IN THE SUPREME COURT
OF THE REPUBLIC OF VANUATU
(CIVIL JURISDICTION)

CIVIL CASE NO 199 OF 2012

BETWEEN:

ANNETTE TIMS
Claimant

AND:

REPUBLIC OF VANUATU
First Defendant

AND:

GEORGE SOALO
Second Defendant

Coram:Justice Mary Sey

Counsel:Marie-Noelle Ferrieux Patterson for the Claimant
Jennifer Warren (SLO) for the First Defendant
Mary Grace Nari for the Second Defendant

Date of Hearing: 13 August 2015
Date of Decision: 25 August 2015

DECISION

Introduction

1.	By her Amended Claim filed on 31 July 2014, the Claimant seeks declarations and Ordersin respect of the determination by the Valuer General (VG) dated 14 September 2012.

2.	The points of the determination that are challenged are outlined in paragraph 7 of the Claim and include in particular finding no. 3 in paragraph 27 and determination No. 1 as follows:

Finding no. 3:

“I find the lessee is in breach of the lease agreement by: - (a) using part of the land for other purposes other than the private rural residential dwelling by building 3 villas and renting them out”

Determination no. 1: 

“The Lessee is in breach of the Lease by renting three villas for monetary gain that contravenes the mandatory use the lease is subjected. Any re-occurrence of the breach should raise the Lessor’s right of forfeiture”.

3.	The Claimant pleads in paragraph 8 of the claim that the VG made errors in the findings and determination. 

 “Particulars

 (i) The private dwelling definition is not limited to one residential house.

a)	These findings and determination are contrary to Section 48 of the Land Leases Act which provides generally for subleasing any Lease (commercial or residential) without requiring a change of use of Lease.

b)	The findings and determination are erroneous as the three villas on the Lease at all material times have been and are being used for private residential dwelling.

c)	These findings and determination are contrary to the Lease which provides for the possibility of subleasing the residential Lease in clause 2 (h) of the Lease.”

4.	In the course of case management of this case it was agreed by the parties that it would be expedient for the Court to hear legal arguments on preliminary issues pursuant to rule12.4 or 12.8 of the Civil Procedure Rules No. 49 of 2002which provide as follows:

 “12.4 The court may hear legal argument on preliminary issues between the parties if it appears likely that, if the issues are resolved, the proceeding or part of the proceeding will be resolved without a trial”.

 “12.8 If the parties have agreed on the facts but there remains a question of law in dispute, the court must hear argument from the parties about the question of law.”

5.	Written submissions were ordered and filed by the parties and final oral submissions were heard on 13 August 2015.

Issue 

6.	Whether or not the VG made errors of law in his findings and determination dated 14 September 2012 when he found that the use of the lease: “for private rural residential dwelling” was breached by the Claimant.

7.	It is timely to look at the chronology of events which led to the registration of the lease in question.
23 August 1999	Rural Residential Lease title 12/0913/106 for 70 years between Alick Sualo (lessor) and Vienot Dominique (lessee) (the ‘lease’) was registered. 
	
29 May 2006	Transfer of the lease from Vienot Dominique to Annette Joan Tims was registered.
	
17 February 2012
	Change of lessor’s name from Deceased Alick Soalo to his successor George Soalo was registered.
	
24 April 2012	George Soalo issued a Notice before Forfeiture to the lessee to remedy the alleged breaches of the conditions of the lease by 24 May 2012, failure of which will force the lessor to forfeit the lease.
	
31 May 2012	The Claimant lodged with the first defendant an Application for Relief against Forfeiture.
	
12 June 2012	The Claimant filed further grounds for the relief against the Notice of Forfeiture.
	
14 September 2012	The VG made his determination and findings in response to the Claimant’s Application. 
	
26 October 2012
	The Claimant filed Supreme Court Claim in Civil Case No. 199 of 2012 challenging the determination and findings of the VG.	
44		

31 July 2014 Amended Supreme Court Claim filed in accordance with the Court Order dated 22 April 2014.

8.	Lease Title no 12/0913/106(the lease)is a residential lease of a surface of 6049 m2 with the Second Defendant (George Soalo) as Lessor and the Claimant (Annette Joan Tims) as Lessee.

9.	The lease has the main house on it as well as three villas built by the Claimant who has subleased these villas to tenants. The Claimant contends that it is the practice in Vanuatu that residential leases could be rented out. Furthermore, she says there are no commercial activities involved regarding the three villas and that no one is doing business on the land. 

10.	In his determination (at paragraph 22) the VG said:“The lease appears to permit more than one building. However, it is mandatory that the additional building must function as part of a private residential dwelling. Buildings such as a garage annexed to the residential dwelling or a cottage for a gardener enhancing the use or function as private residential dwellings are what would be normally accepted.

The next question is whether the villas could be regarded as buildings forming part and parcel of the private residential dwelling use? Considering the fact that the lessee has been living by herself before building the villas in June 2008 until now and also considering that the villas are detached from the residential dwelling she is dwelling in, and considering that the villas are spread over the demised land and are self-contained, the structural development on the land is clearly uncharacteristic of private residential dwelling setting. We therefore find that the villas were built for other purposes other than for the private use of the lessee.”

Submissions

11.	Mrs. Patterson submitted that the Claimant has got the power to sublease her lease and once the sublease is created, the sub lessee has also got the same rights and obligations as defined by the terms of the head lease and one of them is the use of the lease as a private residential dwelling. Counsel further submitted that the lessee is not in breach of the lease by subleasing her lease and the use of the lease as long as the terms of the lease are respected, in particular, the use as private residential dwelling by the sub lessees or tenants. Furthermore, that the lease terms and conditions in clause 2 (h) also provide for such subleasing and that there has not been any submission to the contrary. It is further submitted that there is no evidence or claim that the lease is used for commercial activity or for any other activity than as private rural residential lease.

12.	The Claimant also contended that the duration of a lease/sublease can be for less than 3 years and it does not require to be registered nor be in any prescribed form. That the LLA only requires subleases to be registered if their duration is for more than 3 years (s. 35 LLA) and the consent of the lessor is required for leases of more than 3 years duration in order to register them. Further, that she has the legal right to sublease the lease without the authorization of the lessor and that the main requirement is that the tenant/ lessee respect the terms of the head lease.

13.	Ms. Warren (SLO)submitted on behalf of the First Defendant that the VG’s determination dated 14 September 2012, regarding the breaches of the lease by the Claimant, is not erroneous and that the Claimant had breached Clause 2 (a) of the lease by renting out the three villas for monetary gain.

14.	Counsel further contended that the Claimant’s lease restricts its use to residential purpose and not a commercial activity. To bolster her argument, counsel drew my attention to the case of Demore v. Shaw [2015] VUSC 81; CC 198 of 2012 (1 July 2015)where Chetwynd J. said:

“There is no doubt that both the Claimant and the Defendants have residential leases. A copy of the Defendants' lease is attached as an annexure ('C') to the Claimant's sworn statement. The restrictions (they are set out in the Schedule) are quite stringent and to mention just a few; the land is designated residential, no buildings or structures to be built without approval from the landlord, not to keep any livestock or animals (other than cats and dogs in reasonable numbers) and not to cause nuisance or annoyance to owners or occupiers of adjacent premises. There appears to be no dispute that the Claimant's lease has similar provisions.

The area surrounding both properties is undoubtedly rural. There is an indication in the evidence that all the land was originally a cattle ranch. However it is no longer a cattle ranch and the lessor's intentions in respect of the land are quite clear, the leases restrict use to residential purposes. The leases do not allow any other use. The Defendants' business sticks out like a sore thumb in this residential area. Whilst the Defendants are entitled to use their property for any purpose they wish, they must do so whilst bearing in mind that they have neighbours and they must do so bearing in mind the type of neighbourhood which they occupy. 

15.	In her submissions on behalf of the Second Defendant, Mrs. Nari forcefully argued that the Claimant’s claim is misconceived and that she is clearly in breach of the lease agreement by operating a commercial business on the residential lease as determined by the VG.

16.	Mrs. Nari submitted that Real Estate practice may defer depending on lease conditions agreed to by parties but that this lease specifically prohibits the use of the land for any other purpose other than for private rural residential dwelling. Counsel further submitted that the Claimant has admitted that she built three villas for rental in 2008 and she has been receiving revenue from the villas since then in breach of her lease agreement. That building the villas on the property and renting them out to tenants puts parts of the land to other uses which is in breach of the lease agreement.

Discussion and Decision

17.	Lease in the Land Leases Act [CAP167] (LLA) is defined as applying to both lease and sublease: "lease" means the grant with or without consideration, by the owner of land of the right to the exclusive possession of his land, and includes the right so granted and the instrument granting it, and also includes a sublease but does not include an agreement for lease.

18.	A lease or a sublease of whatever use (residential, commercial, agricultural or special) can be leased or subleased “for consideration” and subleasing and consideration apply to all categories of leases.

19.	Section 48 (1) of the LLA provides for the subleasing of a lease in the following terms: 

“48. (1) Subject to the provisions of this Act and to any provisions in his lease affecting his right to do so, a proprietor of a registered lease may sublease for any period which is less than the remainder of the period of his lease by an instrument in the prescribed form.

(2) Save as otherwise expressly provided in this Act, the provisions of this Act affecting leases, lessors and lessees, shall apply to subleases, sub lessors and sub lessees, with such adaptations as are necessary”.

20.	Clause 2 (a) of this lease in question provides that the lessee is “not to permit or suffer any part of the leased land to be used for any purpose other than for private rural residential dwelling”and not to use or permit the use of the demised land for any noxious or offensive art, trade business or occupation or calling or in any such manner as to cause annoyance nuisance or inconvenience to occupiers or owners of adjacent premises or the neighbourhood.

Clause 2 (h) provides that “in the event of sub-leasing the demised land to covenant with the sub-lessee that he shall perform and observe the covenants on the lessee’s part contained herein except only the covenant for payment of the rent reserved.”

21.	The term: “private residential dwelling” is the standard format of most residential leases in Vanuatu to indicate that a lease is for residential use. Renting out residential villas situated on a residential lease in accordance with the class and the use of the lease is not a breach of the terms and conditions of the lease and it does not contravene the residential use of the lease. There is no requirement or restriction, term or condition in the lease implying that only the Claimant as lessee of the lease can use the land and houses of the lease and that the word private is restricted to the lessee. The definition of private does not limit it to one person. Each sublessee/tenant could be using the lease as private residential dwelling and could occupy the lease as long as they use it for residential purpose for their private use. 

22.	In her submissions, counsel for the First Defendant has placed reliance on Demore v Shaw (supra) in a bidto bolster her argument that the VG’s findings and determination are not erroneous. However, this case is distinguishable from the Demorecase as the cause of action in that case was for private nuisance and the lessee was using a residential lease for an intensive farming operation i.e. as a chicken factory. In this present case, the use of the land has not changed. There was no evidence before the VG that there is commercial activity on the lease. The persons using the land (whether the lessee or sub lessees occupying the villas) are using the lease for residential purpose and respecting the condition of use of the head lease. There are no allegations of any nuisance and no allegation that the land is used by the sub lessees for any other purpose other than residential and/or private rural residential dwelling. 

23.	It is noteworthy that after having admitted that the lease was not limited to one building, the VG went on to find that only the lessee can use the lease when he states: “We therefore find that the villas were built for other purpose than for the private use of the lessee” (paragraph 22). 

24.	There is no such requirement or term in the lease that it must be for the private use of the lessee only. Any person leasing or subleasing the land or part of it would be using the lease privately for residential dwelling and not for public use. The present lease does not limit the use of it to the lessee herself which seems to be the interpretation of the VG. 

25.	Nothing in the lease specifies that only the lessee can enjoy a residential dwelling on the lease. It is not a term or condition of the lease upon which a breach of the lease can be established. It is clear to me that subletting for residential use is allowed subject to conditions in the head lease. The VG seems to have proceeded “on a frolic of his own.”

26.	The fact that the lessee is authorized to sublease the lease in itself is an implied authorisation to have another person or persons occupying the lease. The only obligation of the lessee is to ensure that the sublessees respect the lease terms and conditions in the head lease and, in particular, the use of the villas as private residential dwelling and to ensure that there is no commercial activity as outlined in clause 2 (a) and (h) of the lease. 

27.	Mrs. Nari is of the view that the Claimant has breached the lease conditions by renting out the villas and that the solution to the Claimant’s situation is for a re-classification of the current lease. However, Mrs. Patterson has strenuously argued that subleasing any lease (whether commercial, residential, agricultural, industrial or special) is authorized without having to change the use of the lease to commercial. Counsel has also submitted that,if that was the reality, any subleased lease would be commercial and once the tenancy or sublease ceased and was occupied again by the main lessee, then he/she would need to apply to change its use again. Considering that changing the use of a lease involves surrendering the lease and issuing a new lease, the whole system at the land registry would become rapidly clogged up by all these changes and the cost would be astronomical. I agree with Mrs. Patterson’s submission.

28.	In the final analysis, I have no alternative but to apply the established legal principles of interpreting contracts to find that the wording of the lease in clause 2 was too clear to reach any other conclusion. It appears to me that the Second Defendant did not seek legal advice in drawing up the lease and he made a bad bargain and now has to live with it.

29.	What would be of assistance now (given the situation as it stands)is the imposition of tax by the relevant authorities on rent pursuant to the Rent Taxation Act [CAP 196]. Section 3 thereof provides that “tax shall, subject to the provisions of this Act, be charged at the appropriate rates specified in Schedule 1 to this Act, for every chargeable period, on all rents derived from all leases during that chargeable period.”

Conclusion

30.	After considering the evidence and arguments put forward on the issue posed for my determination, I am satisfied that the VG made errors of law in his findings and determination dated 14 September 2012when he found that the use of the lease: “for private rural residential dwelling” was breached by the Claimant.

31.	Accordingly, I make the following Declarations and Orders:

1.	The VG found by error of Law and Fact in his determination (in paragraph 27 finding 3) that “the lessee is in breach of the lease agreement by using part of the land for other purposes other than for private rural residential dwelling by building three villas and renting them out.” 

2.	The VG made a wrong determination in Point 1 in stating that “the lessee is in breach of the lease by renting three villas for monetary gain that contravenes the mandatory use the lease is subjected [to].” 

3.	The VG’s finding 3 and his determination in paragraph 27 are contrary to the conditions of clause 2 (h) of the lease which envisages the possibility of subleasing the residential lease. 

4.	A lessee can sublease a residential lease for consideration without being required to change the use of the lease as long as the sub lessee respects the conditions of the head lease including the User Clause in the lease.

5.	The quia timet injunction which was granted by the Court on 22 April 2014 against the Second Defendant in favour of the Claimant remains in force until further Orders of the Court. 

6.	The Second Defendant is estopped from issuing a further Notice of Forfeiture on the same ground of use of the lease as found by the VG in his determination dated 14 September 2012.

7.	The Defendants are to pay the Claimant costs on a standard basis to be agreed or taxed.

DATED at Port Vila, this 25th day of August, 2015.

BY THE COURT

M.M.SEY
Judge