Home | Databases | WorldLII | Search | Feedback Tonga Law Reports

Salvation Army (Tonga) Trust v Nau [2001] TOLawRp 12; [2001] Tonga LR 66 (18 April 2001)

IN THE LAND COURT OF TONGA
Land Court, Nuku'alofa

L 7/2000

Salvation Army (Tonga) Trust

v

Nau

Ford J
2, 3 April 2001; 18 April 2001

Land law – competing interests in allotment – good faith
Equity – estoppel – defence between parties to agreement

Mosese Kuki was the landholder of a town allotment (api kolo) in Longolongo, Kolomotu'a. The defendant (Manese Nau) entered into an "Agreement to Maintain Town Allotment" with the landholder on 11 June 1999. On 5 November 1999, the plaintiff (the Salvation Army) entered into a lease agreement with the landholder. Contrary to the terms of the June agreement, the landholder failed to disclose to the defendant that he was negotiating a lease with the plaintiff and nor, for that matter, did he disclose to the Salvation Army the fact that he had entered into the June agreement with the defendant under which he had undertaken "not to make any other agreements with any other party in relation to this api without the knowledge of Manese Nau". The landholder took no part in the proceeding and was believed to be somewhere in New Zealand. On 25 October 1999 the Ministry of Lands issued a Certificate confirming that Cabinet had approved the lease of the api and a formal lease in the format prescribed in the Land Act (Cap 132), was made between His Majesty King Taufa'ahau Tupou IV, King of Tonga, as Lessor and the plaintiff Trust as Lessee on 5 November 1999. The confused situation was discovered and attempts to resolve the matter between the parties failed. On 30 May 2000 the plaintiff obtained an injunction restraining the defendant from entering the property until resolution of the dispute or further Order of the Court. The plaintiff's position was that it had been granted a valid lease in compliance with all the relevant provisions of the Land Act and as, all other things being equal, a registered lease was valid against any unregistered competing interest, that was really the end of the matter. The defendant contended that the landholder had, in the agreement of 11 June 1999, granted the defendant lawful authority to look after the town allotment while he was absent in New Zealand and the agreement provided that he was not entitled to cancel the contract without the defendant's consent. The defendant had carried out work on the property such as clearing the scrub, cutting the grass, demolishing the dilapidated building and erecting a single wire boundary fence and argued that the Salvation Army was under a duty to take reasonable steps to make inquiries as to why someone else was carrying out that work and they should then have reported the matter to the officials at the Ministry of Lands. Further, the defendant argued that in his application for Cabinet approval to the lease, the landholder had completed a false declaration so the lease to the Army was invalid. Finally, the defendant contended that the landholder's false declaration gave rise to the defence of estoppel and, in a similar vein, he argued that because of the work carried out by the defendant on the property, Mr Kuki was estopped in equity from cancelling the binding provisions of the June agreement without the defendant's consent.

Held:

1. The Army did not know anything about the defendant's claimed interest in the 'api until March 2000 and by then the plaintiff had been the lawful lessee of the property for some months. Further, the Army had no knowledge of the spasmodic maintenance type work which the defendant apparently had carried out on the property over some five or six days between the months of September and November 1999. The Salvation Army acted in completely good faith throughout.

2. Estoppel was a rule of evidence codified in section 103 of the Evidence Act (Cap 15). As a rule of evidence it can only operate as a defence as between parties to the litigation. Mosese Kuki, the landholder, was not a party to the proceeding. In any event, in the absence of hearing evidence from either Mr Kuki or the defendant, the Court was not in a position to reach a considered conclusion as to whether or not any of the definitions set out in section 103 would have application to the facts of this case nor, for that matter, whether it would be appropriate to recognise and invoke any other equitable principle.

3. Damages were made up of tender processing costs of $1,000 and rent of $450 per month for accommodation of its officers at a dwelling house in Sipu Road, Kolomotu'a. The Court anticipated the dwelling house would be complete by mid-August 2001 (as opposed to October 2001 as claimed) and therefore awarded damages of $7,075.

4. As the defendant suffered from an unspecified physical disability and could not appear, the Court found that it would be inappropriate to penalise the defendant further by way of a solicitor/client costs award. However, there was no reason why the plaintiff should be out-of-pocket as a direct result of the delays resulting from the defendant's non-appearance. The defendant's conduct effectively resulted in the hearing, which should have concluded during the morning session running over into the afternoon. The plaintiff was entitled to appropriate compensation and that was reflected in the costs award.

5. The following orders were made: a declaration that the plaintiff was the rightful occupier of the land in question; an order requiring the defendant to remove any materials left on the land by him or his agents and thereafter to refrain from entering the premises; damages in the sum of $7,075; and costs were to be agreed or as taxed and, in the event of taxation, two hours of the plaintiff's counsel's Court appearance time was to be allowed at full solicitor and own client charge out rate.

Cases considered:

Fie'eiki v 'Ilavalu [1995] Tonga LR 190

Fonua v MBf Bank Ltd [1999] Tonga LR 4

Harley v McDonald [2002] UKPC 40; [2002] 1 NZLR 1 (PC)

Inward v Baker [1965] EWCA Civ 4; [1965] 1 All ER 446

OG Sanft & Sons v Tonga Tourist and Development Co Ltd, Hamilton and the Minister of Lands [1981-88] Tonga LR 26

Sisifa Sila v Soane Ngahe (Land Court, L 1087/98, Finnigan J, 31 March 2000)

Statutes considered:

Evidence Act (Cap 15)

Land Act (Cap 132)

Rules considered:

Supreme Court Rules

Counsel for plaintiff: Mr Garrett
Counsel for defendant: Mr Niu

Judgment

The Court was told that although the Salvation Army has had a presence in Tonga since 1986 it was not until 1999 that it established a charitable trust which could hold property on the Army's behalf. That charitable trust is the plaintiff in this proceeding. For ease of reference I may simply refer to it as the "Salvation Army" or the "Army" but the Trust is a separate entity from the Church and the Army's social programmes.

The case is about a dispute between the plaintiff and the defendant over their respective rights to a town allotment (api kolo) in Longolongo, Kolomotu'a. The plaintiff has a lease of the land which is dated 5 November 1999. The defendant claims prior rights to the property through an agreement described as an "Agreement to Maintain Town Allotment" he entered into with the landholder, Mosese Manu Kuki, on 11 June 1999. Both parties agree that the real villain in the piece is the landholder, Mosese Kuki. Contrary to the terms of the June agreement, he failed to disclose to the defendant that he was negotiating a lease with the plaintiff and nor, for that matter, did he disclose to the Salvation Army the fact that he had entered into the June agreement with the defendant under which he had undertaken "not to make any other agreements with any other party in relation to this api without the knowledge of Manese Nau".

Mr Kuki took no part in the present proceeding. He is believed to be somewhere in New Zealand but his exact whereabouts is unknown.

In 1999 the Officer in charge of the Salvation Army in Tonga was a Major Fraser. He was replaced on 14 January 2000 by the present District Officer, Captain Garth Stevenson. Major Fraser is presently in Christchurch, New Zealand, and he was not called as a witness for the plaintiff but Captain Stevenson was along with Mr Siope Lomu, the Acting Chief Valuer from the Lands Office.

Mr Niu, for the defendant, called evidence from Tevita Fohe, a long serving minister with the Salvation Army and Mr 'Ekuasi Kaivaha, a planter who had been employed by the defendant to carry out some maintenance work on the api towards the end of 1999.

Mr Fohe said that, on a date which he could not remember but the likelihood is that it was sometime in the first half of 1999, he was approached by Mosese Kuki, the landholder, and asked whether the Salvation Army wanted an api because he had an api to lease. Mr Fohe went with Mosese to see the land which had an old dilapidated building on it. He then put Mosese onto Major Fraser and it appears that Major Fraser handled the negotiations on behalf of the Salvation Army from that point on.

In a letter dated 24 August ostensibly written by Mosese Kuki but probably typed out for him by Major Fraser, Mr Kuki accepted the Salvation Army's offer to lease the api for 50 years for a cash payment on settlement of $15,000 and annual rental payments thereafter of TOP $400 for the first 25 years, subject to adjustment for the second 25 years. On that same day, 24 August 1999, a formal application in the prescribed form to lease the api signed by the trustees for the plaintiff and Mosese Kuki was filed with the Ministry of Lands. The application form included a declaration by Mr Kuki that "there is no impediment to prejudice this lease".

On 25 October 1999 the Ministry of Lands issued a Certificate confirming that Cabinet had approved the lease of the api and a formal lease in the format prescribed in the Land Act (Cap 132), was made between His Majesty King Taufa`ahau Tupou IV, King of Tonga, as Lessor and the plaintiff Trust as Lessee on 5 November 1999.

The Salvation Army then engaged a firm of architects, Jaimi Associates of Nuku'alofa, to design a new three bedroom residential house for the property and early in 2000 the architects proceeded to call for tenders and prepare a tender report for the Army. The Court was told that by the end of February the preliminary work had been carried out and all that remained was for the successful tenderer to be formally notified so that construction work could commence. The Army anticipated that the dwelling house would be ready for occupation by its Tongan officers in June 2000. Unfortunately, for the plaintiff, that was not to be.

On Monday 13 March 2000, Mr Fohe was driving past the property when he was surprised to see a group of workmen carrying out some clearing work. He reported what he had seen to Captain Stevenson who had by then taken over from Major Fraser and the Captain told him to go and find out who the workmen were. Upon inquiry, Mr Fohe was told that the men were working for "the owner" of the api, Manase Nau.

A meeting was then hurriedly arranged between Captain Stevenson and Manase Nau and later with Manase's son. Captain Stevenson suspected that the Naus had simply made a genuine mistake in identifying the property and so he took along to the meeting a survey map to point out the boundaries of the plaintiff's property. The Captain was somewhat taken aback, however, when Mr Nau's son produced the agreement signed between his father and Mr Kuki on 11 June 1999 (which the Nau's represented as a lease) and Captain Stevenson noted that the legal description on the agreement was exactly the same as that shown on the plaintiff's lease. He then knew immediately that they had a problem.

Both parties hoped that they would still be able to work through the confused situation without having to involve lawyers. Initially the defendant had said to Captain Stevenson that if the Salvation Army paid him $1000 then he would walk away from the property. At the second meeting, Mr Nau's son said that his father would release his interest in the api for a payment of $5000. On both occasions, Captain Stevenson responded by pointing out that he had no authority to determine such a matter and he would need to obtain instructions from his superior officers.

Within two days of discovering the workers on the land, Captain Stevenson had instructed the plaintiff's solicitors in the matter and an exchange of correspondence then took place between the lawyers for the respective parties but the matter was not resolved. At one point, the defendant's solicitors said that their client would suffer damage if he had to give up the property but he would be prepared to walk away if the Salvation Army would pay him $10,000 compensation.

On 30 May 2000 the plaintiff obtained an injunction restraining the defendant from entering the property until resolution of the dispute or further Order of the Court. That injunction continues in force.

At the hearing, Mr Garrett said that while the plaintiff had some sympathy with the defendant's plight, any fraud or deceit by the landholder, Mr Kuki, in his dealings with the defendant was a matter between the defendant and Mr Kuki. The plaintiff's position, as Mr Garrett explained it, was that it had been granted a valid lease in compliance with all the relevant provisions of the Land Act and as, all other things being equal, a registered lease is valid as against any unregistered competing interest, that was really the end of the matter.

Mr Garrett submitted that had the Salvation Army known about the 11 June agreement between Mosese Kuki and the defendant prior to the approval of the lease application, then it probably would have felt obliged morally, if not legally, to walk away from the deal but he emphasised that the Army did not find out about the agreement's existence until March 2000 which was long after Cabinet had approved the lease. Counsel further submitted that the Salvation Army did not have any duty to make inquiry of Mr Kuki so as to ensure that his title was not subject to any equitable interest, nor was the Army aware that the defendant had carried out any work on the api until March 2000 and immediately thereafter Captain Stevenson began to take appropriate action.

For the defendant, Mr Niu submitted that the landholder, Mr Kuki, had, in the agreement of 11 June 1999, granted Manase Nau lawful authority to look after the town allotment while he was absent in New Zealand and the agreement provided that he was not entitled to cancel the contract without the defendant's consent. Mr Niu highlighted the work which the defendant had carried out on the property such as clearing the scrub, cutting the grass, demolishing the dilapidated building and erecting a single wire boundary fence. He submitted that in those circumstances, the Salvation Army was under a duty to take reasonable steps to make inquiries as to why someone else was carrying out that work and they should then have reported the matter to the officials at the Ministry of Lands. As Mr Niu put it, "They didn't. They pressed on regardless and got title to the api and then they tried to evict the defendant in breach of his rights of natural justice." Mr Niu submitted that if Cabinet had been aware of the defendant's competing claim then it most likely would not have granted the lease but it would have told the parties to "go away and sort the matter out".

Mr Niu's other principal submission was that in his application for Cabinet approval to the lease, the landholder, Mosese Kuki, had completed a false declaration because the form he signed had said, "I ... declare that there is no impediment to prejudice this lease" whereas the June agreement had been such an impediment and the lease to the Army was, therefore, invalid because "Mosese Kuki did not have what he purported to give to the plaintiff, namely, an unencumbered title".

Finally, Mr Niu submitted that Mosese Kuki's false declaration gave rise to the defence of estoppel and, in a similar vein, he submitted that because of the work carried out by the defendant on the property, Mr Kuki was estopped in equity from cancelling the binding provisions of the June agreement without the defendant's consent.

As long ago as 1981 the Privy Council recognised in OG Sanft & Sons v Tonga Tourist and Development Co Ltd, Hamilton and the Minister of Lands [1981-88] Tonga LR 26, that equitable principles apply to leasehold interests even after a lease has been approved by Cabinet and validly registered. Thus, it was said in that decision:

"The Privy Council wishes to emphasise that equitable principles can apply only to leasehold interests after they have been validly granted ..."

The Privy Council then cited with approval the following passages; first, from Halsbury:

"The court will also protect a person who takes possession of land or exercises an easement over it under an expectation, created or encouraged by the owner, that he is to have an interest in it, and, with the owner's knowledge and without objection by him, expends money on the land ..."

and then from the judgment of Denning MR in Inward v Baker [1965] EWCA Civ 4; [1965] 1 All ER 446 at page 448:

"... if the owner of land requests another, or indeed allows another, to expend money on the land under an expectation created or encouraged by the landlord that he will be able to remain there that raises an equity in the licensee such as to entitle him to stay. He has a licence coupled with an equity ...

So in this case, even though there is no binding contract to grant any particular interest to the licensee, nevertheless the court can look at the circumstances and see whether there is an equity arising out of the expenditure of money. All that is necessary is that the licensee should, at the request or with the encouragement of the landlord, have spent the money in the expectation of being allowed to stay there. If so, the court will not allow that expectation to be defeated when it would be inequitable so to do."

A case that has remarkable similarities to the present is the unreported decision of Sisifa Sila v Soane Ngahe (Land Court, L 1087/98, Finnigan J, 31 March 2000). In those proceedings the plaintiff, who held a registered lease to a town allotment, sought an order requiring the defendants to vacate the property. The defendants claimed that they had lived on the premises for so long and made so many improvements that they had acquired rights to the Land. They claimed that the owner of the land had an obligation to advise the Minister that the land was not available for lease and consequently that the Minister had been led into authorising the lease by a mistake on the part of the landholder. They claimed that the landholder was estopped from evicting them. There were related claims made of fraud and misrepresentation.

The plaintiff's claim in that case was described by Finnigan J as:

"... simple and direct. She [the plaintiff] said that she had a valid lease, made properly in accordance with the Land Act, and thus she had a right over the land contained in the lease over all other would-be occupiers."

After summarising the issues, the learned Judge said:

"Suffice it to say that the law governing the plaintiff's claim is clear. She has the right to occupy the land in terms of the lease, ie, for residential purposes for 20 years from 29 July 1996, so long as she pays $50 per year. This right is given by the Land Act, which is a code, but it may be taken away if there has been some breach of the law or some breach of a promise or some breach of natural justice."

His Honour went on to conclude:

"The evidence has shown no breach of the law, no promise or surrender by the third party [the landholder] and no breach of natural justice ... The third party's [landholder's] permission for the defendant to occupy the land which is covered by the lease has been actively withdrawn, and they must now let the plaintiff enter on the part of the Land."

I have no difficulty in reaching that same conclusion on the facts of the present case. The Salvation Army acted in completely good faith throughout. Although there was a suggestion that Major Fraser may have driven past the property one day when the defendant's workers were on the site, and indeed this was conceded by the plaintiff, the evidence on this point was totally speculative and I am not prepared to give it any greater weight than that. I am satisfied, on the balance of probabilities, that the Army did not know anything about the defendant's claimed interest in the api until March 2000 and by then the plaintiff had been the lawful lessee of the property for some months. I am equally satisfied, on the evidence, that the Salvation Army had no knowledge of the spasmodic maintenance type work which the defendant apparently had carried out on the property over some five or six days between the months of September and November 1999.

Mr Niu's submissions in relation to the equity of the matter and the defence of estoppel were directed primarily at the conduct of the landholder, Mosese Kuki, in allowing the defendant to incur expense in maintaining the property. Counsel submitted that Mr Kuki was thereby estopped in terms of the June agreement from leasing the land or dealing in any other way with the property without the defendant's prior consent. Although no reference was made to the OG Sanft case, the defendant's submissions on the applicable equitable principles followed a similar line to the passage quoted above from the Privy Council decision.

In Fie'eiki v 'Ilavalu [1995] Tonga LR 190, Hampton CJ noted that in Tonga estoppel is a rule of evidence codified in section 103 of the Evidence Act (Cap 15). As a rule of evidence it can only operate as a defence as between parties to the litigation. In the present case, Mosese Kuki is not a party to the proceeding. In any event, in the absence of hearing evidence in this case from either Mr Kuki or the defendant, the Court is not in a position to reach a considered conclusion as to whether or not any of the definitions set out in section 103 would have application to the facts of this case nor, for that matter, whether it would be appropriate to recognise and invoke any other equitable principle.

Perhaps the one distinguishing factor between the present case and the facts in the Sila decision is that in Sila any representations or promises by the landholder would have been oral whereas in the present case the landholder had entered into a written agreement with the defendant. Counsel spent some time during their respective submissions analysing the status of the June agreement. Mr Garrett described it as an agreement "for profit or benefit relating to the use or occupation" of a holding without the Minister's approval and hence, he submitted, it was unlawful in terms of section 13 of the Land Act. Mr Niu described it more as a "caretaker agreement" under which Manase Nau undertook to look after the api for the landholder who was going to live in New Zealand and he suggested that it was obviously designed to overcome the provisions of section 44(2) of the Land Act which provides that if an allotment is abandoned for a period of more than two years then it will be forfeited to the Crown.

For the purposes of this proceeding, it is unnecessary for the Court to have to rule whether or not the agreement is unlawful in terms of section 13 of the Land Act and, in any event, given it's unclear language, it would be difficult to make a finding as to whether or not the agreement was entered into "for profit or benefit" within the meaning of section 13 without having heard evidence from any party to the agreement. Whatever the exact status of the agreement as between the two named parties, I am satisfied, on the facts, that it did not create any legal impediment precluding Mosese Kuki from agreeing to lease the api to the plaintiff. The agreement was not in a form prescribed in the Land Act and, on the evidence before me, I am not persuaded that it created any equitable interest in the property. Save in some exceptional situation, such an unregistered agreement could never pose a serious challenge to the interests of a lessee claiming under a valid registered lease.

Having upheld the plaintiff's claim I now turn to the question of damages.

The plaintiff's claim was quite straightforward. It proceeded on the basis that had the defendant not appeared on the scene in March 2000 then the tender would have been let, work would have proceeded and the house would have been ready for occupation by Salvation Army officers in June 2000. As it was, all work in connection with the project came to a complete standstill in about the middle of March. The plaintiff had to pay the architects $1000 for having gone through the wasted process of calling for tenders and submitting a tender report and since June the Army has had to pay rent of $450 per month for accommodation of its officers at a dwelling house in Sipu Road, Kolomotu'a. The plaintiff, therefore, claims the $1000 figure plus $450 per month from June 2000 until October 2001 when it anticipates that the new dwelling house will be completed.

When work stopped in about mid-March 2000, it was anticipated that the dwelling house would have been completed by June 2000, a period of some three months. If by this judgment work on the tender process is able to proceed again almost immediately then the anticipated completion date should be three months from now, namely July 2001 but the plaintiff's claim is based on a completion date of October; the additional three months apparently represents the plaintiff's estimate of the time that will be involved in going through the tender process again. Even though the evidence on this point was not challenged, I did not find it particularly convincing. The architect was not called as a witness and it seems to me that inevitably there must be some saving in time in going through the tender process on the second time around. Instead of three months, therefore, I am prepared to allow an additional six weeks which comes to a total damages figure under this head of $7075 made up as follows:

(a) rental payment at $450 per month from June 2000 to mid-August 2001.

(ie, 13 ½ months ) = 6075.00

(b) tender processing costs = 1000.00

7075.00

Turning to the question of costs, Mr Garrett made a strong plea for costs to be awarded against the defendant on a solicitor/client basis. He stressed that the plaintiff was a charitable trust funded by public donations and although the Salvation Army had considerable sympathy for the position the defendant found himself in, the fact of the matter, as counsel put it, was that the defendant had buried his head in the sand and had failed to face up to the "hopelessness of his case". Mr Garrett relied upon the decision of Ward CJ in Fonua v MBf Bank Ltd [1999] Tonga LR 4 upheld on appeal, where the Court had awarded costs to the defendant on a solicitor and own client basis because the plaintiff had persisted in what the Chief Justice had described as "a thoroughly worthless action". Mr Garrett submitted that likewise, the present case was "a case which the defendant never had a hope of winning".

It would need to be quite an extraordinary situation before the Fonua principle could apply to a defendant. If a plaintiff genuinely believes that a defendant does not have "a hope of winning" then the law provides a specific remedy to cover the situation. Quite apart from a strike-out application which is a remedy available to both a plaintiff and a defendant, Order 14 of the Supreme Court Rules provides that where a plaintiff considers that the defendant does not have a defence to a claim then he can apply for Summary Judgment and that procedure is designed to bring matters to a head very speedily. If the Court agrees that the defendant does not have a defence then judgment will be entered for the plaintiff immediately. No equivalent remedy is available to a defendant.

There is one aspect of the present case which caused the Court some concern and as a matter of first impression appeared to come close to the type of extraordinary conduct that would need to be established before I would be prepared to award solicitor/client costs against a defendant. What happened was that the defendant did not appear at any stage of the hearing nor did he give evidence. On the morning of the second day, the commencement of the hearing was delayed because the Court was informed that the defendant was to be the next witness and he must have been held up on his way into town. After waiting some time, the Court was told that the defendant would not be appearing and there was an unclear reference to some "physical disability". No medical certificate was produced.

The delays and the eventual non-appearance of the defendant appeared at first to be almost contemptuous and if the Court had reached that conclusion then it may well have been prepared to uphold Mr Garrett's claim. Counsel had, however, without being specific, referred to a physical disability from which the defendant apparently suffers and there was a passing reference made to this condition in the plaintiff's own evidence. In these circumstances, it would be inappropriate to penalise the defendant further by way of a solicitor/client costs award.

Having said that, however, there is no reason why the plaintiff should be out-of-pocket as a direct result of the delays resulting from the defendant's non-appearance. In the recent case of Harley v McDonald [2002] UKPC 40; [2002] 1 NZLR 1 (PC) which was an appeal from the Court of Appeal of New Zealand, the Privy Council in its judgment delivered 10 April 2001, at para 67, said that it is open to the court to penalise conduct "which leads to a waste of the court's time or some other abuse of its process resulting in avoidable cost to litigants." In this case, the defendant's conduct effectively resulted in the hearing, which should have concluded during the morning session running over into the afternoon. The plaintiff is entitled to appropriate compensation on this account and that will be reflected in the costs award.

In the result, I make the following orders:

1. A declaration that the plaintiff is the rightful occupier of the land in question.

2. An order requiring the defendant to forthwith remove any materials left on the land by him or his agents and thereafter to refrain from entering the said premises.

3. Damages in the sum of $7075.00

4. Costs to be agreed or as taxed and, in the event of taxation, two hours of the plaintiff's counsel's Court appearance time is to be allowed at his full solicitor and own client charge out rate.