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Supreme Court of Vanuatu |
IN THE SUPREME COURT OF
THE REPUBLIC OF VANUATU
(Civil Jurisdiction)
CIVIL CASE No. 37 of 1999
BETWEEN:
DANIEL & PATRICIA JOLI
Plaintiffs
AND:
NATIONAL BANK OF VANUATU LIMITED
First Defendant
AND:
ASSET MANAGEMENT UNIT
Second Defendant
Coram: Chief Justice Lunabek
Counsels: Mr. Ishmael Kalsakau for the plaintiffs
Mr. Mark Hurley for the first defendant
Mr. Juris Ozols for the second defendant
REASONS FOR JUDGEMENT
On 10th February 2003, the Court issued the following orders-
The full reasons of the judgment are set out below-
I - INTRODUCTION
(a) The Nature of Proceedings and Relief Sought
The Plaintiff’s by way of Writ of Summons filed before the Court on the 17th May 1999, amended on the 6th July 1999 and further amended and filed on the 27th October 2000, applied to the Supreme Court against the National Bank of Vanuatu and the Asset Management Unit for the damages for a wrongful or unlawful lodgment of caution on their title.
The first Defendant denied that the caution was wrongfully lodged.
The second Defendant denied any knowledge of the Plaintiff’s claim and deny that any liability for the Plaintiff’s claim was ever transferred as averred by the first Defendant.
(b) The Parties
The Plaintiffs are Daniel and Patricia Joli. They were the purchasers of the Lease Title No. 12/0634/008. They are of Port Vila, Republic of Vanuatu. The first Defendant is the National Bank of Vanuatu Limited, a local Company having its established place of business in Port Vila, Efate, Republic of Vanuatu. The second Defendant is the Asset Management Unit, a statutory debt collection agency created by the Government having its established place of business in Port Vila, Efate, Republic of Vanuatu.
(c ) Brief background leading to the dispute
The Plaintiffs allege by instrument of transfer dated 20th July 1995 that they entered into an Agreement for the sale and purchase of leasehold property comprised and described as Lease No. 12/0634/008.
The transfer was registered on the 24th August 1995.
The Plaintiffs had initially inspected the register and found at the time the property was unencumbered and accordingly without any fore knowledge of any existing interests purchased the property for VT3. 000,000.
On the strength of the title duly inspected to be free from encumbrance of any kind and on registration, in an effort to developing their property they went to the Bank d’Hawaii to secure to the said Bank all their interest in the said Title 12/0634/008.
As at the date of mortgage registered on the 21st February 1996 no other rights, charges, encumbrances mortgages or other interests apart from theirs were on the register and this was contingent upon the Bank advancing the Plaintiffs monies to develop their property.
On or about the 11th June 1996 the First Defendant lodged a caution over the Plaintiff’s property (12/0634/008) which caution was registered on the 12th June 1996. The caution has caused loss, costs and damage to the Plaintiffs in that the Bank refused thereafter to lend monies to develop the Title in question and a great of time and expense has been incurred by the Plaintiffs in attempting to seek to have the caution removed to no avail.
The Lands Records Register showed that the title was free from encumbrances prior to the material date of purchase and this was conformed in the Plaintiffs search of the Title 12/0634/008. The Plaintiffs at the time of the transfer had no fore knowledge of any existing interests or rights. The Plaintiff’s mortgage with the Bank was secured on the strength of the register.
The first Defendant had witnessed the transfer at the material date of execution and had by inference accepted that there were no encumbrances over the Plaintiff’s title. The caution was lodged notwithstanding this factor by the first Defendant and despite requests and demands the first Defendant continued to refuse to withdraw the caution.
II - THE ISSUES
The questions for the determination by this Court are as follows-
(i) Is the caution lodged by the first Defendant on the Plaintiff’s title lawful?
If the answer to question 1 is in the affirmative, then-
(ii) Can the first Defendant be liable to this tortious and/or statutory liability?
(iii) Is it proper and fair that the second Defendant be a party to the tortious and/or statutory liability?
III - THE EVIDENCE
(a) Summary of the Plaintiff’s Evidence
The Plaintiff’s had three witnesses testified in Court. They were Daniel Joli, Trevor Hannam and Henry Nin.
The first witness, Daniel Joli’s evidence comprises of two Affidavits and annexes.
He said he and his wife purchased lease described as Title 12/0634/008. Prior to purchasing they inspected the register and discovered there to be no encumbrances. They had no knowledge of any existing encumbrances. He said they were aware that the proceeds of their purchase were sent to the first Defendant.
Accordingly, upon registration in 1995 in an effort to develop their property they attended the Bank to obtain funds to erect their family home. When they secure their rights by way of a mortgage to their Bank, no existing interests or rights prevailed over their right to the title.
He said in June 1996 the first Defendant lodged a caution over their property that took them by surprise. Their Bank would thereafter not provide them finance because of the caution. He said in his evidence that despite their demands the first Defendant would not withdraw the caution lodged on their title. The existence of the caution, to him meant that they could not develop their property at all.
Under cross-examination, Mr. Joli accepted that the first application he made for a loan was on the 3 of March 1998 with the knowledge that a caution executed over his title but this was only made known to him when he went to the Bank to obtain funds.
When asked about a letter written to him by the Director of Land Records in July 1996, he replied that he had never received any such letter from the Land Records and his bank had only informed him about it. When he did obtain the letter after March 1998 he took it to his Solicitors who had without referring him to section 56 of the Land Leases Act advised him that the Defendant had no right to register the caution on his land.
He accepted that his Solicitor wrote to the Attorney General’s Department for the first time on the 3rd June 1998. Prior to that he had attended upon the Lands Department in person and by way of telephone discussions where he was advised the matter would be resolved but had not and that the Department of Lands would sort the caution out with the First Defendant.
He accepted under cross-examinations that discussions took place with his Solicitors with regard to the contents of the letter from the State Law Office. When asked whether he understood that Mr. and Mrs. Hannam had failed to surrender their mortgage prior to subdividing he responded that he had been to see Trevor Hannam who had informed him that the first Defendant had an arrangement with him [Mr. Hannam]
He was shown a letter he had written to the Director Land Records in February 1999. He was asked by the first Defendant’s Counsel whether up to that date they (Joli’s) were blaming the Director of Land Records to which Daniel Joli replied he was accusing the Director of Land Records of accepting to register the first Defendants caution. He said he had spoken with the Director of Land Records Ruben Tamata who had told him there was no solution.
When asked whether he remembered Tamata explaining that Trevor Hannam should have surrendered, Daniel Joli replied that Tamata said Trevor Hannam was to speak with the First Defendant to fix his (Hannam’s) problems.
He was asked whether July 1999 was the first national date he had commenced proceedings to which he replied on the affirmative. When asked whether he could have issued earlier than July 1999 he responded to the effect that every body had promised him the problem would be solved month after month but that he had achieved no solution so he decided to go to Court.
When asked whether he was aware the caution had been withdrawn on application by the second Defendant, he replied that he thought it was the first Defendant but it was only after that he understood it was the second Defendant and he had knowledge that it was withdrawn on or about 15 November 1999.
Under cross-examination by the second Defendant’s Counsel as to the dates he had applied for a loan, he confirmed that he had applied for a loan in 1998 and accepted also that he already had an existing mortgage over his and his wife’s property. When asked to explain the nature of the mortgage and his loan he confirmed in 1995 he had obtained a loan for VT3, 000,000 but that later he had applied for an extension for his loan because of the caution. He was asked to specify whether in all his dealings with the Bank of Hawaii when it came to the caution he was dealing with the first Defendant he accepted this but added as well that he was also dealing with the Lands Department.
Under re-examination, he confirmed that he had written to the Director of Land Records and was meeting with all parties concerned on many occasions and he could not count how many.
He said it was only after February 1999 that he received a call from the first defendant advising him that they were not responsible for the file but that the second Defendant had taken over the matter. He said that he had never received a letter from the first Defendant advising him of any intended transfer of his matter to the second Defendant neither had he received any correspondence from the second Defendant informing him they had taken over his claim against the first Defendant.
The second witness is Trevor Hannam. He said he had subdivided his property in collusion with the first Defendant. The subdivisions were advertised and sold through Caillard Kaddour who was the sole agent for the properties including the title purchased by the Plaintiffs. On settlement Caillard Kaddour would receive payment and would render the cheques to Mr. Hannam to deposit at the National Bank.
He said with regard to the Plaintiff’s monies he handled delivery of proceeds himself and he gave the cheque to Harry Nin immediately after receiving same. The cheque was deposited into his bank account in accordance with the agreement he had entered into with the first defendant. He said at that time he honoured all agreements with the first defendant and was never aware of what had happened vis-à-vis the caution until he received phone call from the Ministry of Lands.
He said he had several meetings about the lodgment of the caution for about one week with the Ministry of lands and Garry Blake. He recalled that at the first meeting with the first defendant it was resolved that they would direct his mortgage with the first Defendant to cover his existing loan.
He said he remembered his wife and him also signed the documents when they were prepared but unfortunately the Land Records would not accept it. He remembered signing the documents 3 to 4 weeks after the caution had been lodged.
He said there was no meeting between the Ministry and the first Defendant to have the caution lifted. He said he met with the Director of Land Records who informed him that the first Defendant was not prepared to lift the cautions on the instructions of their Lawyer.
He said he mentioned to Mr. Tremethick that he was disappointed that the first Defendant was not willing to do anything and shortly thereafter he went to see his Solicitor Mr. Juris Ozols.
Under cross- examination he confirmed his background of nearly 20 years in building and developing at the same time but that the subdivisions at Bellevue were his first as sole sub-divider but previously he had joint-ventured with his son.
He said they had a registered leasehold proprietors of Title 12/0912/008 which was the title what was subdivided and as between the year 1995 and 2000 he had a mortgage with the first Defendant of about VT19, 000,000. He said one of the lots subdivided went to Daniel and Patricia Joli, the Plaintiffs.
He remembered meeting with two officers of the Second Defendant along with its Chief Executive Collin Thompson and at that meeting he recalled them agreeing the second Defendant taking over all the properties and cancelling the debt. He accepted there was a possibility then that the Caution would be removed but he had no knowledge when the caution was actually withdrawn. He was asked whether it was on the Director Land Records advice that the Cautions were not removed to which he replied it was on the First Defendant’s lawyer’s advice, Vasaris & Co.
Under cross-examination by the second defendants lawyer, it was asked whether he advised the first Defendant each time a sale took place to which he responded in the affirmative and furthermore he said the first Defendant was well aware of the sale to the Plaintiffs and did not object to it.
Upon re-examination he stated he was not aware that the first Defendants mortgage had anything to do with the Plaintiff’s title.
He said he had spoken to the Director of Land Records two weeks after who had advised him that the first Defendant had refused to withdraw the Caution on their Solicitors advice.
He said the money or proceeds received from the sale to the Plaintiffs were for the development/subdivision and were not for his house.
The third witness for the Plaintiff is Henry Nin. He said that at the material time in question he was employed in the first Defendant as its Manager Lending.
He said that he was well aware that the Plaintiffs had purchased a plot of land from Trevor Hannam, whose land had been subdivided who (Hannam) was a client of the first Defendant and the first defendant through him had, along with the Hannam’s transferred the Lease over to the Plaintiff’s.
He said he was aware and recognised his signature as witness to the Transfer and had stamped the first Defendant’s seal in witnessing the signatures of the Hannams and the Plaintiffs.
He said that Trevor and Judy Hannam had an account with first Defendant and when Trevor Hannam received the proceeds he gave them to the first Defendant to bank in accordance with the first Defendant’s procedures. In his evidence he said normally the account was with the General Manager but as Manager Lending he had the ability to approve amounts as long as the amount was not over the limit.
He said he was aware that the monies received from the sale of a lot to the Plaintiffs were placed in the Hannams overdraft facility account. He gave evidence that once the sale proceeds were received the Title was transferred and there was no need for a Caution to have been placed on that Title.
He gave evidence that it was part of bank procedure in assisting the client sell his land to keep the Title clear of any encumbrances.
The witness was asked to explain how the first Defendant could have lodged the Caution on the Plaintiffs Title to which he stated that as far as he knew the first Defendant had processed the Transfer and was involved in all respects. He said he did not understand why the first defendant lodged the Caution and added that it was not fair to the Purchaser who had bought the Lot with clear understanding that they could develop it.
His evidence was that as far as he was aware it was the first Defendant’s intention at the time to have the Title transferred to the Plaintiffs and to sell off other lots subdivided because the first Defendants client Trevor Hannam, was at the time in the business of subdividing and selling off.
He commented that at the time there was confusion within the first Defendant because of change over with senior officers of the first Defendant as most senior officers were leaving the first Defendant at the time causing the confusion. He said all senior officers had finished employment with the first Defendant in May 1996 including himself.
Under cross-examination he confirmed he was employed by the first Defendant as a Manager Lending in 1996. He accepted and occupied a senior position of the first Defendant and it was part and parcel of his responsibilities to ensure the first Defendant took securities in relation to customers.
He further accepted that if there was a mortgage the first Defendant would ensure that the mortgage could be surrendered for each customers loan but in the case of Trevor Hannam he was of the opinion that there was no mortgage requested on the property as what they were doing was subdividing and selling.
In his evidence he said he accepted that in principle a Lease had to be surrendered enforce before a subdivision was made but he did not actually seen one for Hannam’s sub divisions however he thought the first Defendant had instructed its lawyers to surrender. He thought the mortgage was being discharged at the same time the first Defendant was processing sale.
He recalled with confirmation when asked that the Hannams had (2) credits with the first Defendant one being a Housing Loan account and the other an overdraft account.
He referred to the transfer of Lease to the Plaintiffs on the 20th July 1995 and to the fact that after execution he remained with the first Defendant for another year and he remembered clearly at the time that he was not aware of any problems arising out of the transactions and that all customers including the Plaintiffs should have got their titles and he was surprised when the Plaintiffs started questioning him about their title.
(b) Summary of the first Defendants Evidence
The first witness for the Defendant is Garry Blake. He gave evidence that the first Defendant had contended that the plots of land constituted a sub-division the first Defendant had mortgage over and the first Defendant was unaware of any sub-divisions of those titles. He said he undertook searches over the title.
He gave evidence that he remembered writing to the Director of land records on the 11th of June 1996 regarding Titles. The letters effect was to inform of the first Defendant position and pertained to the registration of cautions over the titles.
His independent recollection was that Mr. Hannam had indicated it was not his fault but Silas Hakwa’s and the Director of Lands Records. He gave evidence that he begged to differ and told Hannam the onus was on him (Hannam) to rectify the improper process and that the first Defendant would also speak to the Lands Records.
Upon cross-examination, he gave evidence that Mr. Vasaris was primarily dealing with the first Defendant securities and that he had no knowledge about it. He said he was not in position to tell the Court whether or not mortgages should or should not have been secured over the sub divided lots.
He gave evidence that he was not asked at all to deal with the issues but was only instructed about the issue of the sub divisions, which was in 1996. He accepted that subsequent to their involvement the first Defendant was also having discussions with the Hannams without his involvement.
Upon cross-examination by the second Defendant he admitted he was aware the plots had been sold and transferred in that they were no longer in Hannam’s name. He said he knew that the proceeds of sale went to an overdraft facility.
He said he did not know what the first Defendant knew prior to his involvement and he was told by the first Defendant at the time that they were not aware of the sub division.
He admitted under re-examination that he did not carry out the searches by himself and he had had knowledge that searches were being carried out subsequently by Vasaris and Company. He said the transfer to the Plaintiffs was one of the titles unnamed.
The first Defendants second witness is Serge Taga. He was employed with the first Defendant for 6 years. His current position was that of Customer Relations Manager, such position he having occupied for one year.
He said in 1996 he was Officer in charge of Arrears and Recovery Department. He recalled in June 1996 giving instructions to Vasaris and Co in relation to Mr. and Mrs. Hannam. At that time he was in charge of recovery and they were chasing Trevor Hannam over a Notice/Publication over the Bellevue sale issue.
He gave evidence that when they discovered, they first checked out the Lands Records to see if the mortgages were registered as they found out the sub division was over Title 12/0912/008 so to protect the first Defendants interest he wrote to the first Defendants Solicitors to put a caution.
He recalled they contacted Mr. Hannam and he never came in to fulfil his account so Taga asked the lawyers to protect the first Defendant. He was asked whether he undertook any search for information based on the Hannams and he replied they did but could not find anything. He said he remembers speaking to Mr. Nin several times but not specifically on the Hannams sub division.
Upon cross-examination by the Plaintiffs Counsel, he stated that as Officer in charge of recoveries it was his decision to have the caution placed over the titles. He admitted he had not confirmed with the Manager Credit at the time and did not believe he was interfering with the General Manager, as he saw nothing wrong with what he did.
He stated they had no records and even the first Defendant’s lawyers had nothing on their files. The only file they had indicated the first Defendant had a mortgage and the first Defendant should have been aware of what was going on.
Upon cross-examination by the second Defendant, it was put to him that the first Defendant’s file or part of the file he saw did not indicate loan had been given to Trevor Hannam he then accepted that was the case and accepted that despite the reference to the sub division he went ahead and placed Cautions over the titles without referring to the General Manager of the day.
He said he was not aware that proceeds of the sale was being put into the first Defendant and admitted he had made no inquires before issuing the caveats.
The third witness for the first Defendant is Glen Green. He was the Manager Risk for the first Defendant. The witness had reliable experience in his field.
He was asked since being employed by the first Defendant whether he had cause to investigate the Hannam sub-divisions to which he replied he gained access to the first Defendants records from the second Defendant which records had gone to the second Defendant prior to December 1998.
He said Trevor Hannam had two (2) accounts an overdraft and housing loan. He was shown documents, which he identified as corresponding to Trevor and Judith Hannam’s overdraft accounts.
He said it did come to his attention that the first Defendant had a mortgage over the term loan. It did come to his attention there are Cautions and he had investigated how the Cautions were placed in the file as he was able to state that he had knowledge that there were withdrawals which were done by the second Defendant and he had seen that document which was shown to him.
Upon cross-examination by the Plaintiffs he was adamant that the first Defendant did not know that money was going in and he had no knowledge of any settlement. He acknowledged only having come onto the employ of the first Defendant in March/April 1999 that he had no personal involvement in any of the Hannam subdivisions but that he had reviewed the file.
He gave evidence that he accepted that provided the first Defendant gave its approval and provided it had received funds the mortgage could have been released.
He gave evidence that the lending people at the time were responsible for ensuring that the first Defendant was aware of what was going on but it was possible if the first Defendant was aware, once the proceeds of sale were received for the first Defendant to agree to a transfer provided it proceeded within terms acceptable.
He was shown a copy of the withdrawal of Caution and was asked to confirm whether it did say that the first Defendant as Cautioner was removing the caution and he agreed that’s what is said.
The first Defendant’s final witness is George Vasaris. He said in his evidence that he had taken instructions in accordance with the Land Leases Act and in 1996 received instructions from the first Defendant over a leasehold property in relation to a sub-division
He said it was Garry Blake who had received the instructions, which he brought to his attention. He said Garry Blake had the conduct of the matter but was working in consultation with him and they jointly sent the letter to Mr. Hannam.
He recalled meeting at the first Defendant and the subject of the meeting was to explore whether a successful approach could be made to the Director of Lands.
He said at the conclusion of that meeting he volunteered to go to the Director of Lands Records to seek a solution and then they would report back. He said it was clear the Director was proposing to take steps to cancel the leases emanating from the sub-division.
The Plaintiff put it to him under cross-examination whether the Cautions were still on the new titles and then was asked to confirm that the caution on the Plaintiffs title was the caution placed by the first Defendant to which he answered in the affirmative. It was also put to him whether if the first Defendant had removed this Caution it would have facilitated the registration of mortgages to which he supposed it to be so.
It was put to him what he had mentioned preparing mortgages and he was asked to check whether he prepared mortgages for all the titles or just some. After checking the file he confirmed that his preparation related to four titles. He was then asked whether the mortgages he prepared were only in respect of the four unsold titles to which he replied in the affirmative.
Under re-examinations he confirmed that if the Cautions had been removed, it may have facilitated the registration of the mortgages he prepared but they were not lifted as the Director had not accepted there was a valid execution to those leases and there had been no change to his initial attitude.
(c) Summary of the Second Defendants Evidence
The second Defendant has only one witness who was Joe Ligo, the Chief Executive Officer of the second Defendant employed since 1998.
He gave evidence that the second Defendant had had dealings with Mr. Hannam because of his loan with first Defendant, which they took over. He confirmed receiving some files received from the first Defendant. He recognized some documents shown to him confirmed that to be memoranda of the first Defendant dated 9th June 1994.
He identified a letter from the first Defendant to Trevor Hannam dated the 19th September 1994, which contemplated the increase in the borrowing. The signature at the bottom of the page was that of Kerry Jowett, the General Manager.
He showed the next document over the page was a diary memo of the first Defendant dated 22nd June 1994 and it was in respect of the sub-division.
He gave evidence that he was aware in 1999 when the second Defendant took over the Hannam file that his predecessor Collin Thompson signed a withdrawal of caveat.
He was asked what had led Thompson to withdraw and he stated to the best of his knowledge they had received phone calls from Daniel Joli. The second Defendant’s Management Committee considered the complaint and Thompson advised on the basis of the documents tendered that the Caution ought to be removed.
Upon cross-examination by the first Defendant he confirmed that having reviewed the files and the documents he tendered were extracted from the file. He gave evidence the Hannams had security before the property was subdivided.
He gave evidence that although he had not directly seen on the file any request made by the first Defendant to consent to the surrender of lease before it was sub-divided there were other references to the first Defendant to remove the Cautions.
He said he is personally aware that before a sub-division is to take place the lease must normally be surrendered but after the sub-divisions.
He gave evidence and accepted that as successor for the first Defendant they had power under the Act to remove the Caution. He gave evidence that the second Defendant became the owner of the Hannam Mortgages and as the new owner of the mortgages they could withdraw the Cautions.
IV - THE FACTS FOUND BY THE COURT
The Plaintiffs are the purchasers of the Lease Title No. 12/0634/008. The lease was in fact part of a subdivision of an existing head lease title No. 12/09/12/008. The head lease was alive and registered in the name of Trevor Hannam and his wife Judith Hannam and encompasses the Plaintiffs’ lease.
The Hannams have also got an existing mortgage with the first Defendant in relation to this Head lease. The mortgage has not been discharged when the head lease was subdivided and then leased to the Plaintiffs.
This is how the Plaintiffs and the first Defendant happened to collide on each other as a result of the Hannams actions. The Hannams owe debts to the first Defendant. As a result, the Hannams file was sent to the second Defendant whose function is to collect bad debts of the first Defendant.
The Plaintiffs by instrument of transfer dated 20th July 1995 entered into an Agreement for the sale and purchase of leasehold property comprised and described as Lease No. 12/0634/008 from the Hannams. The transfer was registered on the 24th August 1995.
It is found and accepted as fact that the that the Plaintiffs had initially inspected the register and found at the time the property was unencumbered and accordingly without any fore knowledge of any existing interests purchased the property for VT3, 000,000.
It was also fact that the first Defendant was aware of the transfer and the registration of the property. The first Defendant had witnessed the transfer at the material date of execution and had by inference accepted that there were no encumbrances over the Plaintiffs title. Further more, the bundle of documents tendered as second Defendants Exhibit 1 showed that the first Defendant knew of the sale to Mr. Joli, the first Defendant knew of the purchase price and they knowingly received the proceeds of that sale. I found and accept as fact that the first Defendant was a willing participant in the sale of the property to the Plaintiffs in 1995.
On the strength of the title duly inspected to be free from encumbrance of any kind, and on registration, in an effort to develop their property, the Plaintiffs went to the Bank d’Hawaii to secure to the said Bank all their interests in the said Title 12/0634/008.
On or about the 11th June 1996, the first Defendant lodged a Caution over the Plaintiffs registered property. The Caution was registered on the 12th June 1996.
It was further found and accept as fact that the first Defendant lodged a Caution over the property of the Plaintiff even though the property had been transferred and registered in the name of the Plaintiffs. The Caution related to debts due by the Hannams and not the Plaintiffs.
It was finally found and accepted as fact that the first Defendant allowed Mr. Hannam and the Plaintiff to complete the transaction despite the first Defendant knowing of the existence of the previous head lease and the previous mortgage when they allowed the Plaintiffs transaction. On the basis of the whole evidence there was not great deal of dispute. However, when there was dispute, I prefer and accept the evidence of the plaintiffs.
It was the debt liability between the Hannams and the first Defendant that the second defendant took over. At no stage was there any debt liability as between the first Defendant and the Plaintiffs. The second Defendant could not take over something that did not exist. There was no factual findings which can be attributed to the second Defendant causing damage to the Plaintiffs.
V - APPLICATION OF LAW TO THE FACTS
The root of contention in this case points to the Caution lodged by the first Defendant on the Plaintiffs registered property. The Plaintiffs says the Caution was unlawful. The first Defendant said on the contrary that the Caution was lawful. The first Defendant further said the liability rests solely on the shoulders of the second Defendant.
The first Defendant is the National Bank of Vanuatu (NBV). It is a business created by the Government, which has a long-term charter to provide banking services for the citizens of Vanuatu. It is supposed to produce profits for the Government by way of annual dividends. Like all banks it has a significant assets of its own as well as the funds that people deposit with it.
The second Defendant is the Asset Management Unit (AMU). It is a statutory debt collection agency created by the Government. It is an entity, which operates from annual funding directly allocated to it by a separate Government allocation of funds for its operation costs.
The functions of AMU are set out in section 5 of the AMU Act which can be summarized as follows- the acquisition of the bad debts of the NBV, the VNPF and the Development Bank, the collection of those debts and the transfer of such proceeds to the Government of Vanuatu.
Section 7 of the AMU Act spells out that the operations of the AMU will be funded by an annual appropriation by Parliament. It cannot use what it collects to pay to its expenses and the AMU must account to the Government by payment into the public fund of the proceeds for its debt collection work.
The Plaintiffs purchased a leasehold property comprised and described as Lease No. 12/0634/008. The Plaintiffs had initially inspected the register and found at the time the property was unencumbered and accordingly without any fore knowledge of any existing interests purchased the property for VT 3, 000,000.
The transfer was registered on the 24th August 1995.
The Plaintiff’s lease was in fact part of a subdivision of an existing head lease title No. 12/0912/008. The head lease was registered in the name of the Hannams. The Hannams had got an existing mortgage with the NBV in relation to the head lease.
The first Defendants argued that the mortgage had not been discharged when the head lease was subdivided and then leased to the Plaintiffs. They also argued that the lease had not been surrendered before the subdivisions were created. In the light of the evidence and findings by the court, this argument cannot stand and must fail.
The first Defendants gave evidence and denied that there was any record of the subdivision in their files until 1996 when they say they suddenly become aware of it. I found it hard to believe this evidence because from the first Defendant records they knew and approved the subdivision from the very start just as they knew of the sale to the Plaintiffs.
The evidence of the second Defendant’s witness shows that the AMU had a partial photocopy of the first Defendants file and even that partial copy showed file notes, memoranda and correspondence which confirmed that the first Defendant was a knowing participant in the process of sub-division and sale of Mr. Hannams land.
The evidence before the Court showed that the first Defendant knew of the sale to the Plaintiffs. They knew the purchase price and they knowingly received the proceeds of that sale. The first defendant is now estopped to argue to the contrary. The first defendant’s knowledge of and acquiescence in the transaction does give rise to liability.
Being a willing participant in the sale of the property to the Plaintiffs in 1995, it was wrongful action on the part of the first Defendant to lodge a Caution 12 months later in 1996 on the Plaintiffs title.
By virtue of section 14 of the Land Leases Act [163], it states the following-
“Subject to the provisions of this Act the registration of a person as the proprietor of a lease shall vest in that person the leasehold interest described in the lease together with all implied and expressed rights belonging thereto and subject to all implied and expressed agreements, liabilities and incidentals of the lease.”
Section 15 of the Act stipulates that-
“The rights of a proprietor or a registered interest, whether acquired on first registration or subsequently for valuable consideration or by an order of the Court shall be rights not liable to be defeated except provided in the Act and shall be held by the proprietor together with all rights, privileges and appurtenances belonging hereto, free from all other interests and claims whatsoever, but subject-
(a) to the encumbrances and to the conditions and restrictions shown in the register,
(b) unless the contrary is expressed in the register, to such of the liabilities, rights and interests as are declared in this Act not to require registration and are subsisting.”
Section 23(1) of the Act states among other things that-
“No person dealing or proposing to deal for valuable consideration with a proprietor of a registered interest shall be required or in any way concerned-
(a) to inquire or ascertain the circumstances in or the consideration for which such proprietor or any previous proprietor has registered, or
(b) to see the application of any consideration or any part thereof, or
(c) to search any register kept under any previous law.”
The question that needs the attention of the court is, was the lodgment of the Caution by the first Defendant on the Plaintiffs land lease title lawful? The answer must be in the negative on the facts as found by the Court.
Section 93(1) of the Land Leases Act [CAP. 163] states the following-
“(a) Any person who claims any interest in land under an unregistered instrument or otherwise;
may lodge with the Director a Caution in the prescribed form forbidding the registration of any person as transferee of, or any instrument affecting that interest, either absolutely or conditionally.”
The vital point here is the fact that the Plaintiffs leasehold title was a registered title. Section 93(1) above talks about the need to lodge caution on the unregistered title. The circumstances surrounding this case are different because the first Defendant lodged a Caution on the registered titles of the Plaintiffs. The first and second defendants cannot rely on the above section as it does not assist to advance their respective case.
Section 94 of the Land Leases Act [CAP. 163] states that-
“So long as any caution remains in force the Director shall not, except in accordance with the provisions of the Caution or with the consent in writing of the Cautioner or his legal representative enter on the register any change in proprietorship or any dealing... affecting the interest or licence in respect of which the Caution is lodged, but no instrument lodged and acceptable for registration shall be affected by any Caution lodged subsequently.”
The Plaintiffs leasehold property was registered in 1995. The first Defendants lodged a Caution on the Plaintiffs title 12 months later in 1996.
The lodgment of the Caution was done without any legal justification. The Caution was unlawful.
Section 96 of the Act states that-
“(1) Subject to the provisions of this section a Caution other than a Caution entered by the Director, shall lapse as to any interest affected by any transfer or other dealing, except,
(b) a transfer for dealing to which the Cautioner or his legal representative has lodged with the Director his consent in writing,
upon the expiration of 30 days after notice given by the Director to the Cautioner that a transfer or dealing has been lodged for registration, which notice has been given whenever any transfer or dealing is lodged.”
Notwithstanding subsection (1) if the Cautioner serves upon the Director a certified copy of pending Court proceedings the Director shall extend the operation of the caution until the outcome of those proceedings.
Section 97(5) of the Act states that-
“Any person lodging any caution with the Director or allowing any caution to remain without any reasonable cause shall be liable to pay such compensation as the Court thinks just to any person who sustains damage or who has incurred costs or expenses thereby.”
The Plaintiffs did make some request to the first Defendant to withdraw the Caution. The first Defendant refused to withdraw the Caution. They made attempts to the Director of Lands Record to consider the matter to which he replied that the situation is hard. The Director even sent the Plaintiffs to the first Defendant to ask for the withdrawal to which the first Defendant refused in all circumstances.
It is clear from the evidence before the Court that the Plaintiffs purchased the leasehold property No. 12/0634/008, free from all encumbrances of any kind. They had no fore knowledge of existing interests or rights. The caution had caused loss, costs and damages to the Plaintiffs.
The first defendant is liable to pay compensation or damages (yet to be assessed) to the plaintiffs under Section 97(5) of the Act [CAP. 163].
These are the reasons of the orders issued by this Court on the 10th day of February 2003.
My answers to the questions/issues are as follows:
II. (i) Is the caution lodged by the first defendant on the plaintiff’s title lawful?
My answer to II.(i) is: No.
II. (ii) Can the first defendant be liable to this tortuous and/or statutory liability?
My answer to II.(ii) is: Yes as set out under Section 97(5) of the Land Leases Act [CAP. 163].
II. (iii) Is it proper and fair that the second defendant be a party to the tortuous and/or statutory liability?
My answer to II.(iii) is: Yes. However, on the facts as found by the Court, there are no factual finding attributed to the second defendant leading up to damage sustained by the plaintiffs. Thus, the action has been dismissed against the second defendant.
DATED AT PORT VILA this 22nd day of September 2003
BY THE COURT
Vincent LUNABEK
Chief Justice
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URL: http://www.paclii.org/vu/cases/VUSC/2003/87.html