Posala v Hans J Keil Holding Ltd [2008] WSSC 90 (29 October 2008)

IN THE SUPREME COURT OF SAMOA
HELD AT APIA

IN THE MATTER:
of Caveat 1008x affecting all that land at Vaitele
described as Parcel 1394 being part of Parcels 1231 and 1232 Flur XI Upolu
Volume 30 Folio 5 of which Smack Company Limited is the registered owner.

BETWEEN:

FUIMAONO LESA FARANI POSALA
of Vaoala, Architect
Applicant

AND:

HANS J. KEIL HOLDING LIMITED
a duly incorporated company having its registered office at Apia
Respondent

Counsel: Applicant in person
J Brunt for respondent

Hearing: 24 October 2008
Judgment: 29 October 2008

JUDGEMENT OF SAPOLU CJ

Proceedings

[1] These proceedings are concerned with an application filed for the applicant pursuant to s.25 of the Land Registration 1992/1993 for caveat 1008x he had lodged with the registrar of lands not to lapse.

Background

[2] The relevant background to these proceedings may be briefly stated. The applicant is the majority shareholder of a company called Smack Co Ltd (Smack) which he formed. He said that in 1990 he lent to Smack $87,000 as part of the purchase price of the land on which the company is located. He also lent to Smack $200,000 for the construction of the building in which the company is accommodated on the land.

[3] Smack also borrowed from the National Provident Fund (NPF) but the amount of the loan from NPF is not specified. Unfortunately, Smack ended up in serious default on its loan from NPF. Eventually, the land was sold by the NPF to the respondent under a writ of sale.

[4] The applicant said that the monies which he had lent to Smack in 1990 have never been repaid. He also said that those monies were not secured. He now claims that the unpaid and unsecured monies he had lent to Smack gives him an equitable interest in the land to support his caveat. His caveat, therefore, should not be deemed to have lapsed under s.25 of the Land Registration Act 1992/1993.

[5] Counsel for the respondent submitted that the applicant does not have a caveatable interest in the land or a reasonably arguable case to support his caveat.

Relevant law

[6] In Land Law in New Zealand (2003) vol 1 by Hinde, McMorland and Sim at para 10.010 (a), the learned authors state:

"An unsecured creditor has only personal rights against he debtor and therefore has no right to lodge a caveat against the title to the debtor’s land. This is so even if the unsecured creditor has lent money to the debtor for the express purpose of buying the land or paying off mortgages on the lands".

[7] In the case of Rayner v Kilburn [1981] NZHC 492; (1981) 1 NZCPR 395 which is cited by the learned authors of Land Law in New Zealand (supra), the owners of land with a flat built on it sold the land together with the flat to the first respondent. The owners agreed to leave in $3,400 as the unpaid balance of the purchase price of the land. That amount was unsecured save by an acknowledgement of debt from the first respondent.

[8] What happened was that the first respondent borrowed fourth fifths (4/5) of the purchase price of the land from the second respondent (the Housing Corporation) which took out a mortgage over the land. The first respondent then defaulted on the mortgage and the land was auctioned. The second respondent made a successful bid at the auction and the land was sold to it. When the second respondent lodged its certificate for transfer of title at the land registry for registration, the owners who had sold the land to the first respondent had already lodged a caveat.

[9] The question for determination by the Court was whether the owners to whom the first respondent owed the sum of $3,400 being the outstanding and unsecured balance of the purchase price of the land had an interest in the land to support their caveat.

[10] Jeffries J in the High Court of New Zealand said at p.396:

"The calendar of events which I have recited above leaves no doubt that the applicants (owners) simply made an advance, or a loan, to the first respondent to enable him complete the purchase... At the time of lodging the caveat the applicants, in my view, had no legal or equitable interest in the land. They had an acknowledgement of debt not capable of supporting a caveatable interest against the title."

[11] There is another matter I wish to refer to in this part of my judgment. This is the question of who should be made parties to an application for a caveat not to lapse. It would appear that the persons to be made parties to such an application would ordinarily be the person who has presented an instrument for registration and the registered owner of the land.

[12] In Land Law in New Zealand (supra), the learned authors state at para 10.019 (e):

"Section 145 does not stipulate who should be made a party to an application for an order that a caveat not lapse. The person who triggered s.145 by lodging an instrument for registration should ordinarily be made a party. In addition, since the caveator will have to show how his or her claim is derived from the registered proprietor, the registered proprietor should be made a party."

[13] Section 145 of the Land Transfer Act 1952 (NZ) is similar in terms to s.25 of our Land Registration Act 1992/1993

Discussion

[14] The applicant said that he lent monies to Smack the registered owner of the land for the purchase of the land and the construction of the building on it. The loans were unsecured. Smack is a company the applicant formed and of which he is the majority shareholder. Up to now Smack has not repaid the loans from the applicant.

[15] Smack also borrowed from the NPF who took a mortgage over Smack’s land. Unfortunately, Smack defaulted on the mortgage and subsequently the land was sold to the respondent under a writ of sale.

[16] When the respondent presented his deed to the registrar of lands for registration, the applicant had already lodged a caveat against the title to the land. That is the caveat which is the subject of these proceedings.

[17] It is clear from what the applicant, himself, said that he is an unsecured creditor of Smack for the amount of the monies that he lent to Smack for the purchase of the land and the construction of the building on the land. In law, the applicant would have no right to lodge a caveat against the title to Smack’s land. He has only contractual or personal rights against Smack to sue Smack on the loan, but he has no caveatable interest in Smack’s land. It follows that the applicant dues not have a reasonably arguable case for an interest that is capable of supporting a caveat.

[18] Caveat 1008x lodged by the applicant has therefore lapsed and the application is dismissed.

[19] Costs of $1,500 are awarded to the respondent.

CHIEF JUSTICE