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High Court of Fiji |
IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION
Civil Action No: HBC 88 of 2005L
BETWEEN:
MOSESE VOLAVOLA, INOKE KURUKURU & ALIVERETI GONEWAI for and on behalf of MATAQALI LEWEINADROGA
Plaintiffs
AND:
THE ATTORNEY GENERAL OF FIJI
1st Defendant
AND:
THE DIRECTOR OF LANDS
2nd Defendant
AND:
THE NATIVE LAND TRUST BOARD
3rd Defendant
FINAL JUDGMENT
Judgment of: Inoke J.
Counsel Appearing: Mr N Nawaikula for the Plaintiffs.
Mr Siromi D. Turaga for the First and Second Defendants.
Mr N Tuifagalele for the Third Defendant.
Solicitors: Nawaikula Esquire for the Plaintiffs.
State Solicitors for the First and Second Defendants.
In-house Solicitors for the Third Defendant.
Dates of Hearing: 9, 10 and 30 June 2008, 10 and 11 March 2009, 9 August, 10 September 2010, 27 January 2011.
Date of Judgment: 20 May 2011
INTRODUCTION
[1] The Plaintiffs are the beneficial owners of native land on which the Sigatoka Hospital is built. The Sigatoka Hospital is a public hospital run by the State. The Plaintiffs land was leased to the Second Defendant (on behalf of the State) by the Third Defendant (as the statutory trustee of the Plaintiffs) for 99 years from 1 January 1903. The lease expired on 31 December 2002 and negotiations for a new lease have not been successful so this Court is now asked to determine what the parties' rights are.
[2] The Plaintiffs claim, inter alia, that they should be paid the market value of their land in addition to land rent and premium. They say the offer made by the Third Defendant on their behalf which did not include payment for market value was not in their best interests, unlawful and should not be binding.
THE PARTIES
[3] The Plaintiffs represent the members of the landowning unit Mataqali Leweinadroga who are the beneficial owners of the native land in question. The First Defendant is being sued on behalf of the Ministry for Health (which runs the hospital) and the Government of the Republic of Fiji (the State). The Second Defendant is being sued in his capacity as the holder of all leases on behalf of the First Defendant, including the lease in question: NLTB Ref: 4/11/4956 of native land described as NLC Lot 60 on Map Ref L/8, 2. In this judgment, for brevity, I will refer to both of these defendants collectively as the "State". The Third Defendant is the statutory trustee established under the Native Land Trust Act [Cap 134] and which administers all native land and I will refer to it as the "NLTB".
CASE HISTORY
[4] The Writ of Summons was filed on 1 April 2005. On 12 December 2005, the Plaintiffs entered default judgment against the State. On 12 October 2006, the Plaintiffs issued Notice of Assessment of Damages returnable on 10 November 2006. On 26 February 2007 the State filed an application to set aside the default judgment. On 18 May 2007, Phillips J gave leave to defend and struck out the Plaintiffs action for non appearance. On 8 June 2007, the Plaintiffs filed an application to restore their action and on 12 June 2007 the judge restored the action by consent of the parties. On 1 August 2007, the Plaintiffs filed a second default judgment against the State for not having filed its defence. Before the application was heard the State filed its defence on 21 August 2007. On 31 August 2007, the Summons for Directions was filed. Again the State dragged its feet in filing its list of documents so the Plaintiffs filed an application to strike out the State's defence on 1 October 2007. On the same day the State filed its list and three court appearances followed until the Summons to enter the matter for trial was filed on 18 February 2008. The matter was then set down for hearing on 9, 10 and 11 June 2008. The hearing proceeded on 9 and 10 June 2008 and then adjourned for continuation on 30 June and 1 July 2008. At the end of the hearing on 30 June 2008, the matter was adjourned by consent for the Plaintiffs to file an application to amend their statement of claim to be returnable on 25 July 2008. Instead of filing the application the Plaintiffs filed their amended Statement of Claim on 23 July 2008 so on 25 July 2008 Phillips J struck out the amended Statement of Claim because leave had not been granted. The Plaintiffs eventually filed their application to amend on 30 July 2008 which was first called on 1 August 2008. The application was set down for hearing on 29 August 2008 on which date leave was granted by consent. The amended Statement of Claim was filed on 5 September 2008 followed by the amended Defences and Replies and the trial resumed on 10 and 11 March 2009. The trial was further adjourned to continue on 20 and 21 April 2009. The latter hearing did not take place because of the closure of the courts on 10 April 2009. There the matter rested until it eventually came before me on 25 May 2010. The State wanted the case re-heard so I set it down for hearing on 9-12 August 2010. On the morning of the hearing the parties agreed to proceed by way of written submissions and that I take the evidence as heard by the trial judge in the previous hearings. I gave directions for filing submissions and eventually on 27 January 2011 I informed the parties that I will deliver the judgment on notice, which I now do.
THE STATEMENT OF CLAIM
[5] The Plaintiffs pleaded six causes of action in their amended Statement of Claim which I summarise below.
The First Cause of Action
[6] The first cause of action is against the State. The Plaintiffs claim that before the lease expired, the State asked the NLTB to renew or issue a new lease of the subject land. The Plaintiffs allege that as trustee, the NLTB was obliged under s 8 of the Native Land Trust Act to renew or issue a new lease only if such land will not be required by the landowners during the duration of the lease for their maintenance, use and support and, secondly, only if the land is not reserve land.
[7] The Plaintiffs say that it is clear that they do not have enough other land now for their maintenance, use and support and would require the subject land for their future subsistence. Therefore, the land in question cannot be re-leased unless they waive their right of occupation under s 8 of the Act.
[8] Secondly, they say that on the expiration of the lease, the land in question became native reserve and therefore could not be re-leased without their consent to de-reserve it.
[9] The Plaintiffs say that they have intimated to all the defendants on many occasions that they will agree to waive their right of occupation under s 8 and consent to de-reserve the land in question for a new lease provided the defendants pay them $700,000 as consideration.
[10] In 2003, a new lease was offered to the State on those conditions but the State has refused to pay the $700,000 demanded by the Plaintiffs and continues to occupy the land unlawfully.
[11] The Plaintiffs seek (1) a declaration that the State is illegally occupying the Plaintiffs' land described as NLC Lot 60 on Map Ref L/8, 2, and (2) an order that the State vacate the Plaintiffs' land.
The Second Cause of Action
[12] The second cause of action is also against the State. The Plaintiffs claim that the hospital and other permanent improvements built by the State on their land have become part of the land and the State is therefore not entitled to remove them on vacating the land.
[13] The Plaintiffs seek (1) a declaration that the existing improvements on the subject land being permanent have become part and parcel of the land, and (2) an order restraining the State from removing, damaging or interfering with the permanent improvements, fixtures and fittings.
The Third Cause of Action
[14] In their third (and alternative) cause of action, the Plaintiffs claim that they are entitled to consideration of $700,000 for giving up their right of occupation and de-reservation because of:
- The fact that available native land for the use of the 500 members of the Mataqali is only 181.37 acres so that each member is entitled to only 0.36 acres of native land for his/her maintenance, use and support.
- The fact that the subject land has become native reserve and the consideration requested is in lieu of the grant of their consent for de-reservation.
- The fact that what is to be granted is not a lease over an unimproved lot but a lease of a lot with improvements valued at more than FJD2m.
- The fact that rent over native land is a subsidy based on unimproved capital value and not based (as in the USA and other countries) on potential use.
- The fact that, rent being a subsidy, the landowners would have earned much more if they used the subject land for their own commercial use.
- The fact that the State have paid out comparable sums in similar acquisitions.
[15] The Plaintiffs seek a declaration that they are entitled to demand consideration from the State on the grant of a renewal or issue of a new lease.
The Fourth Cause of Action
[16] The fourth cause of action is against the NLTB. The Plaintiffs allege that the NLTB has breached s 4(1) of the Native Land Trust Act by offering their land for lease to the State. The particulars of breach by the NLTB are:
- Failure to assess and or consider other investment opportunities of the subject land that will give to the landowners a higher financial return.
- The NLTB knew or ought to have known that compared to other uses and investment types, the offer of lease will result in the least return and benefit.
- The NLTB knew or ought to have known that the landowners are entitled to the leasehold value but that it failed to demand that in the offer.
- The NLTB knew or ought to have known that other uses like subdivision, sub-leasing partnership in development reaps far greater returns for the landowners but in spite of that the NLTB by offering the lease had opted for the least benefit.
- Failure to demand as a condition of the offer an equitable sum to compensate for lost investment opportunities.
[17] The Plaintiffs say that they have suffered damage as a result of those breaches as follows:
- The Plaintiffs have lost millions of dollars it would have earned had it taken other form of higher use e.g. subdividing the land.
- The Plaintiffs have been denied the leasehold value of the subject property because the Plaintiffs did not obtain it.
- The Plaintiffs have lost missions of dollars because in the offer the NLTB had not demanded any sum to compensate it for lost opportunities.
The Fifth Cause of Action
[18] The fifth cause of action is also against the NLTB. The Plaintiffs claim that the NLTB had breached s 9 of the Native Land Trust Act by offering the lease to the State because:
- The NLTB knew or ought to have known that as far back as 1951 the figures justifying reservation of the subject land was 139 members to 211 acres giving a ratio of 1.51 acres per person which meant that even at the time the NLTB could not have given the land for leasing because the landowners would have needed it.
- The NLTB knew or ought to have known that the Reserve Commission, JLV Sukuna, had already assessed in 1951 that the landowners were in need of their land and therefore had reserved it.
- The NLTB knew or ought to have known that at the time it gave the offer on 3 June 2003, the population to land ratio was 0.36 acre per person which meant the landowners needed their land for their own use.
- Given the figures available to the NLTB, it knew or ought to have known that the landowners required their land for their own use.
[19] The Plaintiffs claim that as a result of those breaches they have suffered damage as follows:
- The Plaintiffs have denied the use of their land for 99 years.
- The Plaintiffs have been denied critical investment opportunities of their land.
- The Plaintiffs have lost all opportunities on investment by investing their land on better investment methods.
[20] They seek (1) a declaration that the NLTB has offered the lease to the State knowing full well that the Plaintiffs would require the land for their own use and thereby in breach of s 9 of the Act, and (2) an order that the NLTB pay damages to the Plaintiffs to be assessed.
The Sixth Cause of Action
[21] The last cause of action against the NLTB is that when the NLTB gave the offer of lease, subject to survey on 13 March 2003 and after receiving money for it, the NLTB was obliged to hold on to that money and not to distribute it until after all formalities had been completed. The Plaintiffs allege that the NLTB without first having a lease executed by all parties and without first obtaining their consent to de-reservation released the money. Such action by the NLTB was unlawful.
[22] The Plaintiffs therefore seek a declaration that the NLTB acted unlawfully in releasing the rent money without the parties executing the lease documents, and without the Plaintiffs' consent.
THE STATE'S DEFENCE
[23] The State denies that the land in question was reserve land. It says that the Native Reserve Commissioner has confirmed that the hospital site is outside native reserve and therefore can be leased out. The State admits that a demand has been made for payment of $700,000 but says that the claim is "baseless, unreasonable, unmeritorious and without legal justification". The State says it is committed to renew the lease and pay equitable and fair compensation according the terms and conditions approved by the NLTB. The State admits that it permanent improvements have been made on the land including the construction of a new Accident Emergency Centre at the hospital with the consent of the landowners costing $250,000 which opened in October 2008. The Plaintiffs have waived their rights by giving such consent.
THE NLTB'S DEFENCE
[24] In defence, the NLTB denies that it had breached ss 4 or 9 of the Act and says that there are some acres of other lands that remain unleased and uncultivated. The NLTB further says that leases could be granted under s 8 of the Act subject to the limitations in s 9 and consent to de-reserve and for good cause under s 17. It admits that an offer to lease was made on 13 March 2003 subject to de-reservation which was revised on 30 November 2003 and still subject to de-reservation. The State paid $220,000 on 27 February 2004 pursuant to the revised offer of 30 November 2003.
[25] The NLTB maintains that the subject land is outside native reserve and by leasing it to the State the NLTB has complied with its obligations under the Act. It has fully considered the benefits to the Plaintiffs of leasing the land as a hospital, monetary and socio-economic, and that the continued leasing of the land as a hospital is for the utmost benefit of the Plaintiffs. It had completed an assessment of the Plaintiffs' land needs before issuing the lease.
[26] The NLTB claims that the Reserve Commission did in fact expressly state that the subject land was exempted from reservation and that the NLTB did conduct a proper assessment of the Plaintiffs' needs and did determine that they had sufficient land for their current and future maintenance, use and subsistence. Further, the NLTB has allotted to the Mataqali from 8 December 2000 a further 21 acres (NLC Lot 2 map ref L/8-2) for their use.
[27] As to whether the subject land was reserve land or not, the NLTB says that the land was outside of native reserve and has at no time ever formed part of nor did it revert to native reserve.
THE AGREED FACTS
[28] It is not in dispute that the subject land was leased for 99 years to the State from 1 January 1903. According to the lease document[1], the lease is a Crown Lease between "Buli Nasigatoka on behalf of themselves and Mataqalis" as lessors and "The Commissioner of Lands on behalf of the Crown" as tenant. The lease was registered on 29 January 1904 in Crown Lease Book IV/88 Folio 59. It was subject to the covenants and powers implied in leases under "The Real Property Ordinance 1876" which were for the lessor's power to distrain, to enter and inspect on notice and to enter into possession in default of payment of rent. The lease was subject also to the following covenant and proviso:
"PROVIDED ALWAYS that the Lessors may from time to time so long as any portion of the land hereby demised shall remain unoccupied by the said Commissioner of Lands or some person holding from or under him enter upon such land and cut and remove the timber and the fruits and edible roots growing thereon without let or hindrance."
[29] The original lease was for 34 acres of land. According to the memorials on the lease, the 15 acres and 2 roods were surrendered on 30 November 1943 and further 18.5 perches were surrendered on 20 July 1951. The remaining area under lease is now 15 acres, 3 roods and 18.5 perches.
[30] On 13 March 2003, the NLTB gave the State an offer to lease the subject land, subject to de-reservation and subject to the payment of $404,107.50 in rent and premium and fees. The parties also agreed that on 4 March 2004 the NLTB received the sum of $220,732.50 from the State pursuant to that offer and that out of that sum the NLTB paid $203,750.00 to the Plaintiffs on 7 April 2004.
THE QUESTION TO BE DECIDED
[31] Despite the various causes of action pleaded, the issues in this case have been narrowed by the submissions[2] of the Plaintiffs' counsel as follows:
"The plaintiff Mataqali members instruct (that) they want to clarify and stress two points at the very outset of this submission. The first is that they want the Court to know that the only reason why they have come to this Court and for that they have incurred huge expenses and time, now going on to its eighth year, is because they feel let down by NLTB, their Trustee. They sincerely feel NLTB has let them down badly and neglected its duty to act in their best interests. Had it not been for that, there would be no need to come to this Court.
The second point they want to stress at the outset of this submission is that it has never been their intention nor will it ever be to evict the Hospital and take their land back. All that they have been asking the Director of Lands directly, and for which they were depending so much for support from NLTB as their Trustee, is to be paid the fair market value of their land as consideration upon alienation in the same way as any other citizen would expect to receive upon the alienation of his land. The Director of Lands and NLTB more especially as their Trustee denied and refused them their request. Their only hope is to get a Declaration from this Court".
[32] The submission means that I do not have to consider the effect of s 9 of the Act which required the NLTB, before leasing any native land, to be satisfied that during the currency of the lease the land was not likely to be required by the landowners for their use, maintenance or support.
[33] The question to be decided therefore is whether the NLTB had fulfilled its obligations as trustee for the Plaintiffs in making the offer of 13 March 2003 which was subsequently varied and agreed upon on 30 October 2003 without an additional payment of "goodwill or consideration".
HISTORICAL BACKGROUND
[34] The initial rental for the whole of the 34 acres was £3 sterling per annum in 1903. Subsequent partial surrenders of the land at the request of the landowners left an area under lease now of 15 acres, 3 roods and 18.5 perches. In 1965, the Crown agreed to pay rental of £22.17.6 with effect from 1 July 1965 and to accept a reassessment of rental in 1978[3].
IS THE SUBJECT LAND RESERVED NATIVE LAND?
[35] One of the basis on which the Plaintiffs rest their claim is that the subject land was native reserve and that once the lease expired it reverted back to native reserve. They say they need their land for their use, maintenance and support because their numbers are increasing but have had to sacrifice it by re-leasing it to the State. On that basis they should be paid more than just rent.
[36] I do not think such a basis can be sustained. Firstly, the subject land could not have been reserved native land in the first place. The land was part of the Plaintiffs 162 acres described as Lot 60 on plan no. L/8-2. Those lands were the subject of Reserve Claim number 57. The recommendation[4] of the Native Land Commissioner, Ratu Josefa Sukuna, was that a reserve be approved for those lands but to exclude several areas under lease including the 34 acres under lease for the Sigatoka Hospital.
[37] Secondly, I held in Kanakana and Others v State [2010] FJHC 563; HBC116.1999S (22 December 2010) that prior to the cession of Fiji to the British Crown, all lands in Fiji were owned by the Fijians according to their customs and traditions, and after Cession, those ownership rights remained unaffected by any rights of the Crown except as stated in the Deed of Cession. Except for compulsory acquisition rights of the State, which point was not raised and argued, those exceptions are not in issue here so it would follow that ownership of the subject land reverted back to the Plaintiffs when the lease expired. To have the same reserved, the Plaintiffs would have to comply with the provisions of the Native Land Trust Act. Those steps have not been taken so the subject land remains as un-reserved. It is not correct to say that the land has to be de-reserved because it was never reserved at any time. Both the NLTB and the Plaintiffs have been wrongly advised in this respect.
[38] Counsel for the NLTB submitted that this issue is the crux of the Plaintiffs case and it having not been made out in their favour the action must fail. I agree because that was the lever which the Plaintiffs and their advisers used to put pressure on both the NLTB and the State to succumb to their demands. The subject land is under the control and management of the NLTB pursuant to the Native Land Trust Act and it is entirely up to the NLTB to negotiate with the State, in the words of s 4(1) of the Act, "for the benefit of" the Plaintiffs. The Defendants argue that they have done just that and which was the rent and premium they agreed upon on 30 October 2003. I therefore need to consider whether that was in fact the case.
THE PLAINTIFFS' VALUATION OF THE SUBJECT LAND
[39] Mr Mosese Volavola was appointed by the Plaintiffs to represent them in the negotiations for the new lease. He assessed the value of the 15 acres under lease based on market value and came up with a valuation of $707,202.00. This is the amount which the Plaintiffs say should be paid to them as "goodwill" or "consideration" for the loss of their land. This payment is over and above the rent and premium.
[40] Mr Volavola's valuation is based on the value of sales on subdivision of the land for residential blocks. He concluded:
The amount of $707,202 as Goodwill for investment purpose(s) for (the) use, maintenance and support of the present and future members of the Mataqali is therefore justified and appropriate.
[41] He explained how he arrived at those conclusions in his brief of evidence[5]:
- It was during (the meeting of 20/11/02) that NLTB said it will leave negotiation on payment of goodwill/consideration to the landowners and Lands Department.
- I want to say something here on why we are demanding the payment of goodwill. Goodwill is not the right term but we use it because it has been used generally. The correct term is leasehold value...
- This is the market value of the lease with or without improvement. In the same way that you have market value of freehold land with or without improvement depending on whether it has improvement on it.
- In my many years at NLTB, the leasehold value has never (been) demanded as consideration. That has been the policy and I do not know the reason for that policy.
- But I know, quietly and silently, the landowners ask why a person is paid so much for a freehold and pittance for native land.
- It was not NLTB who brought up the need to pay for the leasehold value but I and the landowners and the only thing NLTB (said) was – I will leave it to you to sort that out.
- On 11/03/03 I wrote to the Lands Department to plead the payment of the leasehold value.
- ...
- ... I had pleaded to (the) Lands Department the following:
- On expiration of the lease on 31.12.2002 the land has become reserved.
- Altogether the Mataqali has 243 acres 3 r 0 p of this the Mataqali has given away many lands for leasing and development leaving 201 acres as reserve for the maintenance use and support of 500 members. This gives a ratio of 0.4acres for each member.
- Consideration must be given to the highest and best use which, considering all factors is that of a subdivision. On the basis of subdivision, I assessed the leasehold value to be ($707,202).
- This ($707,202) must be paid in addition to the lease and premium calculated by NLTB which are really nothing more than just rent as usual.
- This does not take into account the fact that the landowners will be denied occupation for the next 99 years.
- The highest potential for the land is subdivision. If the landowners do not agree to renew the landowners can subdivide (for $707,202) in addition.
[42] I have some difficulty in accepting Mr Volavola's valuation because I think it is fundamentally flawed in several respects. The calculation of the rent and premium would have to take into account the value of the land to be leased - the "consideration" - so one would not expect an additional payment for it, separate from the rent and premium. It is true that it is entirely up to the parties to negotiate as to what should be paid but I think such a demand would be unrealistic and not likely to be accepted. The Plaintiffs say that they would have to forego their reserved land despite their needs, but even if that is correct, I do not think it justifies such a payment.
[43] Further, I do not think "alienation" - the word used by counsel for the Plaintiffs – of freehold land can be used as a basis for assessing the value of native land. Ownership of native leasehold land always remained with the landowners. At the end of the lease the landowners may decide not to renew the lease and take their land back, creating uncertainty of tenure for the "owner" tenant. In addition, lease payments are paid and reviewed periodically for the duration of a native lease whereas there are no such payments for freehold once alienated i.e. sold. And once freehold land is alienated, the landowner has no reversionary rights.
[44] Another reason which I think makes the valuation not well founded is that there are risks involved in subdivision of land. According to Mr Volavola's calculations[6], he would expect to complete and sell the blocks off within two years of starting. He gave no basis as to how he arrived at this time frame nor did he give any evidence of demand and supply for such blocks or that they will be sold within those two years.
[45] Finally, I do not think it would be right for the Plaintiffs to say, on the one hand, that they need the land for their subsistence, then on the other, to say that if they subdivided and sold it, they would have received $707,220 therefore the State should not only pay that sum now, but also pay rent and premium for depriving them of their land over the next 99 years. Apart from it being contradictory, the demand is for "double compensation", in my view. It seems to me that a fairer approach would be to calculate the rent based on the likely return on investment on the "leasehold value". I am in no way suggesting that this is what the parties should do, for I am of the opinion that that is not a matter for determination by this Court for the reasons I will give later on in my judgment, but one thing is clear, and that is, there is no law which says the Plaintiffs are entitled to the leasehold value as well as market rent. I think the CEO of the Lands Department was quite right when he wrote in his letter to the NLTB of 28 January 2004[7] that the "Good-will" demanded is almost equivalent to purchasing the property outright.
NATIVE LAND POLICY & ADEQUACY OF RENT
[46] Mr Volavola says that NLTB policy has never been to pay for "leasehold value". Several examples were given of where undeveloped native lands were leased at a peppercorn rent and premium but later subdivided and sold for large profits. The Plaintiffs submit that I should look into this policy and consider the adequacy of the proposed rent and premium even though they admit that Courts do not generally concern themselves with whether consideration is adequate or not.
[47] I do sympathise with the submission but I do not think that it is for this Court to decide whether the policy, if it in fact was and is, correct or justified. That is a matter to be decided by the NLTB, the landowners and the State. Putting it in another way, native land policy is a matter between executive government and the landowners and not a matter for the Courts. The Courts only decide disputes according to the laws as enacted to reflect that policy and according to the common law.
[48] Furthermore, it seems to me that this is not a case where the proposed rent and premium could be said to be just of "token" or "nominal" consideration. The State and the NLTB have explained how they arrived at the agreed sums which I find cogent and soundly based.
DO IMPROVEMENTS BELONG TO THE LANDOWNERS ON EXPIRATION OF THE LEASE?
[49] The Plaintiffs also argue that because the improvements were attached to the land, once the lease expired, the land together with the improvements reverted to the Plaintiffs, and the "consideration" should take into account the value of these improvements in favour of the Plaintiffs.
[50] Again, I think the argument is flawed. The lease is silent as to whether the improvements were to belong to the Plaintiffs or the State or what was to happen to them at the end of the lease. I have no doubt that had the parties addressed their minds to it they would have agreed that the Plaintiffs would have to pay compensation for the improvements if they wanted them at the end of the lease otherwise the State would remove/demolish them. One cannot ignore the fact that the improvements were built by the State and for a very specific purpose.
[51] The Plaintiffs rely on the authority of Surji v Native Land Trust Board [1997] FJHC 214; Hba0012.94b (19 June 1997) in support of their argument. In that case, the tenant erected a concrete house instead of a removable house on the land in breach of the terms of the lease. Scott J refused the tenant's claim for compensation for the house when the tenant had to vacate at the end of the lease because of the tenant's own breach. I do not think the same can be said of the present case. The case does not help the Plaintiffs.
BREACH OF STATUTORY DUTY
[52] Lastly, the Plaintiffs argue that the NLTB acted in breach of its duty under s 4(1) of the Native Land Trust Act to administer their lands for their benefit by failing to obtain payment by the State of "fair market value" rent.
[53] Several meetings were held and many letters passed between the parties and their representatives on whether the Plaintiffs were entitled to payment of "good will" or "consideration" of $707,202.00. I refer only to the most relevant letters which show the background leading up to the issue of these proceedings. I start with Mr Volavola's letter to the Director of Lands dated 11 March 2003[8] in which he wrote:
... I have been appointed by the landowners to be their spokesman and to negotiate directly with you on the question of a goodwill payment by government to the landowners.
Since your application for the renewal of lease two years ago, NLTB has had several meetings with the landowners and in some of these meetings your department was also represented. These meetings have mainly covered special conditions including employment, running of the canteen, maintenance work to buildings, running taxi bases, special access from the village to the Hospital site and operation of a mortuary if government decides to off-load responsibility.
The discussion of rental was to be done by NLTB and me and when we agreed, a letter of offer by NLTB to you was to be prepared. The letter of offer would have been sent to you a week ago.
You would have noticed that the offer stipulated that the landowner's consent to de-reserve the 15 acre site for another 99 years will be given once government agrees to a goodwill payment of $707,202.
Although the hospital lease has now expired, I have assured the Ministry of Health that the landowners will not disrupt the normal functioning of the hospital until an agreement is reached and the lease is executed.
[54] On 13 March 2003[9], the NLTB wrote a "without prejudice" letter of offer to the Director of Lands. The offer was for payment of premium of $360,000 and annual rent of $30,000 plus fees and VAT totalling $404,107.50. The letter said:
Please note that this offer is subject to majority written signatures of the Fijian owners and dereservation of the subject area. They have indicated to us that they are willing to do so upon direct negotiation with them for a Goodwill payment of $710,000. This sum reflects the scarcity of land to the landowners together with its reserve status after expiry of the lease on 31 December 2002. It also reflects the landowners goodwill to renew the lease and the fact that they will be deprived from the use of the land for their future use, maintenance and support during the currency of the lease.
If we do not receive any reply or payments by Friday 25 April 2003 this provisional lease offer will be withdrawn and we will close our file on the matter accordingly.
[55] The Director of Lands did not respond until 3 June 2003[10] in which he made a counter offer of $50,000 premium and $9,000 rent.
[56] The NLTB replied on 7 July 2003[11] as follows:
We are very disappointed with your Counter Offer in light of the rates that were recently paid for the renewal of the Lawaqa Government Station. Secondly, your office is fully aware of the shortage of land this landowning unit is facing due to their increase in population which makes them reluctant to renew the lease during our first approach.
...
We kindly request that you reconsider your Counter Offer in view of the points raised above and we shall be available for a meeting in order to resolve this important matter amicably.
[57] The Director of Lands replied on 22 July 2003[12] with a revised offer of $200,000 premium and $10,000 rental. The letter also said:
Please be advised that it is Government Policy that we do not entertain payment of 'goodwill' but only premium.
[58] The NLTB replied on 19 August 2003[13] with a counter offer of $250,000 premium and $15,000 rent, which was the rent that was paid as at the date of expiry.
[59] The Director of Lands replied on 22 September 2003[14] and said that they maintained their previous offer of $200,000 premium and $10,000 rent.
[60] On 30 October 2003[15], the NLTB accepted that offer subject to finalising the arrangement with the landowners and the granting of their consent for de-reservation to enable the issue of a new lease. That did not turn out to be the case because on 1 December 2003, Mr Volavola wrote[16] to the Director of Lands as follows:
I refer to my letter to you on the same subject dated 11/03/2003. Two days ago, on Friday 28/11/203, the landowners had a meeting at the village and asked me to follow up with you on the question of goodwill payment which they are demanding before they give their consent for the de-reservation and leasing of their reserved land.
You have not replied concerning this matter to date and 8 months have now lapsed.
To assist you in making a decision, you are advised to immediately search for a new site for the hospital if you cannot meet the landowners' demand as they would like to develop the present site for higher uses and better return than a hospital lease for their use maintenance and support.
Please be warned that if I do not hear from you soon, then a formal notice to vacate our reserve land will follow and in that regard you should inform me of how much time you require.
Further, since a year will soon lapse at the end of this month after the lease had terminated, the landowners demand that you pay $50,000 for occupying the present site for one year (based on present day value).
The amount is to be paid directly to the Mataqali as your occupying reserve land specifically for their use, maintenance and support without any formal agreement.
[61] That brought the following response from the Director of Lands on 8 December 2003[17]:
We have noted the contents of your correspondence and are considering our options to your proposal.
However, please be informed that we have received a lease offer from NLTB regarding the settlement of the above lease and we are in a dilemma on your proposal.
Please be advised that we are legally bound to negotiate with the NLTB on leasing matters, since they being the legal representative for native landowners. Therefore, we appreciated your concern but we wish to advise if you could please convey your proposal through NLTB.
[62] The Plaintiffs solicitors also wrote on 15 December 2003[18] to the Director of Lands effectively giving him 3 months within which to agree to pay goodwill of $707,202 or face eviction. The letter was copied to the NLTB so on 16 December 2003, the NLTB wrote to the Plaintiffs solicitors as follows:
I acknowledge receiving copy of your letter to government together with your letter explaining to us the grounds that you wish to pursue in regards to payment of goodwill to your clients. In fact this has been the stand of the landowners all along and we have clearly advised them to address the issue directly with government since we do not levy goodwill in our offer.
For your information government has already accepted our offer for a new 99 years lease (subject to de-reservation) with a premium of $200,000 and rent of $10,000 per annum for the first 5 years. The rent will increase to around $57,000 per annum from the 6th year which will be reviewed every 5 years until the lease expires.
We have already advised the landowners on this settlement and they have decided to pursue the goodwill negotiations directly with government based on the justification outlined in your letter. In that respect we would not be in a position to issue a lease to government because the subject land is in native reserve. We would therefore be pleased to see that the matter is resolved as soon as possible so that we could proceed with the processing of the new lease.
I hope that common sense and goodwill would prevail in your negotiation with government regarding the request from your clients in view of the importance of this public utility facility to the people of Nadroga/Navosa.
[63] On 28 January 2004, the CEO of the Lands Department wrote[19] to the NLTB regarding the above letter as follows:
It would not be practical to agree to a lease, which would still be subject to "goodwill" demand from the landowners.
We strongly believe that this claim should be settled by the NLTB before offering us a lease.
Any developer or entrepreneur would relate the rental he has to pay to the value of the land being leased. This is what we had already agreed upon. If the landowners are to put in a separate claim for goodwill then this would upset the whole equation.
We need to educate the landowner on this issue as the "Good-will" demanded is almost equivalent to purchasing the property outright.
[64] The Plaintiffs not being happy with the negotiations went to the press and aired their frustrations. That led to another series of letters from the NLTB to the Plaintiffs solicitors assuring the Plaintiffs that their demands were being addressed.
[65] On 19 February 2004, the NLTB wrote[20] to the Director of Lands suggesting that the State proceed with payments as agreed so that the NLTB could put in motion the process for de-reservation. On the next day the CEO of the Lands Department wrote[21] confirming that arrangements were being made to pay the premium and rent as previously agreed. A payment voucher[22] was eventually raised on 24 February 2004 for those payments and for fees and charges totalling $220,732.50.
[66] On 23 February 2004, the Plaintiffs solicitors again wrote[23] to the NLTB explaining why their clients were demanding a goodwill payment. The NLTB responded on 3 March 2004[24] confirming that payment had been received from the Director of Lands and further explained:
1. Premium.
This is basically rent paid in advance. The rate of which depends on the market rate, dwelling on the principle of demand and supply. Our analysis for alternative use as either residential or commercial indicates that the $200,000 premium for Class 1 – Special Lease is much higher. We will be glad to explain this in detail when we meet.
2. Minimal loss on previous lease.
The rent paid was indeed perceived minimal in the early 1900's but it is the rate that was prevalent in all government leases at that time. Realistically, we really have to consider the open market for land in Sigatoka at the time.
In 1983, rent was reassessed from $45.75 to $10,500 and to $15,000 on 1/1/88. Such market rent increase was aimed to address the nominal rent levied in the past.
3. Minimal available land for the mataqali.
This issue is to be drawn in comparison to the alternative income, as benefits earned to all the members of the mataqali, in return of foregone benefits from the direct use of the land.
A brief estimate of income in the 99 years lease, indicate that in the first 10 years, a total gross of $515,000 is assured to be paid. A conservative projected rental at $100,000 per annum on average for the remaining 89 years amounts to $8.9 millions. The opportunity cost foregone by all landowners in allowing a hospital lease is adequately compensated from the rental income derived as projected. The issue here is to secure an investment option that will magnify and sustain the rental income for the benefits of all mataqali members during the term of the lease and beyond.
You will agree that the projected income far surpassed the compensation amount paid in the Nausori bridge that you referred to in our discussion on 26/2/04. In any case, compensation for land acquisition can never be compared as basis to leasing, since the reversionary rights of leasing always remains with the owners.
4. Higher return from alternative uses such as residential and commercial.
We have answered this in (1) and (3) above. One must ground this hypothetical issue to open market reality. A demand and supply analysis on the locality is critical. In this case, do we have the demand for commercial and residential in the locality? Why is it that there are vast empty spaces from Sigatoka town to the hospital or why is it the lands adjoining the hospital are cane fields extending to Volivoli village on both sides of the highway? These are critical questions that must be answered in establishing the demand and supply of land in Sigatoka, before hypothesising alternative income.
5. Comparable assessment and payments of goodwill on similar cases.
Please quote specific cases for our elaboration when we meet.
6. Ownership of improvements on expiry of lease.
The cases you mentioned may hold waters legally but the position now is that the Board has issued leases over those expired leases on certain understanding. One of which is to enter into a separate agreement (MOU) to cover these issues, as was the case in RKS.
7. Priority to landowners on unskilled labourers.
The Director of Lands has consistently rejected this issue in other expired leases, even though the tenant ministries are agreeable to it. A way to resolve this is to enter into an agreement between the hospital Board (of which a member is a landowner) and the landowner, so as to isolate it from the main lease. We are still pursuing this with the Director of Lands and the Health Ministry.
Last but (not) least, while we both act for the best interests of the landowners, it does not exclude the principle of reasonableness and fairness in the disposition of our responsibilities and we must educate landowners accordingly. We maintain that the premium of $200,000, $10,000 per annum in the 1st 5 years and $53,000 from the 5th to the 10th year is fair and reasonable. We propose to meet with you on the 8th of Monday (sic) at 2.00pm in this office to elaborate in detail on issues raised. Hopefully, from there we can progress further to finalise the lease with the Director of Lands.
[67] The Plaintiffs solicitors replied on 25 March 2004[25] as follows:
As it is, your position and the government's position is clear. It is that and the government will not shift from your present stand and you want the landowners to accept it on those terms. Your letter to me dated 3 March 2004 leaves no further room to consider the landowners demand. It simply seeks to justify the $200,000 per annum already assessed with the inkling that the landowners must accept it. But, worse than that your letter was copied to the Lands Department. Surely, the Lands Department will be only too happy to know that the NLTB agrees with it and not the landowners.
It is sad because the NLTB was established for one reason and one reason only, which is to act in the best interest of the landowners. It must never abandon them. Public interest is a government concern, not NLTB's.
We are on different wavelengths because you talk about premium whilst we are referring to goodwill/consideration in lieu of the landowners giving consent to dereservation. The reserve is an encumbrance and a caveat against the Board. This land can only be leased out to the government if the landowners agree. And they are asking $700,000 for that. The Board can never grant a lease without the landowners consent, unless of course it wants to break the law.
This amount of $700,000 demanded is reasonable and fair for the reasons previously outlined to you. But more than that it is lawful and within their legal rights to demand this money. It is clear now that the government and the Board do not want to negotiate. Three months is ample time and as always the Lands Department has hardly made any effort. The blame now falls squarely on government and NLTB for their delay and indifference. But the landowners will not be forced into submission by the public utility need. They have been through that many times before. They will not go through it again.
There being no resolution within the three months stipulated in the notice the landowners have instructed me, which I now do, to thank the Board for the effort taken. I am also instructed to give the Board Notice, which I now do, under s. 8 and s. 9 of the NLTA that he landowners will be requiring the subject land for their own use. I am further instructed to inform the Board, which I now do, under s. 17 of the NLTA that the landowners will not consent to dereservation.
Accordingly as instructed, I now request to return to the government whatever sum they have paid and see to their eviction, the Board being in no position to grant a lease because the landowners have now refused consent to dereservation and require the subject land for their own use.
Please do not forget to remind the government that according to the terms and conditions of the lease the improvements now belong to the landowners.
[68] The reply from the NLTB was on 2 April 2004[26]:
We are perturbed by your letter of 25/3/04 and wish to comment as follows:
Last but not least, we believe your threats to close the hospital does not carry the support of the majority of the landowners which leaves doubts to the protocol that should be observed in a village traditional set-up. We will be meeting the landowners shortly to further discuss the mater and trust that good sense will eventually prevail to conclude a win-win solution.
[69] The Plaintiffs solicitors wrote back on 5 May 2004[27] and reiterated the Plaintiffs earlier request for the Lands Department to vacate the subject land forthwith. A further letter[28] was sent by the solicitors on 10 June 2004 suggesting that the NLTB consider a valuation from them as a way of resolving the matter. A valuation was done but it did not resolve the matter and about a year later, the Plaintiffs filed their writ of summons.
THE LAW ON BREACH OF STATUTORY DUTY BY THE NLTB
[70] The Plaintiffs submit that the form and nature of this duty are as expressed in the judgments of Marshall CJ in Cherokee Nation v Georgia (477) [1831] USSC 6; (1831) 30 US1; Worcester v Georgia (478) (1832) 31 US 350 and the High Court of Australia judgment in Mabo (No 2) [1992] HCA 23; (1992) 175 CLR 1. I think those cases are not helpful for the Fiji situation because of the fact that our land laws had a Deed of Cession as a starting point. That was the conclusion I reached in Kanakana and Others v State [2010] FJHC 563; HBC116.1999S (22 December 2010) ("the Suvavou Case"). Instead, my view is that the various duties imposed on the NLTB are as set out in the Act, specifically for the present case, s 4(1), which requires the NLTB to administer native land "for the benefit of the Fijian owners".
[71] That seems to me, as a matter of statutory interpretation, to be different from the usual trustee's duty to act "in the best interests of the beneficiaries". The duty here is something less than that. Subject to that rider, I am guided by what was said by Sir Robert Megarry V-C in Cowan v Scargill (1985) Ch 270, 286-7:
I turn to the law. The starting point is the duty of trustees to exercise their powers in the best interests of the present and future beneficiaries of the trust, holding the scales impartially between the different classes of beneficiaries. The duty of the trustees towards their beneficiaries is paramount. They must, of course, obey the law; but subject to that, they must put the interests of their beneficiaries first. When the purpose of the trust is to provide financial benefits for the beneficiaries, as is usually the case, the best interests of the beneficiaries are normally their best financial interests. In the case of a power of investment, as in the present case, the power must be exercised so as to yield the best return for the beneficiaries, judged in relation to the risks of the investments in question; and the prospects of the yield of income and capital appreciation both have to be considered in judging the return from the investment.
...
[72] However, I do accept that whatever the duty is, the standard that is required is that, per Sir Robert Megarry V-C in Cowan v Scargill (supra) at p 289:
... he must:
"take such care as an ordinary prudent man would take if he were minded to make an investment for the benefit of other people for whom he felt morally bound to provide:"
per Lindley LJ in In re Whiteley [1886] UKLawRpCh 180; (1886) 33 Ch D 347, 355; see also at pp 350, 358; and see Learoyd v Whiteley (1887) 12 App Cas 727. That duty includes the duty to seek advice on matters which the trustee does not understand, such as the making of investments, and on receiving that advice to act with the same degree of prudence. This requirement is not discharged merely by showing that the trustee has acted in good faith and with sincerity. Honesty and sincerity are not the same as prudence and reasonableness. Some of the most sincere people are the most unreasonable; ... Accordingly, although a trustee who takes advice on investments is not bound to accept and act on that advice, he is not entitled to reject it merely because he sincerely disagrees with it, unless in addition to being sincere he is acting as an ordinary prudent man would act.
[73] And, as to how the trustee is to exercise his powers, Cowan v Scargill (supra) at p 288, per Sir Robert Megarry V-C:
... in In Re Wyvern Developments Ltd [1974] 1 WLR 1097, 1106, Templeton J. said that ... "He is in a fiduciary capacity and cannot make moral gestures, nor can the court authorise him to do so." In the words of Sir James Wigram VC in Balls v Strutt (1841) 1 Hare 146, 149:
"It is a principle in this court, that a trustee shall not be permitted to use the powers which the trust may confer upon him at law, except for the legitimate purposes of the trust; ..."
Powers must be exercised fairly and honestly for the purposes for which they are given and not so as to accomplish any ulterior purpose, whether for the benefit of the trustees or otherwise: see Duke of Portland v Topham [1864] EngR 339; (1864) 11 H.L.Cas. 32, a case on a power of appointment that must apply a fortiori to a power given to trustees as such.
[74] As to what the word "benefit" means, Sir Robert Megarry V-C said this in Cowan v Scargill (supra) at p 288:
"Benefit" is a word with a very wide meaning, and there are circumstances in which arrangements which work to the financial disadvantage of a beneficiary may yet be for his benefit: see, for example, In re T's Settlement Trusts [1964] 1 Ch 158 and In re C. L. [1969] 1 Ch 587."
[75] In the case of In re T's Settlement Trusts [1964] 1 Ch 158, Wilberforce J was asked to approve a variation of a trust in favour of a child under the Variation of Trusts Act, 1958 (UK) to restrict her from getting her full entitlement on her attaining the age of 21 because she was said to be "alarmingly immature and irresponsible as regards money." The variation would be allowed if it was for her benefit. His Lordship said this of the word "benefit", at p 161:
... "benefit" is a word of wide meaning: it is not restricted to material benefit. On this basis I was urged to approve the arrangement.
This argument, based on the language of the Act, has much force, ...
.
.
There are obvious difficulties in attributing so wide a meaning to the Act of 1958. For example, is the court to consult the wished of the infant? That is, as has been found here, a matter of considerable difficulty, and where, as here, the infant is nearly 21, it would seem preferable, if her wishes can be taken into account, to leave the matter over until she can decide for herself. Or can the court impose a settlement against the infant's wishes? To so this would involve going much further than the court goes under the Act of 1855, and places upon the court a heavy responsibility (which it does not have generally in variation of trusts applications) of considering and estimating the views of other persons (often including parents and medical and psychological experts) as to what is for the infant's benefit.
[76] In the case of In re C. L. [1969] 1 Ch 587, Cross J. also rejected the notion that "benefit" must involve some financial advantage.
[77] Having considered the above cases, I have come to the conclusion that under s 4(1) of the Native Land Trust Act the NLTB's duty to act "for the benefit of the Fijian owners" is as follows:
- To take such care as an ordinary prudent man would take if he were minded to make an investment for the benefit of other people for whom he felt morally bound to provide.
- To seek advice on matters which the NLTB does not understand, such as the making of investments, and on receiving that advice to act with the same degree of prudence. This requirement is not discharged merely by showing that the trustee has acted in good faith and with sincerity.
- Its duty may be discharged even when the benefit to the Fijian owners does not involve a financial advantage. The benefit may include protection of the land in question and prevention of waste and loss.
APPLICATION OF THE LAW TO THE FACTS
[78] I have set out the relevant correspondence above in some detail. It is clear to me that the NLTB had done what it was supposed to do and had complied with its duties and obligations under s 4(1) of the Act. Firstly, there is no legal or other basis for the demand for goodwill or other consideration other than rent and premium. Secondly, I am satisfied that the NLTB acted professionally and prudently and the agreement they reached with the Director of Lands is soundly based and will benefit the Plaintiffs.
[79] The final result is that the lease terms that were accepted by the NLTB on 30 October 2003 are valid and binding.
CONCLUSIONS
[80] As I have found that the land in question is not reserve land and the lease thereof entered into on 30 October 2003 is valid and binding, the Plaintiffs claim for declaration and orders under the first cause of action are refused.
[81] I have also found that the improvements belonged to the State and not the Plaintiffs despite them being affixed to the land. The Plaintiffs second cause of action also fails and the declarations and orders sought are refused.
[82] The third cause of action also fails because there is no legal or other basis for payment of "goodwill or consideration" over and above premium and rent for the native lease. The declaration sought thereunder is refused.
[83] The NLTB in granting the renewed lease had acted for the benefit of the Plaintiffs and therefore had not breached its obligations under the Act. The fourth cause of action also fails and the orders and declarations sought are refused.
[84] The land is not reserve native land. The Plaintiffs claim is simply for payment of goodwill on top of rent and premium. The fifth cause of action is either abandoned or, if not abandoned, cannot be sustained. The declaration and orders sought thereunder are refused.
[85] The lease was validly entered into so the Plaintiffs sixth cause of action also fails and the declaration sought thereunder is refused.
COSTS
[86] This dispute was premised on bad advice given to both the NLTB and the Plaintiffs that the land reverted to native reserve when the lease expired. The Director of Lands was not any wiser. The Plaintiffs advisers' stubborn and steadfast adherence to their untenable position prolonged the negotiations and made resolution impossible. In the circumstances I do not think anyone should be entitled to costs and I make no order as to costs accordingly.
ORDERS
[87] The orders are therefore as follows:
............................................................
Sosefo Inoke
Judge
[1] Agreed Bundle of Documents (ABD) p1
[2] Filed on 24 August 2010, paras 1 and 2.
[3] ABD p 32
[4] ABD p 27
[5] Exhibit P 77
[6] ABD p 69
[7] ABD p 99
[8] ABD p 61-2
[9] ABD p 64-5
[10] ABD p 74
[11] ABD p 77
[12] ABD p 80
[13] ABD p 81
[14] ABD p 84
[15] ABD p 85
[16] ABD p 89
[17] ABD p 92
[18] ABD p 93-4
[19] ABD p 99
[20] ABD p 102
[21] ABD p 104
[22] ABD p 107
[23] ABD p 105
[24] ABD p 110
[25] ABD p 114
[26] ABD p 117
[27] ABD p 119
[28] ABD p 120
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