Stanley v Vito [2009] WSSC 14 (6 February 2009)

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HINI TOFILAU STANLEY of Saleimoa, Minister of Religion and ALOFISA STANLEY his wife
Plaintiff

LAFAELE VITO & SONS LIMITED a duly incorporated company having its office in Apia.
Second Defendant

Counsel: Mr Toailoa for the plaintiff
Ms F Vaai-Hoglund for the first and second defendants

The plaintiffs are husband and wife. They are the owners and registered proprietors of land at Maluafou which comprised an area of 1 rood 08.51 perches and is the subject of these proceedings. The first named defendant is the brother in law of the plaintiff Hini, whose sister is the wife of the first defendant. The second defendant is the family company of the first defendant. In 1994 the plaintiffs allowed the defendants to construct and operate a supermarket and a petrol station on the subject land. A two storey building (supermarket building) was constructed to house a supermarket on the ground floor and accommodation for the first defendant’s son and wife on the top floor. The son and wife managed the supermarket. In 1995 the first defendant built another two storey building (dwelling house) for the plaintiffs to live, upon their contemplated retirement in 2003 from Pastoral work. To finance the plaintiff’s residence, the plaintiff’s mortgaged the subject land to secure a loan obtained by the first defendant from the Pacific Commercial Bank (now Westpac Bank). Again in 1996 at the request of the first defendant the plaintiff’s executed another mortgage dated 6th March 1996 with the Development Bank to secure a loan by the first defendant. When the first defendant again requested the plaintiffs in 1997 for a third loan the plaintiffs refused. The defendants then constructed and operated a petrol station.

By 1999 the defendants' business was struggling. Inability of the defendants to meet loan repayments necessitated the banks to notify and make demands on the plaintiffs as mortgagees who in turn instructed their solicitor who by letter dated 18th February 2000 demanded the first defendant to update payment and in addition suggested for the first time a lease of the land by the defendants. The defendants' business however was rapidly declining and arrears were mounting. The first defendant’s other business ventures at Tufuiopa, about a quarter mile away were also failing and other financial institutions were putting in motion the mortgagee's sale of the Tufuiopa property. I shall deal briefly with the Tufuiopa property later in this judgment. Realising the obvious fate of their land as a consequence of the defendant’s inability to meet loan repayments, the plaintiffs approached the bank and for some reasons not explained to the court the mortgages over the plaintiffs' land were discharged despite the mounting outstanding arrears owing by the defendants, on their business loans and the loan to construct the plaintiffs' residence.

In February 2001 the plaintiffs through their solicitor demanded the defendants to vacate the land within a year; the same demand was repeated in February 2002 but the defendants ignored both demands. By a Statement of Claim dated 21st January 2003 the plaintiffs commenced their actions for an injunction and eviction orders against the defendants. Paragraphs 6 to 12 of the statement of claim alleges:

In or about July 2003 when the defendants' business operations on the land ceased completely, the plaintiffs moved onto the land and occupied the dwelling house whilst the first defendant’s son and family continued to occupy the top floor of the supermarket building until about August when they moved out to live with his wife’s family at Faleula. By the time they vacated the supermarket building electricity had already been disconnected by the Electric Power Corporation presumably for non-payment of the power bills. Three hundred tala was given by the plaintiffs to assist with transportation costs. From then on the defendants have not returned or attempted to re-enter the land. Cyclone Heta inflicted severe damage to the petrol station, pumps, canopy area and the outlying lean to enclosed structure. Damage was also caused to the supermarket building. The plaintiffs with the assistance of their children repaired and renovated the supermarket building and the lean to enclosed structure; they then leased out the lean to enclosed structure, re-opened and operated the supermarket, occupied the top floor of supermarket building and repaired the dwelling house. They also discontinued their action against the defendants.

The defendants counterclaimed that the plaintiffs induced and coerced them to develop the land and construct commercial buildings as well as a dwelling house for the plaintiffs. It was never a condition that the defendants would use the land for seven years otherwise they would never have borrowed substantial amounts of money to reclaim the land, construct substantial buildings and develop businesses on the land. Due to the substantial costs of the improvements they were expected to expend and which they did incur it was agreed or implied that it was not necessary for them to pay any rent and that their occupation of the land was for an indefinite period or for as long as they wish. As the plaintiffs have breached the agreement by terminating the lease the defendants counterclaim for the unjust enrichment which the plaintiffs will gain through the defendant’s efforts in reclaiming and developing the land. The enrichment they claim based on the market value of the land and improvement as of June 2007 comprises of:

Improved land value	$776,000
Dwelling house	$725,000
Supermarket building	$423,000
Petrol Station including tanks	$247,000
	$2,171,000
Less Unimproved Land Value	606,000
	$1,565,000

The defendants counter claim for $1,565,000 on the grounds that the plaintiffs will be unjustly enriched by the efforts of the defendants which the plaintiffs encouraged or cajoled, or alternatively the demand by the plaintiffs for the defendants to vacate the land constituted a failure of the condition upon which the defendants conferred the enrichment, namely, that the defendants would occupy the land for as long as they wish.

The defendants also counterclaim for trespass by the plaintiffs when they entered the land, occupied the dwelling house, exerted pressure on the first defendant’s son to push him out of the supermarket building by erecting a fence around the building and provoking arguments with him. When the first defendant’s son finally gave in and left, the plaintiffs entered the supermarket building, renovated it, and operated the supermarket despite protests from the defendant’s solicitor. It is alleged that the occupation by the plaintiffs of the supermarket building was unlawful and constituted trespass from which the defendants claim damage of $500 per day for everyday of the continuing trespass as well as aggravated damages of $250,000.

Before addressing the plaintiff’s defence to the counter-claim I shall now deal with the Togafuafua land.

Prior to entering theological college in February 1970 the plaintiff Hini (‘Hini) was a joint owner with a friend of a quarter acre section as Togafuafua upon which the plaintiffs built a family home which was occupied by Hini’s brother and family as Hini was then employed as a policeman in Savaii. Hini told the court that as they were preparing to enter theological college when his sister, the first defendant’s wife, requested the plaintiffs if they could move to live on the land.

The plaintiff Hini had not met the first defendant then. They met before Hini agreed. Hini’s younger brother and family who were then occupying the land moved to live with Hini’s parents at Savalalo. Hini completed theological college at the end of 1972. In December 1973 the plaintiffs were called to Saleimoa parish where they served until they retired in July 2003.

In 1991 the first defendant wanted to set up business. But he needed land for the business and for security. He had none. Hini had already bought the half- share from the joint owner of the Togafuafua land when he was approached by the first defendant’s wife in 1991. Hini instructed his then solicitor. A deed of conveyance was executed by Hini; the consideration of $18,000 as the purchase price of the land was not paid to Hini because there was a written agreement between the plaintiffs and the first defendant and his wife signed contemporaneously with the deed of conveyance. The written agreement was to the effect:

The first defendant was able to borrow from the National Provident Fund using Togafuafua as security. He commenced to construct and operate businesses including a shop and bakery on Togafuafua land. In 1995 he bought an adjoining piece of land comprising of an insignificant area of three point seven perches (03.7p), his first acquired freehold land. By 2001 the National Provident Fund as mortgagee commenced mortgagee’s sale of Togafuafua land through the Registrar of the Court.

The first defendant denied that his wife requested Togafuafua land to be used for business and security. He told the court that he and his wife were requested by the plaintiffs to move to Togafuafua to live and to care for the plaintiff's school children before the plaintiffs entered theological college. Throughout the three years the plaintiffs were at theological college the first defendant paid for their fees and provided food every week. He also had to renovate and added windows to the plaintiff’s Samoan house with a lean to they lived in when they moved to Togafuafua. As a result of his generosity to the plaintiffs which continued during the time they served at Saleimoa the plaintiffs decided to and did gift Togafuafua to the first defendant and his wife.

I accept the evidence of the plaintiffs that it was the first defendant’s wife who wanted to move to Togafuafua land to live. There was no need for the plaintiff to ask the first defendant and his wife as there were people already on the land while the plaintiff Hini was posted at Savaii as a policeman. I also accept plaintiff Hini’s evidence that the first defendant and his wife did not provide weekly supplies of food, neither did they pay the plaintiff’s fees for the theological college because there were no fees to be paid. In any event the first defendant’s income at the time from hireage of his truck to the government at $1.20 per hour and his pick-up at seventy cents (.70c) per hour on an irregular basis could not maintain the alleged generosity he provided for the plaintiffs. The plaintiffs conveyed Togafuafua land to the first defendant’s wife to provide land for the business and security for the intended borrowings. But at the same time it was their belief from the legal advise they sought that the gift would benefit their children after the death of the first defendant’s wife.

The plaintiffs' defence to the counterclaim pursued at the trial can be summarised as follows:

The plaintiffs alleged that the manner in which the first defendant and his family gained access to the Maluafou land was the same as that applied by the defendants when they occupied and eventually acquired the freehold title of the Togafuafua property. Counsel for the plaintiffs submitted that the evidence is clear and convincing that:

It must be said at once that this contention is not only incorrect, it is also misleading because the plaintiff Hini told the Court his sister Nino came crying asking for a place to stay. He then told her to go and get the first defendant. They came and it was then he met the first defendant for the first time. Hini then told his younger brother April to move back to Savalalo whilst the first defendant and Nino lived at Togafuafua. There was never any suggestion by the plaintiff of any pressure from the first defendant or his wife.

Again this contention is not supported by the evidence. Neither plaintiff told the court or even suggested that the plaintiff Hini was pressured by the first defendant or his family to transfer Togafuafua. As I have already adverted to earlier the plaintiffs sought legal advice before the land was transferred.

The plaintiffs may have been pressured by the first defendant (which the first defendant denied) but unless that pressure amounts to economic duress as a result of illegitimate pressure by the first defendant resulting in the compulsion of the will of the plaintiff as explained by Lord Searman in Universe Tankships Inc. of Monrovia v. International Transport Workers Federation (1983) 1 AC 1366 at 400, the pressure cannot be labelled as illegal, improper or inequitable. What can be said with certainty is that the evidence does not even suggest that the plaintiffs were harassed or intimidated by the first defendant as contended in paragraph 11 of counsels submissions.

Again this allegation is not totally correct. No rent was discussed as it was common knowledge that the defendants would have free use. What is in dispute is the term of occupation. What is also not in dispute is that the loan secured by the plaintiff’s land was obtained after the supermarket building was completed and it was agreed between the plaintiffs and the first defendant that the defendants will at their expense construct a two storey dwelling house on the land for the plaintiffs and the plaintiffs will give their land as security for the loan by the defendant to fund the construction of the house.

The allegations advanced to support the notion that the defendants dirtied their hands in acquiring the remedies they are seeking cannot be substantiated by the evidence and the submissions based on the clean hands principle must fail. The maxim, "he who comes into equity must come with clean hands" was thoroughly examined by Young J of the Supreme Court of New South Wales in FAI Insurances Ltd v. Pioneer Concrete Services Ltd (1989) 15 NSWLR 552. He said at page 561 after examining the leading authorities and commentaries in leading text:

"However, the more one examines the rule in its application in the cases, the more one can see that it is only if the right being sought to be vindicated by the plaintiff in a court of equity, is one if protected, would mean the plaintiff was taking advantage of his own wrong, that the court will either debar him from relief or perhaps say he is not a proper plaintiff in a representative suit."

The defendants' counterclaim in trespass is not supported by the evidence and must fail. I have already determined that the term of occupancy by the defendants of the Maluafou land was neither seven years, nor for as long as the defendants wish. What is not in dispute was that the plaintiffs would move into and occupy the residential building in 2003 when they retired. When they did move in, the supermarket was closed and the petrol station was abandoned. According to the first defendant’s evidence the petrol station was closed in 2002 on the advise of his accountant. The plaintiffs then erected a fence. The defendants' counterclaim alleges that the plaintiffs erected a fence and gate to exert pressure on the first defendant’s son to leave the supermarket building. But the evidence falls far short. The first defendant’s son told the court that he could not recall being given a key to the gate but the gate was opened most of the time; which suggests convincingly that the first defendant’s son was not bothered by the erection of the fence, neither did he believe that it exerted pressure on him to leave the building. He did leave in August 2003. In 2004 he talked with Hini’s wife at Togafuafua and in response to her inquiry he told her that he was not returning to Maluafou. He also told the court that he wanted to return but his father told him to leave. Hini’s wife then told him that they (the plaintiffs) would to use the building and he gave his approval because of what his father said.

It was after that conversation that the plaintiffs commenced to repair and renovate the supermarket building; they eventually occupied the top floor and operated the supermarket. I accept the plaintiffs' evidence there was no stock in the supermarket when they renovated it. Evidence given by the first defendant’s son did not suggest, as alleged in the counterclaim, that the plaintiffs provoked arguments with the first defendant’s son in an effort to pressure him to leave the supermarket building. He left voluntarily. He told the court he wanted to return but his father told him not to. The defendants have abandoned Maluafou and they cannot allege trespass especially when the defendant’s son approved the plaintiff’s use of the supermarket building. The action is trespass accordingly fails.

Counsels are not at odd on the functions and requirements of the principle of unjust enrichment enunciated in various ways in the decisions of this court in Public Trustee v. Foketi Brown & others (unreported 24/1/1992); Atiifale Fiso v. Peter Eugene Reid (unreported 30/6/2000); Misileti Tufuga Fatu v. Siaosi Leavasa (14/5/1998 unreported) and Elisara v. Elisara (unreported 22/11/1994). The function and purpose is to disgorge from a defendant (in this case the plaintiffs) unjust benefits and ill-gotten gains and restore them to the plaintiffs (defendants) who has suffered a countervailing deprivation. The essential ingredients are the deriving a benefit by the defendant at the cost of or detriment to the plaintiff in circumstances in which it would be unfair for that benefit to be retained by the defendant. The ultimate test is the unfairness of allowing the benefit to be retained by the defendant. It is now established from the authorities cited above following the decisions of Supreme Court of Canada in Rathwell v. Rathwell (1978) 2 SCR 436 and Sorochan v. Sorochan (1986) 2 SCR 38 that the essential requirements for unjust enrichment are:

From my finding of facts which I have averted to I find the first two ingredients to have been satisfied. Before the defendants moved onto the land, it was low-lying especially towards the rear and subjected to flooding except for the area where there was an old shop and where the defendants constructed the supermarket building. The defendants had filled the land to raise it to road level before they constructed the dwelling house and the petrol station. Other than providing the land as security for the loans all the costs for the filling of the land and construction of the buildings were met by the defendants. As a result of the efforts of the defendants the market value of land has increased considerably and the plaintiffs are currently enjoying the occupancy of the buildings and receiving income from the improvement on the land by way of rents and operating a supermarket.

Similarly, it will also be apparent from my findings of facts that it would be unjust to allow the plaintiffs to retain the benefit or that there is no juristic reason for the plaintiffs to retain the benefit. I have rejected the plaintiff's contention that the defendants were given seven years to occupy the land but even if that was the original agreement when the defendants constructed the supermarket building, the plaintiffs subsequently agreed to and have knowingly allowed the defendants to continue to develop the land and add expensive improvements. Indeed when the supermarket building was formally dedicated, the plaintiff Hini attended and presented pigs and fine mats, and he often visited whilst his residence was being constructed. Before his residence was constructed at the rear of the land, he knew or ought to know that the land had to be filled in and retaining walls constructed to stop erosion onto adjoining low lying lands. The defendants have been occupying the land since 1994 and after some seven years of occupation, the plaintiffs in 2002 commenced to make a move through their solicitor to remove them. By letter dated the 13th February 2002 the solicitor wrote the first defendant to the effect:

"I write following my earlier letter concerning Hini’s (plaintiffs) land at Maluafou which they wish to move to upon their retirement in the New Year.

Hini and wife want to tidy up the land in April this year, by which time all business activities on land should cease and petrol station removed.

All other business should remain as exchange for the land at Togafu’afu’a. Hini, wife and children do not wish to enforce the written agreement of 19 April 1991."

At the time the letter was written the defendant’s businesses at Togafuafua and Maluafou were struggling and the mortgagee's sale of Togafuafua was publicly advertised probably prompting the plaintiffs to ignore the written agreement of 19th April 1991. They have also persuaded the banks to discharge their Maluafou property as security without any responsibility towards the payment of, or contribute to the payment of the loan obtained by the defendants for the construction of the dwelling house. They willingly co-operated with the defendants when the businesses were thriving but speedily disassociated themselves when the storm emerged. Then they wanted the defendants to vacate Maluafou before they retired in 2003.

When they bought Maluafou in 1990 it was a loan lying area subject to flooding. When they occupied it in 2003 they inherited land raised by 1.2 meters with retaining walls, two large two-storey buildings and a petrol station.

It would be unfair to allow the plaintiffs to retain the benefit. The defendants succeed in their claim under unjust enrichment.

The plaintiff’s claim for the value of the land fill and retaining wall of approximately $170,000 is supported by the valuation report of Mr Seru of Central Property Valuers. That report is dated 27th June 2007. The valuation report produced by the plaintiff’s dated 11 June 2004 does not address the land fill issue. If $170,000 is the value of the land fill and retaining wall in June 2007, then its value in 1994 and 1995 when the work was actually done should be considerably less. It is the actual cost of the fill and retaining wall, which should be the proper basis for assessing compensation. If $170,000 is the value of the fill and retaining wall in 2007 then the testimony of the first defendant that $200,000 was spent on the fill by Silva Transport and Alafua Transport is utterly ridiculous. Neither of those two entities was called to testify. The 2007 report gives the approximately area filled as 1225 square meters to a depth of 1.2 which means that the whole land area of 1 rood 8.51 perches was filled evenly to a depth of 1.2 meters. That cannot be accepted. The supermarket building was built on the spot where there was previously a shop. At the time the valuation was done in 2007 the whole of the land was covered with concrete and buildings, the only source of information for the valuer would have been the first defendant. Although the valuer’s findings were not challenged under cross-examination, I am not bound to accept and I do not accept his report as to the area filled. I reduce the area filled by 50% so that the volume of loose fill is:

As to the value of the fill the 2007 report estimated the cost of fill as at June 2007 at $62.50 per cubic meter. No evidence was adduced as to the approximate cost of fill in 1994 and 1995. Bisson J in Misileti Tufuga Fatu v. Siaosi Leavasa (supra) determined the cost of land fill in 1995 after considering the testimonies of two engineers and a Public Valuer to be $15 per cubic meter including compaction costs. I will adopt that so that the cost of fill is:

As for the costs of constructing the retaining wall the valuer calculated $70,000 as the cost of labour and material in 2007 which in 1995 would be a lot less. No evidence was lead or given under cross-examination as to the approximate cost in 1995. I deduct 30% reducing the cost of retaining wall to $49,000 so that the cost of fill and retaining wall totals $60,025.

The plaintiffs engaged the services of Elon Betham & Associates a Licensed Public Value to assess the current market value of the land in June 2004. At that time the renovations to the supermarket building and the outlying building by the petrol station have not commenced. The report described the outlying building in poor condition whilst the supermarket building is described as being:

"neglected over the years and needs tidying up in the form of repainting, a complete cleaning to interiors including minor repairs especially to electrical wirings and fittings".

The report valued the land then at $260,000 and the buildings at $400,000. Each building was not valued separately. Central Property Valuers, engaged by the defendants valued the buildings in June 2007 as follows:

"Dwelling House	$725,000
Supermarket buildings	$423,000
Outlying building (Petrol Station)	$177,000

It must be remembered that the three buildings have undergone major repairs since the 2004 valuation report. This is especially true of the outlying building, which has been rented out as well as and the supermarket building. In determining the value of each building as at June 2007, the summation approach was adopted. This approach determines the cost to create a duplicate improvement as of the valuation date. Market construction rates of buildings similar in design, use and location would then determine the replacement value or estimated cost to construct a similar building using modern materials and current standards. And the current value is then derived from depreciating the age of the building. The depreciation rate used by the valuer was based on:

Effective age of building (1994 – 2007)	= 13 years
Economic life expectancy of building	= 50 years
Depreciation rate	= Effective age / Economic life expectancy
	= 13/45
	= 29%

If the life expectancy of a building is relatively short, then the rate of depreciation should be much higher and accordingly the current market value much lower. The economic life expectancy of the supermarket building and the outlying building (petrol station) based on the 2004 valuation report by Mr Betham can be doubtful to be at 50 years. How the valuer determined the construction rate of $2,500 per square meter was never explained. Based on that construction the value of the current value for the buildings are:

(1) Dwelling house: 408 square meters x $2,500	= $1,020,000
Less 29% depreciation	= 295,000
	= $725,000

(2) Supermarket building: 239 m2 x $2,500	= $597,000
Less 29%	= 173,000
	= $423,000

(3) Outlying building 100 m2 x $2,500	= $250,000
Less 29%	= 73,000
	= $177,000

I do not accept defendants' submissions that the defendants should be compensated on the market value of the buildings. It is the actual or estimated cost of construction, not the current market value of the buildings, which should be the basis for compensation. I rejected the valuation by Central Property Valuers of the cost of the fill; the valuations of the buildings by Central Property Valuers must also suffer the same fate. I am genuinely disappointed in the apparently unreliable and unprofessional approach by some if not most of these public valuers who either inflate or deflate their valuations depending on the purpose or motive of the party who engaged their services. I expressed the same concern in AJ Wulf Enterprises Ltd v. The National Provident Fund 23/2/07 (unreported). In that case the architect who designed the building for the borrower and the quantity surveyor for the lender both adopted $685 per square meter construction costs of a building situated about two hundred meters from the Togafuafua and Maluafou properties. The formula for construction adopted by the borrower and lender in that case was:

I shall proceed with the costings of construction based on that formula to determine the cost of construction of each building. Using the same measurements given in the Central Property Valuers report the estimated cost of each building is:

(a) Residential Building:	408 x 650 =	$279,480
Less 1% Depreciation	$2,794.80
Less 2% Deterioration	$5,589.60
		$8,384.40
		$271,095.60

Plus Labour costs at 33%	$89,461.55
Engineer Fees at 2%	5,421.91
Architect Fees at 4.5%	12,199.30	$107,082.76
Total costs		$378,178.36

To account for reduced building rates and lower labour costs in 1995 I will deduct a further 30% to reduce construction costs to $264,724.85.

(b) Supermarket building
Construction Costs		$163,715.00

Less 1% depreciation	$1,637.15
Less 2% deterioration	3,274.30	$ 4,911.45
		$158,803.55

Plus labour costs	$52,405.18
Plus engineers fees	3,176.07
Plus Architect fees	7, 146.16	$ 62,727.41
		$221,530.96

I also deduct 30% for the lower building rates and labour costs in 1994 to reduce construction costs to $155,071.68.

(c) Outlying building (petrol station)
Construction Costs		$68,500.00

Less 1% depreciation	$ 685.00
Less 2% deterioration	$1,370.00	$ 2,055.00
		$66,445.00

Plus labour costs		$21,926.85
		$88,371.85

Again I deduct 30% as above reducing the cost to $61,860.30 so that the total cost of construction amount to $481,656.83 which I propose to award as compensation for the buildings. It is true that the defendants had occupied the land for some eight years free of rent, but that can be off set by the plaintiffs inheritance of land with increased market value as a result of the fill and retaining walls as well as two large buildings, a petrol station and a concrete car parking area.

Cost of fill	$ 60,025.00
Cost of buildings	$481,656.83
Total	$541,681.83

Supreme Court of Samoa

Stanley v Vito [2009] WSSC 14 (6 February 2009)