IN THE COURT OF APPEAL OF TONGA
Court of Appeal, Nuku’alofa

CA 2/98

Tafolo

v

Vete

Burchett, Tompkins, Beaumont JJ
5 and 6 August 1998; 7 August 1998

Land ⎯ equity of possession ⎯ varied / discharged by subsequent arrangements
Practice and procedure ⎯ no evidence in crucial areas ⎯ new trial ordered 

Semi Vete and Tevita Fetuli, the first and second respondents, brought ejectment proceedings in the Land Court against Siaosi Tafolo and his son Fasi’apule, the appellants, seeking possession of a town allotment [“the allotment”]. The Minister of Lands, the third respondent, was joined as a third party to the proceedings. The Land Court made an order for possession against the appellants. The appellants appealed that judgment. 

Held:

1. The main matter that appeared to have been raised by the appellants in their pleadings was an equity of possession. 

2. Any such equity could be varied or discharged by subsequent arrangements made between the parties. There appeared to be two such arrangements. 

3. The parties failed to lead evidence in crucial areas in relation to the arrangements. It followed that through no fault of his Honour, the trial miscarried because both sides failed to plead, and adduce evidence on, those two matters. 

4. Given the failure of the parties to address the real issues in their respective pleadings, and in their evidence, there would be no order for costs on the appeal. 

5. It was necessary and appropriate to order a new trial 

Statutes considered:
Land Act Cap 132

Counsel for appellants: Mr Tu’utafaiva and Mr 
Fakahua
Counsel for first and second respondents: Mr Muller
Counsel for third respondent: Mr Malolo

Judgment

Introduction

Semi Vete and Tevita Fetuli, the first and second respondents, brought ejectment proceedings in the Land Court against Siaosi Tafolo and his son Fasi’apule, the appellants, seeking possession of a town allotment [“the allotment”]. The Minister 40 of Lands, the third respondent, was joined as a third party to the proceedings.

The Land Court made an order for possession against the appellants. They now appeal from that judgment. 

In order to understand the context in which the findings of the Land Court were made, it is necessary to describe the issues tendered by the parties in the pleadings, and to outline the evidence at first instance.

The Claims Made by the First and Second Respondents

The statement of claim alleged: 

• The first appellant resided on the allotment. 

• The second respondent agreed, subject to the approval of the third respondent and of Cabinet, to lease the allotment to the first respondent. 

• On 5 October 1993, Cabinet gave its approval. 

• On 21 June 1994, a Deed of Lease was issued to the first respondent for a term of fifty years commencing on 21 June 1994. 

• Despite requests to move, the first appellant remained on the allotment. 

• An order for possession was sought accordingly. 

The Appellants’ Defence and Counterclaim

In answer to this claim, the appellants pleaded the following: 

• It was “unreasonable” for the first appellant to be asked to move off the allotment: the first respondent understood that the appellants had occupied the allotment for over forty years. 

• The first and second respondents misled the third respondent into granting the Deed of Lease. 

By their counterclaim, in addition to the matters pleaded in their Defence, the appellants alleged the following: 

• The first appellant and his family had lived on the allotment since 1948. He built a big dwelling house there in 1956 in which the second appellant resided. The appellants resided on the allotment with the intention that, in accordance with a promise made to them, a deed of grant would be issued to the second appellant. 

• Since 1945 the first appellant looked after and cared for and provided maintenance for the late Tevita Moeata Fetuli, who was the former holder of the allotment and father of the second respondent. The late Tevita Moeata Fetuli and his wife Vaopolo, in consideration and appreciation of their love and maintenance, promised the appellants to grant them the allotment. 

• The first appellant, in reliance on the promise of a grant of the land by the late Tevita Moeata Fetuli, moved into the allotment with his family in 1948 and built their dwelling house on it in 1956. The late Tevita Moeata Fetuli and Vaopolo were staying in their own separate house on the allotment. 

• After the death of Vaopolo in 1967, the first appellant continued to serve and maintain the late Tevita Moeata Fetuli and his second wife, ‘Elenoa, and their children. 

• In 1982, after the death of Tevita Moeata Fetuli, the late ‘Elenoa asked the first appellant for $1,500.00. The first appellant gave her this amount and she assured him of the registration of the allotment. 

• Later in 1982, instead of registration of the allotment in the name of the appellants, the late ‘Elenoa only allowed a short-term lease permit to the first appellant. 

• In 1990 the second respondent approached the first appellant and asked for $2,000.00, promising registration of the allotment in the name of the second appellant. 

• The first appellant, in reliance on this representation, gave $2,000.00 to the second respondent. 

• The second respondent, notwithstanding receipt of the $2,000.00 from the first appellant, and despite his promise to register the allotment in the name of the second appellant, entered into only a lease with the second appellant, instead of having the allotment registered in his name. 

• The second respondent “holds equitable right in favour of” the appellants in respect of the allotment. 

• The appellants have occupied the allotment for forty-seven years.

• The first respondent was “wrong” and the second respondent misled the third respondent to grant a Deed of Lease to the first respondent. Moreover, the respondents understood that the appellants had occupied the allotment for over forty years. 

• The appellants claimed that the Deed of Lease granted to the first respondent was unlawful since - 

(a) it was granted as a result of the fraud or misrepresentation of the second respondent upon the third respondent. 

(b) the land was “not available for grant” for the purposes of the Land Act, as it was occupied by the appellants. 

(c) there was a mistake or misunderstanding on the part of the third respondent. 

(d) it was “inequitable.” 

(e) the second respondent was estopped from denying his letter dated November 1988. 

[The second respondent’s letter dated November 1988 was in these terms:

“I hereby respectfully convey in this letter that I am truly satisfied that [the second appellant] continue on living on the land that he leased pending to his legal status on the land.

I authorise that his house remain where it is in 1956 (October) and the water cistern [and] shop, I authorise those assets to remain on the land forever and it is my consent with respect. 

I show respect with the truth with kindness, refer to my writing and signature. (sgd the second respondent).

I [second appellant] have authorised [the first appellant] the father of [the second appellant] to draw up this agreement.

I Rev. Siaosi Tafolo (Free Methodist) of Tonga [the first appellant] is the author of this agreement as authorised by [the second respondent].”] 

• Accordingly, the appellants counterclaimed for:

(a) an order cancelling the Deed of Lease 

(b) any other order the Court deemed just.

The First and Second Respondents’ Answer to the Appellants’ Counter Claim 

In their answer, the first and second respondents denied, or did not admit, the substantial allegations made by the appellants in their counterclaim. The first and second respondents added the following specific answer: 

“14. The first and second [respondents] deny that the lease was granted based upon fraud or misrepresentation. Deny that the land was not available or say that [the appellants] were illegally occupying the land. Deny that the third [respondent] has made a mistake. Deny that the lease is inequitable and [say] that the second [respondent] is not estopped from denying the letter of November 1998.”

The Respondents’ Evidence

The first respondent said that he made the leasing arrangement with the second respondent in 1993 and had paid rent since 1994. He knew that the appellants occupied the allotment but the second respondent had told him that the appellants’ lease had expired, and that they had been required to vacate. 

The second respondent said that the allotment had previously [in 1986 — see below] been leased to the first appellant. That previous lease had expired [in 1988]. [It is common ground that in 1986, the first appellant was granted a lease permit by the second respondent for a term of two years, expiring in 1988]. In 1989 he commenced ejectment proceedings against the appellants. Those proceedings were settled [in 1992 — see below]. Under the settlement, he agreed to a renewal of the lease to the first appellant for five years, but the first appellant failed to register it. 

[A copy of an application to the third respondent for the renewed lease, signed by the first appellant, was in evidence. It bore date 8 May 1991. The first respondent’s typed signature appeared on it. It provided for a term of five years and a rent of $100 per annum. 

Court papers in the 1989 proceedings were also in evidence. They indicated that, on 2 May 1991, counsel for the parties informed Webster J that the appellants were “making arrangements for the payment due;” that on 9 May 1991, his Honour was informed that “the payment agreed has now been made and a lease application signed;” and that on 2 July 1991, counsel said that the approval was ready for submission to Cabinet for approval with a view to its registration. 

The Court papers also indicated that on 14 February 1992, Dalgety J noted the following and made these orders: 

“Upon hearing counsel for the parties (Hola, Niti, and Mrs Tafea) who represented that between them parties have agreed upon a renewal of the lease in question, suitably backdated, and that said renewal is now before His Majesty’s Cabinet for approval; and accordingly that all contentious issues between the parties have now been resolved extra-judicially; therefore, (by) consent 

IT IS ORDERED AND ADJUDGED: 

1. That the action be dismissed: and, 

2. That no order for costs be made against or in favour of any of the parties to this action.”] 

The second respondent was cross-examined about his 1989 ejectment action and the settlement of the litigation in 1992. He agreed that it was settled by the first appellant for $8,000. He denied that this amount was paid to him so that the first appellant could continue to occupy the land. He first said the amount was “for rental”. He then said that the settlement was entered into on the basis that, if he was paid $8,000, he would extend the lease for five years.

The First Appellant’s Evidence

The first appellant, now resident in United States of America, said that he had occupied the allotment since 1945. For many years, he looked after the previous holders, who promised to register the allotment in his name. He built a substantial dwelling house on the allotment in 1956 at an estimated cost of $350,000. In 1982 he asked the second respondent to honour his family’s promise to register the allotment in the first appellant’s name, but the second respondent did not do so. In November 1988, the parties signed the letter set out above. The subsequent litigation commenced by the first respondent against him was settled. The first respondent was paid $8,000; and he agreed that the allotment would be registered in the name of the first appellant, who “would live on the land forever.” 

The Judgment under Appeal

The learned primary Judge first considered the appellants’ claim that the grant of the Deed of Lease was vitiated by fraud or mistake. His Honour said: 

“I have treated the allegation of fraud … as being one which the [appellants] must prove on the balance of probabilities. This they have not done. It may truly be said that they have raised a suspicion that events have not gone as they would ordinarily be expected to go, but beyond that suspicion there is no evidence whatsoever … that this land passed to [the first respondent] as a consequence of fraud. That however does not deal with the allegations of innocent misrepresentation or mistake.” 

Having said that he was convinced of the honesty of the appellants, the primary Judge found that the first appellant moved onto the allotment in 1948 and looked after the previous holders. He cleared, filled and levelled the allotment. He believed that he had been promised the allotment. He built a substantial house upon it. Of this, his Honour said: 

“It is not the kind of construction which one might reasonably expect the [first appellant] to put up unless he had a clear unconditional expectation of the land upon which it is built to be registered in his name.” 

His Honour noted that a document held by the Ministry of Lands dated 19 September 1963 indicated that an instruction was given to prepare a Deed of Grant of the allotment to the first appellant. The primary Judge said: 

“Why the instruction to prepare a deed of grant for [the first appellant] was not carried out or if it was, why the Deed has now not appeared is now unable to be answered. The [appellants] have not been able to demonstrate the reason for the failure of the Land office to carry out what was the unequivocal direction of the Minister of Lands in 1963.” 

His Honour went on to refer to the discussion between the first appellant and the first respondent in 1982 and said: 

“The [first appellant] asked [the first respondent] to register the [allotment] as his father had promised. He refused. Instead he agreed to allow [the second appellant] to lease the [allotment] for a term of two years in consideration of a payment of money. 

It is sufficient to say that the agreement broke down and there was some litigation which was settled by [the first appellant] paying to [the first respondent] the sum of about $8,000. The fact of the settlement was recorded by Dalgety J. Before Dalgety J the terms of settlement were not recorded. The order simply dismissed the action and recorded that there would be no order as to costs. However, in the preamble the document records that the parties have agreed: 

‘upon a renewal of lease in question suitably back dated … and accordingly all contentious issues between the parties have now been resolved …’ 

‘The parties’ were [the first respondent] [the appellant] and [the third respondent]. It was at that point that [the first appellant] had an opportunity to resolve the unfulfilled promise of Tevita Fetuli Moeata to register the land in [his] name and he failed to do so. The order was made on 14 February 1992.” 

His Honour next referred to the letter dated November 1988 and found, despite the denial of the first respondent, that the first respondent had signed it. The trial Judge said: 

“What does the document mean? In my opinion it means that in November 1988 [the first respondent] expressed permission for [the second appellant] to remain on the land that he leased ‘pending his legal status on the land’. Whatever that last phrase may mean it does not convey any interest save perhaps a licence to [the second appellant] to conditionally reside on the ‘land that he leased’ - land which is unidentified. The document purports further to authorise ‘assets’ house, water cistern and shop to ‘remain on the land forever’. It does not convey to [the appellants] or either of them any right to registration of any land including the land the subject of this action pursuant to the Land Act provisions or at all. It was never clear just what, if any, part the document played in the litigation which was settled.” 

His Honour went on to note first, that although the process of granting the allotment to the first appellant was “well in train by 1963 at the instance of the Minister”, yet the appellants “did nothing to further their hold on … their claim in equity for a legitimate grant …”; and secondly that there was no evidence of what inquiries were made by the Lands Ministry as to the existence of any agreement between the holder and the lessee, or as to whether there was an occupancy at the time of the lease to the first respondent. 

In concluding that the first and second respondents’ claim for possession was made out, his Honour said: 

“However the real question seems to me to be whether this case is one of those that fits within the contemplation of the judgments in relation to equitable defences. I conclude that it does not. The [appellants] and each of them have settled litigation in a way which is inconsistent with the claim that estoppel or any other equitable defence would afford them protection against the claims of the [first and second respondents].”

The Grounds of the Appeal

By their notice of appeal, the appellants now challenge the judgment on these grounds: 

• Fraud in the grant of the lease to the first respondent should have been found. 

• Since the first appellant had no control over a grant or its registration, his Honour should not have held that the first appellant failed to take “an opportunity to resolve the unfulfilled promise of Tevita Moeata Fetuli to register the land in [the first appellant’s] name.” 

• The November 1988 letter conveyed an interest greater than a licence. 

• There was evidence of an occupancy at the time of the lease to the first respondent. 

• His Honour erred in failing to consider the appellants’ submission that the Deed of Lease was granted by the Minister of Lands to the [first respondent] upon ‘misrepresentation or mistake.’ 

• His Honour should have held that an equitable defence had been made out. 

• His Honour erred in holding that the appellants had settled litigation in a way which was inconsistent with their claims of estoppels or other equitable defences.

Conclusions on the Appeal

We agree with the primary Judge that, upon proof of the Deed of Grant, the first and second respondents were, at common law, entitled to an order for possession. The onus then shifted to the appellants to establish a defence at law, or in equity, that would answer the claim for ejectment; and, as has been seen, a number of defences and counterclaims were advanced by the appellants in their defence and counterclaim. 

The main matter that appears to have been raised by the appellants in their pleadings is an equity of possession of the kind described by Halsbury’s Laws of England [4th Ed Reissue] Vol 27(1) at 33 as follows: 

“Equity recognises and enforces rights (sometimes referred to as ‘equities of possession’ or ‘equitable licences’) so as to restrict the revocation of licences to occupy or use premises which at common law would be regarded as revocable. This restriction occurs where a person who is occupying or using land has acted in reliance upon the representation or the acquiescence of the person having a proprietary interest in respect of that land. Where a person has established an express or implied licence to occupy premises, the role of equity is supportive and supplementary, but, if the legal relationship between the parties is such that the true arrangement between them will be frustrated if they are left to their legal rights and duties at law, an equity will arise notwithstanding that there has been no agreement (so that there is no contractual licence), and notwithstanding that the representation made or the belief which has been acted upon is so imprecise as not to define the duration of the right to occupy or use the premises; in such circumstances it is for the court to determine what period of occupation or use is sufficient to satisfy the equity. Such rights arise by operation of the principles of equitable estoppel.”

Of course, if such an equity were to be made out here, it would prima facie bind only the second respondent. But if it was shown that the first respondent, as the holder of the legal leasehold estate, also had notice of the appellants’ equity, he would also be bound. 

Any such equity could, of course, be varied or discharged by any subsequent arrangements made between the parties themselves. In the present case, it appears that there were two such arrangements: 

(1) the November 1988 letter; and 

(2) the settlement of the litigation in 1992. 

His Honour correctly appreciated that either or both of these were significant, perhaps critical, to the outcome of the proceedings. Yet, as has been noted, neither was pleaded by either side in any substantive sense [the 1988 letter was barely mentioned in the appellants’ counterclaim]. Moreover, no attempt was made by either side to lead evidence to explain the true context of the 1988 letter. Given its patent ambiguities, such evidence was essential. The evidence about the 1992 compromise was equally unsatisfactory. Again, despite the conflict in the evidence given by the parties in cross-examination as to the terms of the settlement, no attempt was made by either side to call the legal representatives involved in the negotiation, notwithstanding the obvious significance of their evidence. 

The position then is that, although no objection was taken to this course, the parties proceeded to depart from the pleadings in substantial respects in their conduct of the case. The problem was severely compounded when the parties failed to lead evidence in the two crucial areas we have mentioned. It followed, we think, that through no fault of his Honour, the trial miscarried, because both sides failed to plead, and adduce evidence on, those two matters. 

In the circumstances, it is necessary and appropriate to order a new trial. We reach this conclusion with regret, but we can see no alternative if justice is to be done in this case. Given the failure of the parties to address the real issues in their respective pleadings, and in their evidence, there should be no order for the costs of the appeal. 

Orders

We make these orders: 

1. Appeal allowed. 

2. Set aside the orders of the Land Court. 

3. Order a new trial of the proceedings. 

4. No order for the costs of the appeal.