Jensen v Samoa National Provident Fund [2014] WSCA 10 (7 November 2014)

COURT OF APPEAL OF SAMOA
Jensen v Samoa National Provident Fund [2014] WSCA 10

Case name:	Jensen v Samoa National Provident Fund
Citation:	[2014] WSCA 10
Decision date:	7 November 2014
Parties:	TAMALETA TAIMANG JENSEN (appellant) v SAMOA NATIONAL PROVIDENT FUND (respondent)
Hearing date(s):	5 November 2014
File number(s):	CA 06/14
Jurisdiction:	Civil
Place of delivery:	Court of Appeal of Samoa, Mulinuu
Judge(s):	His Honour Justice Fisher His Honour Justice Blanchard His Honour Justice Nelson
On appeal from:	Supreme Court
Order:	- The appeal is dismissed with costs of SAT$5,000 to the respondent plus disbursements, if any, to be approved by the Registrar
Representation:	T K Enari and C S Vaai for appellant S Leung Wai for respondent
Catchwords:	claim for damages – purchase of land- physical condition of the property - contractual relationship – ceased trading – registered title - appeal dismissed
Words and phrases:	“tenants” “vendor” “defaulted”
Legislation cited:	D W McMorland, Sale of Land (3 ed, 2011) at 8.02(a)
Cases cited:	Cook v Taylor [1942] 1 Ch 349 Ellis v Rogers [1885] UKLawRpCh 113; (1885) 29 Ch D 661 Wisely v McGruer [1909] NZGazLawRp 42; (1909) 28 NZLR 481
Summary of decision:

IN THE APPEAL COURT OF SAMOA
HELD AT MULINUU

FILE NO: CA 06/14

BETWEEN

TAMALETA TAIMANG JENSEN
Appellant

A N D

SAMOA NATIONAL PROVIDENT FUND
Respondent

Coram: Honourable Justice Fisher
Honourable Justice Blanchard
Honourable Justice Nelson

Counsel: T K Enari and C S Vaai for appellant
S Leung Wai for respondent

Hearing: 5 November 2014
Judgment: 7 November 2014

JUDGMENT OF THE COURT

1. This is an appeal from a judgment of Malosi J dismissing a claim for damages by a purchaser in respect of a purchase of land from a mortgagee of the registered owner. We grant leave for the appeal to be brought out of time.
2. The land was at Malifa. It was a freehold of half an acre in area and consisted of a motel complex (including 16 units) known as the Christina Hotel and a further area leased to tenants, including the Ministry of Education, on short term leases. The owner of the land was Christina Motel Company Limited, a family company of the Grey family. The land was subject to a mortgage to the respondent, Samoa National Provident Fund (SNPF). It appears that the motel business had ceased trading but members of the Grey family were in occupation of the motel. The motel company had defaulted under the mortgage and SNPF had taken steps towards exercising its power of sale. It advertised in the Samoa Observer inviting expressions of interest on an “AS IS BASIS”. Those words were emphasised by the use of the capitals.
3. On 29 August 2011 Mr Jensen wrote to the SNPF as follows:
   • “Re: Expressions of Interest for “CHRISTINA HOTEL MALIFA”
   • I wish to submit this letter submitting my in (sic) interest in buying the above-mentioned property on an “As Is Basis” located at Malifa.
   • I wish to tender the amount of SAT$1,500,008.02.”
4. Other than giving contact details that was the entirety of his communication. It seems that by this time, and certainly by the time a contractual relationship existed, Mr Jensen had inspected the property and had been supplied by the SNPF with a registered valuer’s report on the property dated 23 August 2011 (assessing its value at SAT$2,280,000) and a document that purported to be a “Staff search” of the registered title which showed the SNPF’s mortgage but no other encumbrances and no caveats against the title.
5. On 16 September, while the tender remained unaccepted, the SNPF wrote to four members of the Grey family requiring them to move out of the Christina Hotel within 14 days. It asked them not to remove any fixtures or fittings and warned of a damages claim if they did so. The SNPF wrote again on 20 September, this time to five members of the family, repeating its requirements for them to vacate and asking for co-operation in giving notice to their tenants. It does not appear that Mr Jensen was made aware of these letters.
6. On 27 September 2011, the SNPF wrote to Mr Jensen saying that its management had “approved and accepted” his tender, but subject to two conditions:

“1. Payment of the full amount is received and receipted by the Fund no later than Monday 10 October 2011; and

2. All current tenants (in the event of non-renewal by new owners) are to be given 1 month adequate notice to vacate and seek alternative arrangements for accommodation from the date of receipt by the Fund of the full amount as stated in 1 above.”

7. Mr Jensen replied on 3 October saying that he fully accepted these conditions but asking for the settlement date to be extended to 24 October 2011 so he would have time to arrange funding from his bank. He in fact worked for Samoa Commercial Bank Limited and arranged to borrow 100% of the price from it, to be secured by a mortgage. The next day, 4 October, the SNPF agreed to the extension of the settlement date. The sale contract thus concluded on that day consisted only of the correspondence between Mr Jensen and the SNPF.
8. It does seem amazing that a purchase of this size would be contracted for on such a casual basis without the parties bothering to protect themselves with a form of agreement settled by their lawyers and without expressly dealing with the fact that there were persons in occupation of the motel. Mr Jensen admitted in cross-examination that he knew the Greys were in occupation before making his purchase. Nor does it appear that he took the elementary precaution of carrying out his own search of the title.
9. Mr Jensen inspected the property again on 23 October with representatives of the SNPF. He made no complaint about its condition at that time.
10. On 24 October, Mr Jensen’s lawyer, who was also instructed to act for the Samoa Commercial Bank, made payment to the SNPF of the whole of the purchase price. She also sent them a transfer form asking it to be executed. It seems that this was done immediately.
11. But the next day, 25 October, it had been discovered that there was a caveat on the title by Christina Grey. As she had died in 2009 the caveat must have been on the title long before the events with which we are concerned. Mr Jensen’s lawyer wrote immediately to the SNPF about the caveat seeking to have it take steps to remove it. The lawyer also mentioned that Mr Jensen had agreed that the tenants be given one month to move out. She also asked that the SNPF send the Grey family notice of the change of ownership and require the Greys to move out.
12. The tenants duly vacated their portions of the property. Mr Jensen has made no complaint about how or when they did so.
13. Mr Jensen’s problems after settlement were twofold. First, the caveat needed to be removed from the title to the land so that he could register the transfer. On 15 December 2011 the Supreme Court made an order for removal of the caveat on the application of the SNPF. But on 23 December another member of the Grey family lodged another caveat. It was removed by the Court on 6 March 2012 and Mr Jensen was able to register. But this time it was Mr Jensen who had to make the application and bear the cost, because the SNPF took the view they no longer had any obligation to Mr Jensen in respect of the title.
14. The second problem was the failure of the Greys to vacate the motel. They did not leave until 1 May 2012 and after they had gone the motel was found to have been badly damaged, presumably by one or more members of the family.
15. Mr Jensen fell into arrears to Samoa Commercial Bank because he had no income from the property from the end of October 2011 until he got vacant possession on 1 May 2012. Eventually the bank exercised a power of sale and sold the property for an amount sufficient to cover the mortgage. Having borrowed the whole of the price, Mr Jensen made no loss of capital.
16. He claimed from the SNPF as damages the sum of SAT$223,172.92 for loss of income from the motel (calculated at a daily rate of SAT$1,187.09, which does not appear to have been particularised) plus loss of the income he says he would have earned from the position of manager of the motel of $21,304.68 (calculated at a daily rate of SAT$191.26, again not particularised). For the damage to the property and missing items he claimed a replacement cost of SAT$144,500 which he supported by a valuation from an architect. The trial Judge considered that the architect had sufficient experience to give an expert opinion. There was also a claim for general damages of SAT$250,000 which the Supreme Court Judge said was not explained to her.

The Supreme Court judgment

17. Malosi J, after finding these facts and referring to some authorities, said that the “as is basis” of the sale was a red herring in her view. Mr Jensen had accepted that, prior to putting in his expression of interest, he had inspected the property and was satisfied with what he saw. He inspected again before settlement with representatives of the SNPF and the Samoa Commercial Bank and, as he said, “everything was still in its normal state.”
18. The Judge noted that the property was not sold as a going concern. Given the mortgagee sale by the SNPF she accepted that was the position. The motel company did not have the resources to operate the motel as a viable business and had been in difficulty for some time.
19. The Judge referred to the rebuttable presumption of vacant possession which was, she said, rebutted by the specific agreement reached in respect of the tenants, who had actually moved out in accordance with the notice given to them. She accepted, however, that it was “an implied condition that so far as the Greys were concerned, upon settlement they were to vacate the property”, though she found that Mr Jensen had known during the negotiations, if not right up to settlement, that the Greys were still in occupation and were contesting the SNPF’s right to exercise its power of sale.
20. The Judge concluded that the parties entered into the sale and purchase agreement relying on the staff search attached to the valuation report. She was critical of the failure of Mr Jensen’s solicitor to search the title immediately prior to settlement.
21. Malosi J found that SNPF had not known of the existence of the first caveat until after settlement but had acted with due haste to have it removed.
22. She referred to a ruling by Slicer J on 13 December 2011 that despite the first caveat Mr Jensen held unencumbered legal and equitable title to the property and was entitled to vacant possession. Slicer J had held that the caveat did not affect that right to possession. In Malosi J’s view Mr Jensen could have moved into the property after that Court ruling. By electing to wait for the outcome of the application to discharge the second caveat he had clearly not taken steps to mitigate his subsequent loss.
23. The Judge found that the SNPF was not involved in the damage to the property. Mr Jensen had to rely on his own inspection and judgment in relation to both the title and the quality of the property. She was not satisfied that the SNPF had been in breach of contract. Mr Jensen had agreed to buy on an “as is basis” subject to the tenancies. The tenants were all gone within the agreed period of one month. He was satisfied with the condition of the property when he twice inspected it, got what he bargained for and “the contract was complete.” The SNPF had taken reasonable steps to remove the first caveat and had no interest in the property when the second caveat was lodged. She found also that the SNPF had done all it could in the circumstances to make it clear to the Greys that they were obliged to vacate. Mr Jensen had not said what more he had expected. He had also failed to mitigate his loss after the caveat ruling in December 2011.
24. Malosi J therefore dismissed the claim in its entirety.

The argument on appeal

25. The argument on appeal was ably presented by Mr Vaai. He correctly isolated the key issue as being whether the SNPF had a contractual obligation to provide vacant possession at the date of settlement. He submitted, first, that in context the references to “tenants” in the correspondence that constituted the contract encompassed all occupants of the property, including the Grey family. But, if that was not accepted, Mr Vaai said, there was a presumption under a land sale contract that on settlement the vendor would give vacant possession unless it notified the purchaser that it could not or would not do so. Silence on the point – no reference to the Greys in the correspondence – meant that the SNPF had contracted to remove them by settlement date. The damages claimed were a direct consequence of the SNPF’s failure to do so.
26. Counsel rightly did not try to make anything of SNPF’s undoubted contractual breach in failing to give clear title on settlement. It was accepted that the presence of the caveat on the title when Mr Jensen settled the purchase had not been a cause of the claimed losses.

Discussion

27. We do not accept that “tenants” in the contractual communications included the Grey family. Unlike those holding parts of the property under tenancies, they were not tenants of either the mortgagor or the SNPF but simply occupiers associated with the mortgagor. The stipulation for the giving of one month’s notice if Mr Jensen did not renew their leases could never have been intended to refer to the Greys.
28. As Mr Vaai said, it is indeed the well established position under an open land sale contract (i.e. one which is not the subject of a comprehensive written agreement dealing with the point) that there is a rebuttable presumption in favour of the purchaser that on settlement the property is to pass to the purchaser with vacant possession: D W McMorland, Sale of Land (3 ed, 2011) at 8.02(a), citing Cook v Taylor [1942] 1 Ch 349. To rebut the presumption the vendor must show either that the contract contains an express provision to the contrary or that before the contract was made the purchaser both knew the true situation and intended to buy the property in that true state, if only because the purchaser knew the vendor could not change the situation: Ellis v Rogers [1885] UKLawRpCh 113; (1885) 29 Ch D 661; Wisely v McGruer [1909] NZGazLawRp 42; (1909) 28 NZLR 481.
29. We consider, however, that in this case the presumption was rebutted by the SNPF’s stipulation, accepted by Mr Jensen, that it was selling on an “as is basis” in circumstances where Mr Jensen must have known that the sale was by a mortgagee, had inspected the property and must also have been well aware that the Greys were in possession of the motel and were disputing the SNPF’s right of sale.
30. Mr Vaai submitted that “as is basis” referred exclusively to the physical state of the land and buildings. We do not accept that. The meaning of the expression “as is basis” must be determined objectively in light of the context in which the contract was made and is not influenced by subsequent unilateral actions or statements by a party. The context in which the expression has been used in a land sale contract is quite different from its more common use in a sale of a chattel, such as a motor vehicle or an item of machinery, where it is often coupled with “where is”. In the context of a land sale it would add very little by way of protection for a vendor since any land sale is of the land, buildings and other improvements in their condition at the time the sale contract is entered into. And under an open contract risk passes to the purchaser once the contract has been made. That risk includes damage by fire or other peril and damage caused by a third party.
31. It follows that it is unlikely that the “as is” provision was intended to refer only to the physical condition of the property. Looking at the matter objectively, the stipulation seems to us to have been principally directed at the Greys’ occupancy and was intended to remove from the SNPF any legal obligation to evict the Greys from their occupation of the motel. In contrast, there was an express requirement for notice to be given to the tenants, but only if Mr Jensen wished that to be done.
32. It is accepted that all damages claims were made on the basis that the SNPF had an obligation to give vacant possession of the motel. As the appellant fails on this crucial point, the appeal is dismissed with costs of SAT$5,000 to the respondent plus disbursements, if any, to be approved by the Registrar.
    

Honourable Justice Fisher

Honourable Justice Blanchard

Honourable Justice Nelson