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Asset Management Unit v Ngwele [2007] VUSC 77 (12 September 2007)

IN THE SUPREME COURT OF
THE REPUBLIC OF VANUATU
(Civil Jurisdiction)

Civil Case No. 213 of 2005

BETWEEN:

ASSET MANAGEMENT UNIT
Claimant

AND:

ANDREW AND JANET NGWELE
Defendants

Coram: Justice C.N. Tuohy

Counsels: Ms. La’au for Claimant
Mr. Stephen Tari Joel for Defendants

Date of Hearing: 6 September 2007
Date of Decision: 12 September 2007

RESERVED JUDGMENT OF JUDGE C N TUOHY

Introduction

1. This is a claim by a mortgagee of leasehold property for an order empowering it to sell the property and consequential orders.

Factual Background

2. There is no dispute that the mortgage has for many years been in default although there may be some question about the exact balance owing. Indeed the last time the defendants made a payment on account of the mortgage was on 6 January 2003.
   
3. Mr. Tari Joel acknowledges that if it were not for an agreement between the parties recorded in a letter dated 1 July 2004 and signed by the defendants on 9 July 2004, there would be no question that the Claimant is entitled to the orders sought.
   

4. The letter is set out in full below:

1st July 2004

Mr. Andrew & Janet Ngwele

National Tourism Office

PO Box 209

Port Vila.

Re: YOUR OFFER OF VUV 4.8 MILLION

The AMU Management committees met on the 23rd June 2004 and considered your offer and resolved to agree for a settlement amount of VUV 4.8 Million with your buyer.

Our offer is based on past bad track of your loan repayments.

Should you agree with our counter offer of VUV 4.8 Million please sign the duplicate copy of the letter and forward it to us.

Thanking you in advance and look forward for your good cooperation.

Yours faithfully,

Maki S. SIMELUM

Chief Executive Officer

We agree with AMU’s offer of VUV4.800.000.

Andrew & Janet Ngwele

9/7/2004

5. The evidence established the context in which this agreement was made. The Claimant was exerting pressure on the Defendants to repay their defaulting mortgage. They were looking for buyers for the property. Obviously they were unable to sell for less than the balance owing under the mortgage without the Claimant’s consent as they would not have been able to provide an unencumbered title to the purchaser.

6. At the time, the Defendants were negotiating to sell to one Philemon Tari. Mr. Ngwele came to the Claimant’s office asking what sort of sale price the Claimant would accept to discharge its mortgage. He was proposing a figure less than VT 4.8 million. The Claimant required VT 4.8 million and agreement was reached accordingly. At the time, at least VT 6 million was owing on any view.
   

7. A further letter was produced in evidence dated 15 July from the Claimant to Philemon Tari.

It is also set out in full:

15 July 2004

Mr Philemon Tari

Tari Bag

Port Vila

Dear Mr. Tari,

Re: PROPERTY ANDREW AND JANET NGWELE

After our discussions (AMU/Andrew) this morning, we hereby agree to make our final offer of VUV 4,800,000 to you.

Should you please accept sign below on space provided.

Yours faithfully

Maki SIMELUM

Chief Executive Officer

Mr. Philemon Tari

"Signature"

I agree to purchase the property at VUV4,800,000

Date: 15.07.04

However, Philemon Tari has never completed the purchase.

8. The next written communication by the Claimant to the Defendants was a letter of demand dated 8 April 2005 which stated:

Dear Mr. Ngwele,

Re: DEMAND NOTICE

The Asset Management Unit hereby demands payment in full of the debt amount set out below.

Total balance outstanding, now due in full: VUV7,762,396

You are hereby given Seven (7) days from the date of this letter to make payment in full at the offices of the Asset Management Unit. If you fail to make payment in full as demanded by the expiry date of the aforementioned period, we will take action to recover the debt without further notice to you.

Yours sincerely,

Aurelie TITI

OIC Housing"

That was not complied with and this proceeding was issued on 22 November 2005.

9. Mr. Tari Joel submitted that the letter signed by the Claimant and Defendants amounted to an agreement by the Claimant to withhold action under the mortgage until:

a) A reasonable time to complete a sale of the property at VT 4.8 million had expired; and

b) A clear notice had been given to the Defendants that the agreement to withhold action was at an end.

10. While he acknowledged that the Defendants have had a reasonable time to sell, he submitted that there had never been any notice to terminate the agreement. Therefore, it was not open to the Claimant to seek to exercise its power of sale under the mortgage.

11. Ms. La’au submitted:
    
    1. that there was no agreement because there was no consideration given;
       
    2. in any event, ample time had been given for the Defendants to sell the property and the letter of demand amounted to notice that the Claimant was terminating the agreement.
       

Discussion

12. The issue is what legal effect does the letter have. Both counsel couched their submissions in the law of contract. I am satisfied that they were right to do so. The letter was obviously intended to have contractual effect. Contractual language of offer and agreement was used and both parties signed the letter. In the case of the Claimant, its stamp was imprinted.
    

13. There are two obvious omissions in the letter. First, there is no reference to the Claimant forbearing from exercising its rights under the mortgage for any period. Secondly, there is no reference to how long the Claimant might be bound to its agreement to accept VT 4.8 million.

14. Although neither counsel spoke of the law relating to implied contractual terms, it was implicit in the submissions of both of them that each was seeking to imply a term into the agreement which is not there. In the case of Mr. Tari Joel, a term that the Claimant would not seek to exercise its rights under the mortgage until it had given a clear notice to the Defendants that the agreement was at an end; in the case of Mrs. La’au that the agreement could be terminated by the Claimant if the property had not been sold for VT 4.8 million within a reasonable time.

15. In certain circumstances the courts are prepared to imply a term into a contract which the parties may have omitted but which is necessary in order to give business efficacy to the contract. In BP Refinery (Westernport) Pty Ltd v. Shire of Hastings [1910] ArgusLawRp 71; (1977) 16 ALR 363, the Privy Council set out five pre-requisites which must be satisfied before an unexpressed term can be implied on the grounds of business efficacy. These are:
    
    1. the term sought to be implied must be reasonable and equitable;
    2. it must be necessary to give business efficacy to the contract as no term will be implied if the contract is workable without it;
    100. it must be so obvious that "it goes without saying";
    4. it must be capable of clear expression;
    5. it must not contradict any express term of the contract.
       
16. Applying those criteria, I think there must be implied into this agreement a term that while it remained in force, the Claimant would not exercise its power of sale under the mortgage. If it were to do so, the Defendants would not be able to sell to their buyer, Philemon Tari, and a sale to him at VT 4.8 million was the whole basis for the agreement in the first place. "It goes with saying" that the Claimant would withhold action for some period. Such a term satisfies all other pre-requisites above.
    
17. By the same token, there must be implied a term that the agreement would come to an end if no sale to Philemon Tari was completed within a reasonable time. The agreement referred to "your buyer" which means a specific person and the extrinsic evidence established that that person was Philemon Tari. It was not an open-ended agreement allowing the Defendants to sell to anyone. As a matter of business efficacy (and common sense), this agreement could not continue in force indefinitely without the sale and repayment of the mortgage taking place. Once more all 5 pre-requisites are satisfied.
    

18. Mr. Tari Joel’s argument was that not only must a reasonable time for selling the property expire, but also clear notice to the Defendants must be given by the Claimant that the agreement was at an end. While it might have been good practice for the Claimant to have written to the Defendants formally advising that they intended to continue action under the mortgage, I think the agreement is perfectly workable without notice. While there can always be argument about what "a reasonable time" is in the circumstances, there are many contracts where that phrase is part of an express term and the Courts have always considered them workable. It does not "go without saying" that there needs to be notice, even if that might have been an advisable course. The Court is not permitted to imply a term into a contract simply because the Court thinks it might be "fair" to do so. Therefore, I find that notice was not required and the Claimant ceased to be bound by the agreement once a reasonable time had expired.

19. Certainly a reasonable time to complete a sale to Philemon Tari had expired by the time the letter of demand was sent. Even if I am wrong in my conclusion that notice was not required, the letter of demand was very clear notice that the Claimant was terminating any agreement to withhold action or to accept VT 4.8 million.

Conclusion

20. Therefore there will be judgment for the Claimant. The Court makes the following orders:
    

1) an order that the Claimant, as Mortgagee, be empowered to sell and transfer the leasehold property contained and described in title number 11/OG21/003 by such means and in such manner as it shall deem fit.

2) an order that pending such sale and transfer the Claimant, as Mortgagee, or an agent or agents duly authorized by it in writing, be empowered to enter on the leasehold property and act in all respects in the place and on behalf of the proprietor of the lease, and to apply in reduction of the monies due and owing to the Claimant all or any rent received in respect of the said property.

3) an order that the purchase monies to arise from the sale and transfer of the said leasehold property and the monies received (if any) by the Claimant pending such sale and transfer shall be applied.

a) Firstly, in payment of the expensed occasioned by the sale and transfer or going into and remaining in possession (as the case may be), including the costs of this application;

b) Secondly, in payment of the moneys then due and owing to the Claimant as Mortgagee;

c) Thirdly, in payment of subsequent registered mortgages or encumbrances (if any) in order of their priority;

d) Fourthly, the surplus (if any) shall be paid into this Honourable Court pending further order.

4) That the Defendants pay the costs of this proceeding to be agreed or fixed by the Court.

Dated at Port Vila on 6 September 2007

BY THE COURT

C. N. TUOHY
Judge