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High Court of Fiji |
IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION
CIVIL ACTION NO. HBC0378 OF 2000L
MOHAMMED RAFIQ
V
SHER MOHAMMED
Gates J.
Dr M.S. Sahu Khan for the Plaintiff
Mr Anu Patel for the Defendant
25 July 2001, 6 May 2004
JUDGMENT
Executor Trustee redeeming mortgage for estate; mortgagor requesting transfer to another mortgagee pursuant to section 73 Property Law Act Cap 130; mortgage not a transfer of land section 63 Land Transfer Act; prior oral agreement to subdivide collateral to mortgage; whether clog on equity of redemption; consent of Director of Town and Country Planning given, then revoked; oral agreement not made subject to consent of Director; unauthorised application to subdivide by mortgagee to Director; need for note or memorandum in writing of sale of lands section 59(d) Indemnity, Guarantee and Bailment Act Cap 232; powers and duties of trustee; informed consent of beneficiaries necessary for any contract terms in excess of reasonable commercial rates.
[1] As executor and trustee of an estate the plaintiff seeks an order directing the defendant to transfer the mortgage held over estate property to another. The defendant resists saying there was a prior oral agreement to subdivide and to give his daughter a 20 perch lot out of the land, but the agreement has not been performed. The plaintiff denies there was any such agreement. The question is can the defendant resist the request to transfer?
[2] The plaintiff applies by summons pursuant to Order 5 rr.3 and 4 of the High Court Rules, and asks the court to make the order by virtue of section 73 of the Property Law Act Cap 130, and its inherent jurisdiction. Two affidavits were filed in support by the plaintiff and one opposing by the defendant.
Background
[3] The plaintiff is the sole surviving executor and trustee of his father’s estate. His father, Mohammed Hussain s/o Basir lived at Yalalevu, Ba and died on 12 July 1985. Probate was granted on 17 August 1989 to the plaintiff and another brother, who has since died. By his will the testator had given all of his property to his widow for her lifetime. On her death the property was to go to 8 sons in equal shares.
[4] The estate included a freehold land CT6006 which was mortgaged to the Bank of Baroda under mortgage No. 353989. In 1996 the bank commenced a mortgagee sale. The defendant came to the rescue of the estate, paid off the bank, and had the mortgage transferred into his name. The defendant’s daughter was married to one of the plaintiff’s brothers, one of the 8 residual beneficiaries.
[5] The plaintiff says the intention was to reimburse the defendant eventually, so that the mortgage could be transferred to the plaintiff or to someone of his choosing. It was decided that the mortgage be transferred to one Jan Mohammed.
[6] By a solicitor’s letter of 3 October 2000 the plaintiff as trustee of the estate informed the defendant that the estate would redeem the mortgage debt of $7,176.50. The letter referred to section 73 of the Property Law Act which reads:
"73. (1) Where a mortgagor is entitled to redeem he shall by virtue of this Act have power to require the mortgagee, instead of discharging, and on the terms on which he would be bound to discharge, to transfer the mortgage to any third person as the mortgagor directs; and the mortgagee shall by virtue of this Act be bound to transfer accordingly.
(2) This section applies to mortgages made either before or after the commencement of this Act, and shall have effect notwithstanding any stipulation to the contrary; but does not apply where the mortgagee is or has been in possession."
[7] The plaintiff relies also on section 63 of the Land Transfer Act which states:
"63. A mortgage registered in accordance with the provisions of this Act shall have effect as a security, but shall not operate as a transfer of the land or of the estate or interest therein, charged."
[8] By virtue of section 4 of the Subdivision of Lands Act, no subdivision may take place without the prior approval of the Director of Town and Country Planning. The subdivision of the estate property here could not be made without such prior consent. It does not come within any of the exceptions. As such the oral agreement, since it included such a term, was made in contravention of the Act, and was illegal. Application must be made in writing to the Director first, by the person seeking to subdivide the land [section 5]. The only person who could make such an application for the estate was the plaintiff as trustee. No application was ever made by the plaintiff.
[9] The position of the courts to such agreements has been consistent and adverse. In Devi Dayal v Jagdish Kumar (unreported) Fiji Court of Appeal Civil App. No. 33 of 1980; 30 September 1980 the court said (at p.9):
"The granting of the relief sought would perfect a scheme, substantially performed, for dividing Farm No. 866 into two separate titles leaving one title – or one lot – less than five acres. Such a division contravenes section 5 of the Subdivision of Land Act and is illegal. It is nothing to the point that clause (e) of the agreement provides for consent to be obtained because a division in fact has already been effected without any consent. The consent required by section 5 is the prior approval of the Director of Town and Country Planning. The Court will not lend its aid to perfecting such a scheme already carried out in fact. The defence of illegality succeeds."
[10] The defendant says: "it was agreed with the plaintiff’s solicitors firm through their agent and/or servant one Abu Munam that the plaintiff would subdivide the land described in paragraph 2 of the said affidavit and transfer 20 perches from Certificate of Title Number 6006 to my daughter Sabra Bibi."
[11] The defendant does not depose to any conversation with the plaintiff personally, nor explain the circumstances as to how it came about that he volunteered to provide the necessary finance to pay off the bank.
[12] The defendant says he engaged a surveyor and paid for him to do a survey. He says a deposited plan was made and "sent to Suva". He exhibited a letter of 23 April 1998 from Messrs Sahu Khan and Sahu Khan, the plaintiff’s solicitors. The letter deals at first with the payment of the mortgage matter and then continues:
"The work was substantially completed and we were only waiting for the plan which was not given to us for reasons best known to your client.
We could not have the final deed executed."
[13] In his second affidavit the plaintiff says that "the defendant has himself and without our knowledge begun to subdivide the land in question". The plaintiff, when he discovered this, caused his solicitors to complain to the Director of Town and Country Planning. They pointed out that neither his consent as trustee and registered proprietor of the land, nor those of the beneficiaries, had been obtained.
[14] The plaintiff also exhibited a letter from the Ba Rural Local Authority of 16 November 1998 in which the Secretary had written to the Director making recommendation for approval of the subdivision. He said "the applicant’s interest is to give Lot 1 to his son-in-law Mr Hafiz to build his house. This lot at present is vacant. The balance of the land would be kept by Mr Sher Mohammed for his own use and future developments". None of this could have carried any authority, since the defendant was not a mortgagee in possession. He was simply at that stage the mortgagee.
[15] The plaintiff exhibited a letter to the Director of Town and Country Planning dated 13 March 1999 in which his solicitors remonstrated with the Director for having dealt with the mortgage. On 18 March 1999 the Director wrote to the defendant advising him that the approval for the proposed subdivision had been revoked, since he was not the legal owner. None of this correspondence was exhibited by the defendant.
[16] Neither of the parties has informed the court of the terms of the mortgage. However it is clear the mortgagee, the defendant, had no legal standing to prepare a subdivision or to apply for the Director’s consent to such a scheme. If there had have been an agreement to provide a lot for the defendant’s daughter, the agreement could have had no legal effect without the prior consent of the Director to such subdivision. There was no prior consent. Instead, to the defendant’s unilateral application, the defendant not being the registered owner, there had been a considered revocation by the Director, amounting to a refusal to give approval.
[17] I do not find the defendant has raised a convincing account of this unusual transaction with a trustee of an estate. I do not consider I need to hear further evidence beyond the affidavits and I accept the plaintiff’s account: Eng Mee Ong v Latchumanan [1980] AC 331.
[18] Had I accepted that there had been such an agreement, which was otherwise enforceable, I would have found it to have been a collateral contract and therefore not a clog upon the equity of redemption. Its existence could not have interfered with the plaintiff’s entitlement to have the mortgage redeemed or transferred to another mortgagee of his choosing: Kreglinger v New Patagonia Meat Co Ltd [1914] AC 25. The plaintiff is entitled to his order directing transfer.
No memorandum
[19] The plaintiff through his counsel Dr Sahu Khan, also argues that if there were an agreement to give away land from the estate it would be unenforceable anyway since it fails to comply with section 59 of the Indemnity, Guarantee and Bailment Act Cap 232.
[20] Section 59 relevantly provides:
"59. No action shall be brought .......
(d) upon any contract or sale of lands, tenements or hereditaments or any
interest in or concerning them; or
.......
unless the agreement upon which such action is to be brought or some memorandum or note thereof is in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised."
[21] Clearly there is no written evidence of this nature for the sale of the lot to the defendant or to his daughter.
Powers and duties of a Trustee
[22] As executor and trustee of the estate the plaintiff was obliged to carry out the written instructions of the testator contained in the will. A trustee must always act in the best interests of the trust. A trustee would not be empowered to enter into a contract on behalf of the estate which contained unusual and highly favourable terms for a mortgagee. The trustee would have to keep within reasonable market and commercial rates of remuneration or interest. To go outside such ambit would require the informed consent of all of the beneficiaries: Re Jones, Jones v Cusack-Smith [1931] 1 Ch. 375 and cf. consent of all trustees, Luke v South Kensington Hotel Co. [1879] UKLawRpCh 96; [1879] 11 Ch.D 121; Phipps v Boardman [1965] 1 All ER 849. There is no evidence of such disclosure and consent.
Conclusion
[23] The plaintiff is entitled to an order:
Order:
A.H.C.T. GATES
JUDGE
Solicitors for the Plaintiff: Messrs Sahu Khan and Sahu Khan, Ba
Solicitors for the Defendant: Messrs S.B. Patel & Co., Lautoka.
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URL: http://www.paclii.org/fj/cases/FJHC/2004/296.html