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Liu Hong v Lee [2005] FJHC 459; HBC0147J.2005S (29 September 2005)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC0147J OF 2005S

BETWEEN:

LIU HONG & MOON SHUEN YUEN
both of Wailoku, Tamavua, Suva. Businessman and
Businesswoman respectively.
PLAINTIFFS

AND:

WILLIAM LEE
of 74 Padamlala Street, Namadi Heights, Suva, Fiji. Unemployed.
DEFENDANT

Counsel for the Plaintiffs: V. Qereqeretabua: M. A. Khan Esq.
Counsel for the Defendant: A. Naco: Naco Chambers

Date of Judgment: 29.09.05
Time of Judgment: 9.30 a.m.

JUDGMENT

This is the Plaintiffs’ Summons under section 169 of the Land Transfer Act (Cap. 131).

The Defendant was the registered propriety of the property described as C.T. 18924 being Lot 36 on D.P. 4064 situated in Suva. The Defendant, on 16 April 1999, mortgaged the property to Habib Bank (mortgage No. 460017) in consideration of an expansion by $80,000.00,, overdraft facilities to Motorlink Limited, (“the Company”) by the said Bank (3^rd party mortgage). Under the terms of the mortgage, the Defendant as mortgagor, was responsible for the payment of the principal sum and any further advances made by the Bank to the Company. Additionally, the Defendant was required to pay interests on the loan.

The Company was subsequently wound up (HBE0028.2002) leaving the Defendant with a debt and interests of $167,052.94, owed to the Bank. Notice of Demand was served on the Defendant requiring all moneys due and owing including interest, under the mortgage to be paid. Upon the failure of the Defendant to pay, the Bank proceeded to advertise the sale of the property (mortgagee sale) on 4 December 2002. The property was purchased by the Plaintiffs, having succeeded in their tender of the sale, and the transfer effected on 28 February, 2005. The Defendant however, remains on the property.

Defendant To Show Cause

It is trite that the Defendant under S.169 proceedings show cause why he should not give up possession. If, he proves to the satisfaction of this Court, that he has a right to the possession of the land, the Court may dismiss the Plaintiffs’ summons.

The Defendant’s whole argument is based on allegation of fraud and/or fraudulent conduct of the Bank and others which the Court understands, is the subject of another proceedings brought by the Defendant (C.A. HBC0378.2004). According to the Defendant, the Plaintiff ought to have known that, given that the accepted price of the property was way below its market value, and that the solicitors for the Bank had also acted on behalf of the Plaintiffs as purchasers, that fraud was involved.

Plaintiffs Argument

The Plaintiffs deny fraud or any knowledge of fraud and/or fraudulent conduct on the part of the Bank or persons. As far as they are concerned, they had responded to the Banks mortgage sale and were successful in their bid. Thereafter, the transferwas effected, and in reliance on their good title they have now mortgaged the property to Colonial National Bank of Fiji. The Plaintiffs rely on the indefeasibility of title principle.

Evaluation

Sections 39 and 40 of the Land Transfer Act affords protection to the registered proprietor by guaranteeing a good title upon registration. The exception is in the case of fraud. This law and the effect of registration under our Torrens System are well settled. The leading Privy Council decision of Frazer v. Walker [1967] AC 569 interpreted the New Zealand equivalent of our sections 39 and 40, as conferring upon a registered proprietor upon registration, “a title in the interest of which he is registered which is (under sections 62 and 63) immune from adverse claims, other than those specifically excepted.”

The Privy Council in Frazer stated at p. 583

“The leading case as to the rights of a person whose name has been entered without fraud in respect of an estate or interest is the decision of this board in Assets Co. Ltd v. Mere Rohi {1905} AC 176 . . . In each appeal their Lordships decided that registration was conclusive to confer upon the appellants a title unimpeachable by the respondents.” . .

The concept of “indefeasibility of title” as applied in Assets Co. Ltd. and Frazer v. Walker, is equally applicable to rights of a registered proprietor under our laws. Sections 39 and 40 grants immunity to the registered proprietor from adverse claims, so long as he was a bona fide proprietor without notice.

Barker J. in Church of Samoa Trust Board v. Broodlands Finance Ltd. [1984] 2 NZLR 704, said at p. 712,

“Prior to the determination of Frazer v. Walker by the Privy Council, there had been considerable debate amongst legal writers on the Torrens system as to whether the principle should be one of deferred, as opposed to immediate, indefeasibility. The Privy Council ruled in favour of immediate indefeasibility. This concept confers on any bona fide registered proprietor or registered mortgagee (such as the Defendant) all the benefits, rights and interests consequent upon registration, irrespective of any irregularity or error leading to the registration of the instrument, falling short of fraud on the part of the person seeking registration. This is clear from the advice of the Board delivered by Lord Wilberforce at p. 1075; he pointed out that registration, once effected, must attract the consequences which the Act attaches to registration whether that registration was regular or otherwise. In other words, the fact of registration determines the rights and interests of the parties in relation to the land.

There are exceptions to the indefeasibility of title principle. Fraud, which the Defendant is alleging here, is one of the exceptions. However, for the Defendant to succeed, he must prove that the Plaintiffs actually knew the existence of the fraud, and the right of the adverse claimant. As the Privy Council stated in Assets Company Limited v. Mere Rohini (supra) at p. 210, “by fraud in these Acts is meant actual fraud, i.e. dishonesty of some sort, not what is called constructive or equitable fraud . . . Further, it appears to their Lordships that the fraud which must be proved in order to invalidate the title of a registered purchaser for value . . . . must be brought home to the person whose registered title is impeached or to his agents. The mere fact that he might have found out fraud if he had been more vigilant, and had made further inquiries which he had omitted to make, does not of itself prove fraud on his part.” (emphasis added)

In Wainiuha Sawmilling Company v. Waione Timber Co. Ltd. [1923] NZGazLawRp 32; (1923) NZLR 1137, Salmon J. said, at p. 1175:

“The true test of fraud is not whether the purchaser actually knew for a certainty the existence of the adverse right, but whether he knew enough to make it his duty as an honest man to hold his hand, either to make further enquiries before purchasing, or to abstain from the purchase or to purchase subject to the claimants rights rather than in defiance of them. If knowing as much as this, he proceeds without further inquiry or delay to purchase an unencumbered title with intent to disregard the claimant’s rights, if they exist, he is guilty of that wilful blindness or voluntary ignorance which, according to the authorities, is equivalent to actual knowledge, and therefore amounts to fraud.”

The Defendant’s allegation of fraud is primarily against the Bank. As against the Plaintiffs, the contention is that they should have known that the assets of the Company upon being wound up was in the hands of the Official Receiver, rather than the Bank. I am not convinced that in the circumstances of this case, the Plaintiffs were required to enquire further and look beyond the Bank’s mortgagee sale. As far as they were concerned, the Bank had acted in accordance with the provisions of the mortgage from the Defendant, as mortgagor. As whether the property was properly an asset or not of the Company upon winding up is an issue before the Court in HBC0378.2004.

Even by the most liberal of interpretations of fraud as defined by the Court in the cases cited above, I am not able to find from the evidence before me, anything to support the Defendant’s argument of fraud on the part of the Plaintiffs.

Finally, the Defendant submits that given that he is pursuing a separate action against the Bank in HBC0378.2004, that he should remain in occupation of the property, until that a matter is decided.

The law in this area is as stated by Mishra J.A. in Dinesh Jamnadas & Or v. Honson Limited (1985) 31 FLR, 62, at p. 65:

“At the hearing, the appellant’s main submission was that, as proceedings relating to the same matter were already before the Supreme Court, the application should be dismissed. The learned Judge, quite correctly in our view, held that existence of such proceedings was, by itself, not a cause sufficient to resist an application under section 169 of the Land Transfer Act.”

Again in Muthsami v. Nausori Town Council CA 23/86 Mishra J.A. confirmed that

“the mere institution of proceedings by Writ did not by itself shut out the claim under section 169 of the Land Transfer Act in a proper case. It was for the appellant to show, an affidavit evidence, some right to remain in possession which would make the granting of an order under section 169 procedure improper.”

Similarly in this case, the facts that the Defendant is pursuing in a Writ action the Bank on similar facts as here, does not prevent the Court from hearing the Plaintiffs’ Section 169 application.

Result

In the end, the Court finds as follows:

1. That the Plaintiffs are bona fide proprietors without notice.
   
2. That the Defendant has failed to satisfy the Court that he has a right to remain in possession of the land.
   
3. That a Court will not be prevented from hearing a Section 169 proceedings merely because of the institution of a Writ action on the same matter elsewhere.
   

Order is made for the Defendant to vacate the property with immediate effect.

Costs is summarily fixed at $250.00 against the Defendant.

F. Jitoko
JUDGE

At Suva
28 September 2005