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Kwan v Hatanga Ltd [2017] SBHC 11; HCSI-CC 538 of 2015 (21 February 2017)

IN THE HIGH COURT
OF SOLOMON ISLANDS
Civil Jurisdiction

BETWEEN: WILLIAM KWAN - Claimant

AND: HATANGA LIMITED - 1^st Defendant

REGISTRAR OF TITLES - 2^nd Defendant

Date of Hearing: 31 January 2017
Date of Judgment: 21 February 2017

Mr. A. Radclyffe for claimant
Mr. B. Upwe for defendant
(Attorney General to abide decision of the Court)

Application for Relief against forfeiture and Rectification of lease Register

Brown J:

These proceedings seeking relief against forfeiture of the claimant’s lease of parcel no. 191-023-135/3 belonging to the 1^st defendant, Hatanga Ltd [Hatanga] were instituted on the 20 October 2015. The proceedings seek findings, in the category A Claim, that no valid notice before forfeiture by Hatanga was served on the claimant as required by S.138 of the Land and Titles Act and that no valid notice of re-entry was served on the claimant. As well, the claimant seeks rectification of the Lease Register to have him reinstated as owner of the lease-hold estate.

By S. 157 (which relates to notices before and relief against forfeiture) the provisions affecting the Commissioner of Land’s rights of forfeiture of an estate, by need for notice before forfeiture and an owners right of relief against forfeiture, shall mutatis mutandis, apply to cases such as this, where the 1^st defendant had become owner of the estate in the land parcel. For there is no dispute over the fact that the 1^st defendant’s ownership of the particular land was subject to the lease at the time it become owner, in 2010, for the registered lease to the claimant was originally taken from the Guadalcanal Province for a term of 50 years from the 1 January 2002 at an annual rental of $ 3,000.

It must be remembered that there are two issues, for relief against forfeiture does not call for consideration of the validity of a notice required by S.138, rather other matters are for the courts consideration on the question of relief, the pre-requisite to a right of forfeiture is the effective notice. Section 139.-[1] says:-
“The owner of an estate upon whom a notice has been served under section 138, ...” rather presumes the validity of the notice before leading to other circumstances for the court’s consideration before any exercise of discretion on the question of relief.

The claimant pleads in the first place, the effectiveness of notice required by S.138 of the Act. If the court should find against him on that issue, then the other matters pertaining to the courts discretion to be found in S.139, are pleaded, the claimant says, supported by the evidence, and thus calls for the court to grant relief by way of reinstatement of the lease.

The first issue, then is whether the “notice” to forfeit was a valid notice, for the 1^st defendant’s evidence of the notice and the fact of its service by registered post has not been contested, rather the “reasonableness” of the period allowed in the notice to contest the proposed forfeiture in the light of the time when actual notice was received by the claimant, and the basis relied upon by Hatanga. For the period stated by the notice was one month in which to rectify the failure to pay rent, the section refusing a right in the Commissioner [or subsequent owner] to exercise forfeiture without allowing a reasonable period for rectification of breach.

For by letter dated 1^st September 2015 Hatanga Ltd addressed to William Kwan^[1], rental was increased and notice given of Hatanga’s intention to enter and repossess the property if payment of the arrears of the increased rent was not made within 30 days. In fact rental had not been paid to Hatanga since the company had become owner of the property nor had demand previously been made. On the 5 October 2015, Hatanga gave notice of re-entry to William Kwan through default of payment and possession of the property.^[2] It would seem change of physical possession had not happened and re-entry will depend upon the outcome of these proceedings.

By letter of the Registrar of Titles sent William Kwan on 13 October 2015, the Registrar informed him of the forfeited lease and notice of re-entry entered on the lease register. He was also informed of his right to apply for relief to the High Court within one month from the date of re-entry notice.^[3]

The claimant denies the basis for relief relied upon by Hatanga. For there is no evidence of the claimant having been advised of the change of ownership of the lease holder. In fact Mr. Bartlett in his oral evidence in court on cross examination relied wholly on the wording of the lease, for he said he had “no obligation in by law inform him of the transfer” when asked about Kwan’s knowledge of the transfer of the ownership of the lease to Hatanga from the Guadalcanal Province.

There is then, no advice of the change of ownership from the Commissioner to Hatanga of the lease as required by the Lands Titles Act^[4] for the leasee is explicitly not liable for breach of any agreement to pay rent before notice. The 1^st defendant argues the claimant acknowledged in his statement of the 5 November 2015^[5] that he knew of the defendant’s title and consequently there was no need to issue a notice required by section 173[5][b] of the Act. This is again a misunderstanding of the Act. Implied or actual knowledge of a change of ownership of the lease does not obviate the requirement for the statutory notice. The 1^st defendant may not presume to rely on the failure to pay rent as a breach entitling it to give notice before forfeiture under section 138 of the Act in the absence of the notice of change of ownership required under section 173[5][b].

The Notice of the 1 September 2015 relied upon, had changed the rent payable, backdating the changed obligation. The claimant denies the right of the lessor in this case to unilaterally increase the rent. The lease contained no rent revision clause.

The claimant offered the amount of rent outstanding under the terms of the lease in the sum of $ 16,750-00 (after he had in effect accepted Hatanga’s right as lessor to rent entitlement) an offer rejected. The offer was rejected by Hatanga since it did not accord with the notice of the 1 September^[6] seeking the amount of increased rent in the sum of Ten Million dollars.

I am satisfied the Lease Instrument, “WK 1-21”^[7] provides at clauses 3 & 4, the term and annual rental, subject to S.135 of the Land & Titles Act. Section 135 gives the Commissioner pursuant to subsection 3, power to review the rental payable at intervals of not less than 25 years. Any such right of revision of rent by any subsequent lessor, (by transfer from the Commissioner) cannot arise before the statutory period of 25 years has passed unless by agreement under S. 159. The claimant says there is no such agreement. No agreement has been show by the defendant, who agreed in cross examination that the Commissioner’s transferred lease enabled Hatanga to assume the benefits and liabilities in the original lease document.

Mr. Bartlett, for the defendant, did say he was under no obligation by law to inform the claimant of the transfer, an understanding which regrettably is wrong and which may have been partly responsible for the continuation of these proceedings.

The effect then, is that particular breach of the lease complained of in the notice of the 1 September was no breach in terms of the Act and consequently the notice was invalid. The defendant by his counsel’s written submissions relies on a breach of the condition of the lease in that rent was unpaid. As a consequence the notice of forfeiture issued. In support of his argument, he calls in aid s. 155[3][a]:-
“155-[3] The right of forfeiture shall be taken to have been waived if-
[a] the lessor accepts rent which had become due since the breach of the agreement or obligation which entitled the lessor to forfeit the lease or has by any other positive act shown an intention to treat the lease as subsisting; and
[b] ..”
By refusing to accept the cheque tendered for the rent due in accordance with the original lease, the 1^st defendant, the lessor, argues it has not waived the right of forfeiture. This argument fails for the reasons, above, for the right of forfeiture had not arisen.

Whilst the issue about the time allowed by the notice, to one month, was argued, the invalidity of the notice for the reasons given, do not require resolution of the issue. For in the absence of a valid notice, the lessor is not entitled to exercise the right of forfeiture.^[8]

Suffice to say the presumption of normal service by post has been displaced by the factual evidence of the claimant and no evidence in answer to the actual receipt of the registered posted notice after the month stated by the notice had passed, perhaps by the responsible officers of the Post Office, has been brought. I accept the factual evidence of the claimant about the date he actually received the notice and find unreasonable the time allowed by the notice, treating as it does with the ownership of the lease coupled with the supposed breach of the right presumed by Hatanga to a purported increased rent of $10m.

In these circumstances where the actual receipt of the notice is after the expiration of the period nominated by the notice of the 1^st September, the claimant calls in aid section 139 of the Act for the exercise of my discretion for relief against forfeiture. Having regard to the conduct of the defendant company which failed to notify the claimant of the change of ownership of the leased property yet proceeded to claim rental moneys never agreed, this court in its discretion is also satisfied of the entitlement in the claimant to relief against forfeiture.

The court hereby orders rectification of the lease register pursuant to S.139 (1) by act of the Registrar of Titles reinstating the claimant as owner of the lease-hold estate in parcel no. 191-023-135/3. In so far as the claimant seeks a declaration in relation to the Hatanga Board of Directors’ knowledge of the companies notice of the 1 September, whilst there is an email string between the lawyer for the claimant and a person named as a director of the 1^st defendant, such material is not of such veracity as to afford the court satisfaction on the issue. I decline the declaration as sought. The claimant shall have his costs from the defendant. I give liberty to apply in relation to the terms of these orders.

__________________
BROWN J

^[1] Bundle of Pleadings & Sworn Statements, 57
^[2] Bundle, 67
^[3] Bundle, 18
^[4] Land & Title Act, S. 173(5)(b)
^[5] Bundle, 7
^[6] Bundle at 67
^[7] Bundle at 12-15
^[8] Land & Titles Act, S. 138