possession of the land.

The respondent defended those proceedings on the basis of the Limitation Act 1975, alleging adverse possession for more than 12 years. This defence was rejected by Casey J in the Supreme Court on 23 April 1995, on the basis that the respondent had been in possession as a licensee of the appellants, and therefore not in adverse possession. This decision was affirmed by the Court of Appeal on 29 August 1996.

It is clear, therefore, that any building work completed on the "European House" between 9 April 1992 and the valuation report of 18 April 1994, and the further work carried out between the report of 18 April 1994 and the report of 4 September 1995, was carried out in the knowledge that completion of the house had been expressly forbidden and that the appellants required him to vacate. The respondent's further building expenditure may have been undertaken in the hope that he would acquire title by virtue of the Limitation Act, but if that was the case then his hope was not realised. It is difficult to see how improvements carried out on the land of another can create an equity based on unjust enrichment when the owner has expressly forbidden further expenditure and further occupation.

The absence of evidence as to the state of the "European House" at the date of the letter of 9 April 1992 precludes us from finding that it was incomplete or that further work was done despite the letter. If such work was done, it may have been too late at that stage for it to be practicable for the respondent to avoid completing it. The other work, which created structures assessed at a value of ST$262,000, was clearly done against the express wishes of the appellant. The question is whether this work was an improvement to the land which it would be unjust to allow the appellant to retain.

No doubt there can be circumstances where a claim to unjust enrichment might still succeed notwithstanding a clearly expressed wish by the owner that no further expenditure should take place. There could be a genuine dispute as to ownership and as to possible rights obtained by 12 years adverse possession. There could be situations where it is clearly in the interests of both parties that work commenced should be completed, and the respective rights sorted out later. While accepting that such situations are possible, we can find nothing in the evidence that would entitle the present respondent to succeed on a claim in equity based on expenditures incurred after he received the solicitor's letter of 9 April 1992.

The onus is on the respondent to prove all the elements of his claim. He had to show that he was fairly entitled to restitution, that it would be unjust for the appellant to retain the benefit. In respect of the respondent's work described in the valuer's report of 4 September 1995, he has failed to produce evidence on which the Judge could properly have found a valid claim for restitution.

It follows that the sum of ST$263,000, included in the Judge's award in respect of buildings, must be disallowed. The total judgment for ST$728,000 is accordingly reduced to ST$465,000.

(ii) [A]warding a value of $200,000 for fill on the land;

The Judge reached his figure on what he described as a "broad axe" approach. If he had awarded the valuer's figure of ST$1,433,000, the appellant might have had difficulty in attacking it. The valuer assessed the value of the frontage land as bare swamp land at ST$280,000. He assessed the added value of the fill on the basis of a calculated volume, translated into a number of truckloads, at $65 per load. He acknowledged that this assessment of cost was not reflected to the full extent in the increase achieved in value. The same method was used in his report of 11 October 1995 in respect of the new land, giving a figure of ST$433,000. This evidence might seem to have justified an award of no more than ST$860,000. The Judge awarded only ST$200,000.

How the Judge arrived at this figure is unclear to us. He described it as a "broad axe" approach. He rejected any work carried out which was not a "commercial cost" to the respondent, and rejected any measuring of cost in the values of today rather than those of years ago. We are not called upon to decide whether he was correct in this approach, because there is no cross-appeal. It is quite clear to us, however, that the ST$200,000 awarded was a very modest amount in the circumstances. We are certainly not persuaded that it was excessive, or that the Judge erred in favour of the respondent in awarding it.

(iii) [N]ot allowing for the period that the plaintiff and his family lived rent free on the defendant's premises;

We have already discussed this under item (iv) of the section dealing with alleged errors of law. The matter was not pursued in the Supreme Court. There was no evidence on which the value of any benefit to the respondent could be quantified. There was no cost to the appellants which could be offset against the costs incurred by the respondent in his improvements to the land. We find no error of fact.

(iv) [N]ot taking into account the defendant's evidence and submission that the defendant did not want the respondent's buildings or land fill as it had spoiled the land

We have referred to this argument under item (iii) of the section dealing with alleged errors of law. It is not necessary to add anything further to what has been said. We find no error of fact.

Conclusion

In the result, we reject the appellant's arguments except in respect of the improvements carried out after the solicitor's letter of 9 April 1992, and assessed in the valuer's report of 4 September 1995. This results in a reduction in the amount of restitutionary compensation from ST$728,000 to ST$465,000, comprising ST$200,000 for cost of fill and ST$265,000 for the earlier improvements in the nature of buildings. The judgment is amended accordingly.

The respondent is entitled to retain the costs awarded to him in the Supreme Court, but reduced by 3% of ST$263,000 to reflect the reduction in the amount recovered. The appellant has been only partially successful in this Court, but is entitled to an allowance for costs in this Court, which we fix at ST$1000.00, with disbursements as fixed by the Registrar.

Solicitors:
Toailoa Law Firm, Apia, for Appellant
Apa & Enari, Apia, for Respondent