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Bishop of Melanesia v Maile [1973] FijiLawRp 9; [1973] 19 FLR 49 (19 July 1973)

(1973) 19 FLR 49

COURT OF APPEAL OF FIJI

BISHOP OF MELANESIA

v

DANIEL MAILE

[COURT OF APPEAL, 1973 (Gould V.P., Henry J.A., Marsack J.A.), 10th, 19^th July]

Civil Jurisdiction

Landlord and tenant-rent-appropriation-agreement to waive arrears-appropriation by landlord of subsequent payments by tenant in satisfaction of rent outstanding prior to agreement-intention of parties regarding agreement and further acceptance of rents.

Contract-performance-appropriation of payments-agreement to waive arrears of rent-appropriation by landlord of subsequent payments by tenant in satisfaction of to rent outstanding prior to agreement-intention of parties regarding agreement and further acceptance of rents.

Contract-validity -ostensible authority to enter into an agreement.

After a lease for 99 years had been in existence for 11 years and arrears of rent had accrued, the landlord and tenant entered into an agreement in 1967 waiving the outstanding arrears and converting the original rent into the new currency of dollars. Rents, although irregular, were thereafter paid up till December 31, 1970. The landlord purported to appropriate the last payment of rent to a period prior to the agreement and thus invoke the forfeiture clause in the lease.

Held: 1. The agreement of 1967 and the intention of both parties made it clear that subsequent rents were to be appropriated to the period after the agreement.

2. There was no question of ultra vires as the Archdeacon had ostensible authority to enter into the agreement on behalf of the appellant.

Cases referred to:

Leeson v. Leeson  [1936] 2 K.B. 156; [1936] 2 All E.R. 133.
Parker v. Guiness 27 Law Times L.R. 129.
Uxbridge Permanent Benefit Building Society v. Pickard  [1939] 2 K.B. 248.

Appeal from a judgment of the High Court of the British Solomon Islands.

K. C. Ramrakha for the appellant.
Respondent unrepresented.

The following judgments were read:

HENRY J.A.: [19th July 1973.]-

The facts relevant to this appeal are short and the point of law involved turns upon the right to appropriate moneys paid for rent. Appellant, being a corporation sole, had power to grant leases of land on Santa Ysabel Island. Pursuant to this power, by an indenture dated April 11, 1956, appellant leased land to Respondent for a period of 99 years from January 1, 1956. Rent was payable for the first 3 years in the sum of £25 before December 31 in each year. For the balance of the term the rent, was increased to £50 per year and was payable in two equal instalments of £25 each before June 30 and December 31 in each year. The said lease contained the following condition, namely:-

5. that if the said Lessee shall fail to make the prescribed payments within three months after the prescribed dates or contravenes the conditions of sections three and four hereinbefore mentioned the property shall immediately revert to the Melanesian Mission without redress.

The case now proceeds to the year 1967. The currency is now dollars. On July 19 1967 Respondent and the Archdeacon of Central Solomons signed a document in the following form:-

DIOCESE OF MELANESIA

FROM-

ALL SAINTS' CATHEDRAL
HONIARA,
BRITISH SOLOMON ISLANDS.

Venerable H.V.C. REYNOLDS,
Archdeacon of Central Solomons
Telephone No. 546

19th July 1967

I Daniel Maile of Sikaiana and the Lessee in the Indenture dated the eleventh day of April 1956 relating to the land of Mara-na-tabu, an island off Santa Ysabel hereby promise to pay the premium of One hundred dollars a year as set out in paragraph two of the said Indenture, such payments to be made in two equal parts before the 30th June and the 31st December of each year.

I Daniel Maile further agree that if I fall to make the above payments at the above prescribed dates with the additional three months allowance as set out in paragraph five of the said Indenture I waive full rights to the land which will then revert to the Diocese of Melanesia.

I Harry Vivian Collette Reynolds acting on behalf of the Diocese of Melanesia hereby waive any claim to back rent now due at this date, the twentieth of July one thousand nine hundred and sixty seven.

Signed at Honiara 19th July 1967
D. MAILE

Signed at Honiara 19th July 1967
H.V.C. REYNOLDS

After the signing of this document appellant, in its accounts, commenced to credit payments made thereafter in settlement of rent as from July 1, 1967. Payments by Respondent still continued to be irregular. The books of account of appellant show the following appropriations of payments:-

In February, 1971 Respondent paid the sum of $100. In the records of appellant this was appropriated to the periods January 1, 1959 to June 30, 1959 and July, 1, 1959 to December 31, 1959. If this appropriation was justified then, under the arrangement made on July 19, 1967, Respondent was in arrear as on and from July 1, 1969. If this payment had been appropriated pursuant to the said arrangement rent would have been paid up till December 31, 1970. Having been paid within 3 months, then clause 5, which provided for the reverting of the land to appellant, would not become operative.

After having, on this occasion, departed from the method of appropriation in force since July, 1967 appellant gave to Respondent a notice in the form following:-

Diocese of Melanesia,
P.O. Box C 19.
HONIARA
BRITISH SOLOMON ISLANDS PROTECTORATE

 I THE UNDERSIGNED give you notice as follows:-

1. The lease dated the 11th day of April 1956 and made between ALFRED THOMAS HILL Bishop of Melanesia acting for and on behalf of the Diocese of Melanesia (then known as the Melanesian Mission) of the one part and yourself of the other part whereby the plantation and premises at Maranatabu off Santa Isabel and the adjoining portion of Santa Isabel comprised therein were demised unto you for a term of 99 years contains a proviso or condition that if you should fail to make the prescribed payments within three months after the prescribed dates the said plantation and premises should immediately revert to the Diocese of Melanesia (referred to therein as the Melanesian Mission) without redress.

2. The rent due on the 30th June 1970 is outstanding and more than three months overdue; furthermore the total rent due and outstanding up to and including the 30th June 1970 a mounts to $690 and the rent of' $50 due on 31st December is also outstanding.

3. I the undersigned Bishop of Melanesia acting for and on behalf of the Diocese of Melanesia require you within three months from the date hereof to pay all arrears of rent provided that all such money, received from you or on your behalf will be appropriated so as to discharge the said arrears of rent in the order in the order in which the payments prescribed under the said lease became due.

4. If at the expiry of three months any rent is still outstanding your lease will be considered determined as from the 31st December 1970 and proceedings instituted to forfeit the said lease recover possession of the said plantation and premises and to cover any outstanding rent and mesne profits.

Dated the second day of March 1971.

†John Melanesia
L.S       .

To Daniel Maile
Maranatabu
Santa Isabel
B-S-I-P-

Apart from any question of the validity of the document of July 19, 1967 as an effective waiver of arrears of rent, the above notice would be ineffective if the appropriation of the sum of $100 paid on February 9, 1971 was made wrongly. This for two reasons, namely, (a) because default prior to 1967 was no longer available as a ground to invoke clause 5, and (b) an appropriation on the same basis as earlier payments made after July, 1967 would settle rent due up to December 31, 1970. In that event the period of 3 months required by clause 5 would not have expired. It was not argued that default prior to July, 1967 was available for the purpose of creating a right to exercise the powers contained in clause 5.

I turn, therefore, at once to the question of appellant's right to appropriate the said payment of $100 to rent overdue prior to the arrangement of July 19, 1967. It is clear law that a debtor has the first right of appropriation, but such right need not be exercised in express terms. If not expressly communicated to the creditor an appropriation by a debtor may be inferred from the nature of the transaction or from the circumstances in which the payment was made.

The law on this topic is conveniently summarised in Halsbury's Laws of England, 3rd Edition, Volume 8 at pages 214, 215, paragraph 366. I propose to refer to one authority only. In Leeson v. Leeson  [1936] 2 K.B. 156 Greene L.J. said on page 162:-

It is true that a debtor who owes two debts to his creditor is entitled to appropriate a payment which he makes to his creditor to one debt rather than to the other. When, however, he does not notify the creditor of his intention, and when the circumstances are such that the creditor receives the payment merely in satisfaction of the debts and the payment is not more appropriate to the payment of the one debt than to that of the other the creditor is entitled to make the appropriation. When it is said that there need not be an express appropriation of a payment, but that the appropriation can be inferred, that does not mean that appropriation of a payment from some undisclosed intention in the mind of the debtor. It is to be inferred from the circumstances of the case as known to both parties. Any other view might lead to injustice, as the creditor's right to appropriate a payment would be defeated. When the matter is examined upon principle it will be found that an undisclosed intention in the mind of the debtor is not sufficient to support an appropriation. If authority is needed for that proposition it can be found in the judgment of Lush J. in Parker v. Guiness 27 Law Times L.R. 129, 130 where he said 'What is to be considered is this. Is the true inference to be drawn from all the circumstances of the case that the debtor paid the moneys generally on account, leaving the creditor to apply them as he thought fit, or is the true inference that he paid them on account of special portions of the debt for the purpose and with a view to wipe out these out of the account? His undisclosed intention so to do would, of course, not benefit him. It is what he did in fact, and not what he meant to do that is to be regarded.

The circumstances in the instant case clearly show that the result of the arrangement made on July 19, 1967 was for arrears to be treated as having been waived. Whether or not such waiver was legally effective is besides the point. From this it naturally follows from the document that any further payments were intended to be appropriated against rent falling due from that date onwards. This is precisely what was done by appellants for 5 consecutive half-yearly periods. Then in February 1971 there is a sudden departure from this system of appropriation. A payment of $100 was appropriated to arrears which had accrued in 1959. These arrears, whether effectively or not, were purported to have been waived in 1967. The appropriation made by appellant was directly in conflict with the document of July 19, 1967.

It is, I think, clear that all payments made after the document was entered into, were made in pursuance of it and were intended by both parties so to be made. The arrangement then made was never cancelled or varied by notice or otherwise by appellant even although Respondent did not make the payments punctually. Appellant acted upon that document as if it were an effective waiver and allowed Respondent to make all payments thereafter in its terms. In my judgment, therefore, the circumstances point inevitably to the fact all payments made after July, 1967 were made and were intended by the parties to be made in pursuance of the arrangement of July 19, 1967. Accordingly, appellant had no right to appropriate the payment made on February 9, 1970 in any manner other than in pursuance of the terms of that document and the course of conduct adopted between the parties. That being so clause 5 of the indenture had not become operative. Appellant had no right to claim forfeiture when the notice of March 2, 1971 was given.

Counsel for appellant argued, but did not press, a claim that the document of July 19, 1967 was ultra vires and therefore of no effect. This argument was based on an alleged lack of authority on the part of Archdeacon Reynolds to enter into such an agreement on behalf of appellant. In my view there was no question of ultra vires. The only question was whether or not Archdeacon Reynolds had authority, either express or ostensible, to enter into such an agreement. I think that, in the circumstances, he had ostensible authority: vide Uxbridge Permanent Benefit Building Society v. Pickard  [1939], 2 K.B. 248. However, even if this be not so, clearly the acceptance and appropriation of rents pursuant to ostensible authority was carried out in the ordinary course of the business of handling payments of rent from a lessee. If so, then the course of conduct, based on the document (which was not repudiated), set up a clear inference that all rents paid thereafter were referable to the period subsequent to July, 1967 and that it was the intention of both parties that all payments thereafter would be so appropriated. This makes it unnecessary for me to deal with the effect of legislation relating to limitation of actions.

I would dismiss the appeal.

MARSACK J.A.

I agree with the judgment of Henry J.A. and with the reasons he gives in support of that judgment. In my view, determination of the appeal turns on the validity of the document of 19th July 1967, signed by Archdeacon Reynolds on behalf of the Diocese of Polynesia, and by the respondent. At the trial in the court below the present Bishop of Melanesia said in evidence:

As regards Ex C I say that it is no value. It was signed by Archdeacon Reynolds. The Mission is a corp. sole and can only sign by delegation. At the date of that document there was no Bishop. Hill had resigned and therefore his power of attorney to Reynolds had lapsed and I was appointed but not enthroned and I did not issue any fresh power. Therefore Reynolds had acted without authority. I do not want to press that point."'

Whether the point was pressed or not, I am firmly of opinion that the document of 19th July 1967 was legally effective to do what it purported to do: and, as is pointed out by my brother Henry in his judgment, was recognised as such by the conduct of the parties during a period of over two years subsequently, to the signing of it.

As in my opinion the arrears of rent had been waived in terms of the document in question, there did not exist on 2^nd March 1971 the state of affairs giving rise to a right to issue the notice upon which the action was based, that is to say rent in arrears for three months. Consequently that action could not succeed.  I therefore agree that the appeal must be dismissed.

GOULD V.P.

I have had the advantage of reading the judgment of Henry J.A. in this case and am in entire agreement with his reasoning and conclusions. I add only the brief comment that the circumstances of the case were such that it is beyond doubt that the parties must have contemplated that the payments being made by the respondent were being appropriated by him to the account of current rental. Acceptance of the payments by the appellant in those circumstances involved acceptance of the appropriation. All members of the Court being of the same opinion the appeal is dismissed.

Appeal dismissed.