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BDO Spicers Auckland Trustee Company Ltd v Native Land Trust Board [2003] FJHC 31; Hbc0442rfd.2003s (4 December 2003)

IN THE HIGH COURT OF FIJI
(AT SUVA)

CIVIL ACTION NO. HBC 442 OF 2003S

Between:

BDO SPICERS AUCKLAND TRUSTEE COMPANY LIMITED
Plaintiff

and

NATIVE LAND TRUST BOARD
LAKO MAI ISLAND RESORT LIMITED
INTERVAL HOLIDAYS (FIJI) LTD
LAKO MAI RESORT DEVELOPMENT LTD
TOUCHDOWN PRODUCTIONS LIMITED
Defendants

J.C. Sloan and Ms. M.B. Moody for the Plaintiff
T. Bukarau and J. Masiyaka for the First Defendant
Ms. R. Lal and R. Naidu for the Third and Fourth Defendants
J.W. Turner and S. Parshotam for the Fifth Defendant
No appearance by the Second Defendant

REASONS FOR DECISION

These proceedings were commenced by writ of summons issued on 22 October 2003.

On 23 October at approximately 3 p.m. I granted the Plaintiff an interim order ex parte restraining the Defendants from taking any step which might adversely affect the interests of the owners of time share occupation rights at Lako Mai Island Resort which is situated on Malolo Island, Nadroga.

On 29 October, after hearing all parties save the Second Defendant I discharged the interim order. These are my reasons.

On 31 August 1993 the First Defendant (NLTB) granted the Second Defendant a 99 year lease over approximately seven hectares of land at Malolo for the purpose of building a holiday resort. A copy of the lease is Exhibit JLM 2 to the affidavit filed by James Lawry MacQueen in support of the ex parte application.

As appears from a valuation report prepared by Brian Turner Property Services Ltd of New Zealand on 4 August 2003 (Exhibit F to the affidavit of Michael David Joseph Molloy) a resort complex consisting principally of 20 bures, a main amenities block and staff accommodation was constructed in the early 1990’s.

According to the copy affidavit of Frank Allan Yeates filed on 28 October 2003, by 1995 the Resort was facing financial difficulties. In August 1996 the second Defendant agreed to sublet the Resort to the Fourth Defendant. This sublease, a copy of which is Exhibit FAY 3 to Mr. Yeates’ affidavit was registered on 16 October 1996 (see also the last page of Exhibit JLM 2).

Paragraph K of the sublease gave the Fourth Defendant the right to grant timeshare licences to occupy all or part of the Resort. How far this sublease was consistent with the Native Land Trust (Leases and Licences) Regulations (Cap 134 – Subs 12) to which it refers and certain provisions of which it purports to exclude and how far the sublease itself and the granted right to offer time share licences are consistent with Section 12 of the Native Land Trust Act (Cap 12) is not clear. It is however worth noting that according to paragraph 7 of Siteri Cevalawa’s affidavit filed on behalf of the NLTB:

“the first time [the NLTB] came to learn that there were other companies involved in the Lako Mai lease was when it received injunction papers from the Fourth Defendant earlier this year.”

According to paragraph 4.4 of the Yeates affidavit the agreement reached between the second and the Fourth Defendants also provided that if sufficient time share units were sold then the ownership of the resort would be transferred to Yeates or his nominees. On 19 December 1997 following the successful sale of these time share units the Second Defendant transferred its interest in the lease to the Third Defendant, a company controlled by Yeates. The transfer which was registered on 13 January 1998 was subject to the sublease previously granted to the Fourth Defendant (see Exhibit FAY 4 and the last page of Exhibit JLM 2). Whether that transfer was valid in view of the provisions of Section 12 of the Native Land Trust Act may be doubted.

On about 7 April 1998 the Third Defendant entered into some form of transfer agreement with yet another company, Lako Mai Resort Management Limited. That transfer was registered on 7 April 1998. In paragraph 4.5 of his affidavit Yeates avers that the Third Defendant:

“granted to Lako Mai Resort Management Limited sublease No. 437338. I am unable to exhibit that sublease as it is missing from the office of the Registrar of Titles and all my records remain on the resort.”

Whether this transfer complied with the requirements of Section 12 of the Native Land Trust Act is not clear. Neither is it clear what the nature of the sublease might have been since it will be remembered that the Third Defendant’s interest was subject to the sublease granted by the Second Defendant to the Fourth Defendant.

On 27 March 1997 yet another company, Lako Mai Resort (New Zealand) Ltd apparently acting on behalf of the Third Defendant entered into an agreement entitled “Deed of Participation” under which the Plaintiff (albeit under a slightly different name) was appointed the Statutory Supervisor of the time share scheme being offered by the Fourth Defendant.

Mr. MacQueen explained the role of a Statutory Supervisor in paragraph 3 of his second affidavit sworn on 30 October 2003, the original of which, at the time of writing, has still not been filed. The Statutory Supervisor is a creature of the 1978 New Zealand Securities Act. Briefly, he is required to look after the interests of time share owners. In paragraph 5 of his first affidavit and in paragraphs 6 and 7 of his second affidavit Mr. MacQueen stated that over 1,000 time shares in Lako Mai Resort were sold in New Zealand and about 150 were sold in Fiji. The total value of these sales was NZ$14,980,000. It appears that of the total sum F$2,646,000 was paid to the Second Defendant (which as has already been noted transferred his interest to the Third Defendant on 19 December 1997), F$2,359,000 was paid to the Third Defendant, while no less than $9,589,000 was received not by a Lako Mai company but by Accent Holidays, a New Zealand company controlled and substantially owned by Yeates.

During the years 1998 to 2002 there were numerous difficulties between the Resort and the NLTB (see Exhibits SC5 b – SC5 f). Time share owners also had many complaints (Exhibit SC5 i). On 17 November 2002 the NLTB sent a notice of breach to “Managing Director, Lako Mai Resort Management Limited” at the offices of Jamandas and Associates, Suva (Solicitors for Yeates) under the provisions of Section 5 of the Property Law Act (Cap 130) (see Exhibit SC5 a). Among the breaches listed in the notice were failure to pay rent, failure to comply with occupational health and safety regulations and failure to pay FNPF contributions. The note bears at its foot the endorsement:

“Hand delivered to Frank Yeates this am.”

above a signature and the date 19 November 2002.

On 24 January 2003 Frank Allan Yeates, as Fourth Plaintiff together with “Lako Mai Resort” as Third Plaintiff, Lako Mai Management Limited as Second Plaintiff and “Lako Mai Development Limited” as First Plaintiff obtained an ex parte order in the Lautoka High Court (Byrne J) restraining the NLTB from “exercising its powers of re-entry under notice dated 17 November 2002 until further order of the Court.” The matter was adjourned for mention on 30 January 2003 however I was advised that the interim order remains in place until today. Whether “Lako Mai Development Limited” is the same body as the Fourth Defendant herein is not clear. I was not shown a copy of the affidavit filed in support of the interim injunction granted on 24 January.

In paragraph 9 of her affidavit Siteri Cevalawa averred that on 30 December 2002 the NLTB re-entered and determined the lease. On 7 February 2003 the lease was cancelled (see Exhibit FAY 7).

It appears that when the High Court at Lautoka granted its order on 24 January 2003 the NLTB had already re-entered and taken possession of the Resort. It also appears that no steps have been taken to enforce the order obtained.

In paragraph 6.1 of his affidavit Yeates accepted that re-entry took place on 30 December 2002. In paragraph 6.2 to 6.15 he explained that he accepts that the lease has been cancelled and that the Lako Mai Group of Companies is no longer acceptable to the traditional owners of the land and the NLTB. In paragraph 6.5 he asserted:

“the resort has been in the custody of the landowners. I am advised and verily believe that the resort has been completely destroyed and has now become derelict and inoperable.”

The latter assertion is in marked contrast to the report of Brian Turner already referred to, which states that it was commissioned in August 2003 by Frank Yeates acting on behalf of Lako Mai Island Resort Limited (a company in which in paragraph 4.7 of his affidavit he stated that he had never had any interest at all) and which describes the accommodation units as being in “excellent state of repair”, the amenities building as being “in a good state of repair throughout” while “the site generally offered a tidy presentation.”

I suppose that the resort could have been completely destroyed between August 2003 and October 2003 although why such destruction would have been inflicted by the landowners following re-entry I do not know. I did not view a video tape which was annexed to the NLTB affidavit.

On 26 October 2003 Michael Molloy on behalf of the Fifth Defendant filed an affidavit in opposition to the extension of the injunction granted on 27 October. In his affidavit he explained that in June 2002 the Fifth Defendant became interest in acquiring the Resort. During subsequent negotiations with the NLTB the Fifth Defendant was advised that the lease granted to the Second Defendant had been cancelled. In due course a Deed of Settlement was drawn up. A copy of the Deed is Exhibit E to Mr. Molloy’s affidavit. According to paragraph 4.5 of the affidavit:

“the terms of the Settlement Deed was agreed on Tuesday 21 October 2003 by all the parties and the Settlement Deed was signed by Touchdown Productions at its offices in Auckland at about 2 p.m. New Zealand time (1 p.m. Fiji time) on Thursday 27 October.”

On 29 October Mr. Sloan obtained leave to file a further affidavit. The deponent was Robert Anderson Smith, a partner with Munro Leys, Solicitors for the Plaintiff.

In paragraph 5 of his affidavit Mr. Smith deposed to the sequence of events on the afternoon of 23 October 2003 after the granting of the ex parte order. Paragraph 5 begins:

“I am informed by Mr. Sloan and believe that:-”

As is well known, the rule in Fiji is that counsel appearing may not file affidavit evidence in the same proceedings (Watson v. Bish FCA Reps 85/179). It should hardly need to be said that the filing of an affidavit by a person whose only knowledge of the matters deposed to is derived from counsel appearing is equally unacceptable.

Where there is an application by a Plaintiff for an interlocutory injunction the Plaintiff must first establish that he has a good arguable claim to the right he seeks to protect. His affidavit evidence must show that there is a serious question to be tried. It was at that initial point that I found the Plaintiff to be facing difficulties.

The main thrust of Mr. Sloan’s submission was that unless restrained by the Court then, as a result of the Defendants’ actions, the timeshare owners who had invested a very substantial amount in the Resort would lose their entire investment. This, Mr. Sloan submitted, demonstrated that there were serious questions to be tried and therefore the injunction should be continued.

With respect, that submission ignores the maxim damnum sine injuria esse potest: it is not enough to prove loss to prove wrong. As I see it, before I could be justified in granting injunctive relief against the Defendants or any of them I would have to be satisfied that the affidavit evidence showed that there was a good arguable case by the Plaintiff against each of the Defendants whose actions it was sought to restrain.

The first problem is that despite Mr. Smith’s unusual evidence it appears that the NLTB had already entered into a binding contract (the Deed of Settlement) with the Fifth Defendant granting it a lease over the resort by the time the ex parte injunction was applied for on the afternoon of 23 October.

The second difficulty is that it now seems clear that the order of the High Court in Lautoka was granted several weeks after the NLTB had exercised its right to re-enter.

The third difficulty is that it is not at all clear why either the NLTB or the Fifth Defendant should have their contractual freedom circumscribed on the grounds of rights granted to the time share owners by a sublessee whose own sublease and whose power to grant time share rights are at least highly questionable in view of the provisions of Section 12 of the Native Land Trust Act.

As it seems to me, the time share owners rights to occupy were wholly dependent on the continuation of the good relationship between the NLTB and Lako Mai Resort Limited or its legitimate successor in title. There was no attempt made to suggest that the NLTB had wrongly exercised its rights of re-entry; that the breaches complained of in the notice dated 17 November had been remedied. I was not told that there had been any application by any person for relief under the provisions of Section 105 (4) of the Property Law Act.

Having considered the evidence and the submissions of counsel (those filed by Mr. Turner being particularly helpful) I was not satisfied that the Plaintiff had shown that there were serious legal issues to be tried between itself and each or indeed any of the Defendants as pleaded. While I have sympathy for the time share owners it was made clear to them in the Prospectus issued to them (Exhibit JLM 1, paragraph 7.4.3) that the security of their investment was subject to the continued good standing of the head lessee.

Having concluded that the Plaintiff had failed to established a good arguable case I was bound to refuse to extend the interim injunction. Bearing in mind the hostility of the landowners to the Lako Mai Group and recognising the viability of the Fifth Defendants’ venture I was also satisfied that the balance of convenience did not favour the Plaintiff.

As a footnote to this ruling I think that I should add that shortly after reaching the point in drafting this ruling where I cited Watson v. Bish I was given a copy of a Judgment of the Fiji Court of Appeal (Tompkin J.A.) dated 28 November 2003. Unusually, I was not previously aware that an appeal had been lodged against my ruling and I was not asked to expedite the giving of these reasons so that they could be considered by the Court of Appeal. For the record in the High Court I note that the Court of Appeal dismissed the Plaintiff’s application for an injunction against the Defendants pending the hearing of an appeal against my dismissal of its application for the continuation of the injunctive relief.

M.D. Scott
Judge

4 December 2003