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Cyclamen Ltd v Port Vila Municipal Council & Minister of Lands [2007] VUSC 7; Civil Case 043 of 2004 (22 March 2007)

IN THE SUPREME COURT
OF THE REPUBLIC OF VANUATU
(Civil Jurisdiction)

Civil Case No.43 of 2004

BETWEEN:

CYCLAMEN LIMITED
Claimant

AND:

THE PORT VILA MUNICIPALITY COUNCIL
First Defendant

AND:

THE MINISTER OF LANDS
Second Defendant

AND:

THE ATTORNEY GENERAL
Third Defendant

Coram: Justice C. N. Tuohy

Dates of Hearing: 26 and 27 February 2007
Date of Decision: 22 March 2007

Counsel: Mr. Willie Daniel for Claimant
Mr. Silas Hakwa for First Defendant
Ms. Molisa & Mr. Stevens for Second and Third Defendant

RESERVED JUDGMENT

Introduction

1. This is a claim for judicial review of decisions of the Second Defendant (the Minister) in relation to a tourism development being undertaken by the Claimant ("Cyclamen") at the Seaside Area in Port Vila. The claim also seeks review of decisions of the First Defendant ("The Council") but it was considered expedient that the claim against the Minister be heard first.
   

Facts

2. Cyclamen has at all relevant times been the owner of leasehold title 11/0B31/048 which in 2000 was a vacant piece of land situated in a residential zone at Captain Cook Avenue overlooking First Lagoon in Port Vila.
   
3. The lease was a residential lease originally granted by VULCAN for a term of 50 years from the Day of Independence, 30 July 1980. It is clear from the lease document that the original lessee was the alienator of the land as defined in the Land Reform Act (Cap. 123) and acquired his leasehold title on that account. When VULCAN was abolished, all land owned by it reverted to the Government: the Land Reform (Revocation) Order No. 16 of 1988.
   
4. The lessee covenanted in schedule 2 as follows:
   

To use for Designated Purpose Only

(c) Not to permit or suffer any part of the leased land to be used for any purpose other than for ................................................

And not to use or permit the use of the leased land for any noxious noisome or offensive art trade business or occupation or calling or in any such manner as to cause annoyance nuisance or inconvenience to occupiers or owners of adjacent premises or the neighbourhood,

PROVIDED that the lessee may with the written consent of the lessor first had and obtained alter the use of the demised land.

The parties seem to have been unaware of the gap in the covenant until it was pointed out at trial.

5. In 2000, Cyclamen proposed to build and operate a tourist resort on the land. To that end, it set about obtaining the necessary consents and approvals. On 31 October 2000, the Minister as lessor signed a consent to registration of the Surrender of Residential title No. 11/0N31/048 "for the purposes of creating a new Commercial/Tourism lease title". There is no evidence of any agreement as to the terms of a new commercial lease, not even its duration.
   
6. On 8 February 2001, Cyclamen’s application for planning permission was granted by the Council on conditions. The development was to include the reclamation of some land on the edge of the lagoon which would become part of the leasehold title. Approval for this under the Foreshore Development Act (Cap. 90) was given by the Minister of Internal Affairs on 27 February 2001.
   
7. In May 2001, adjoining neighbours, Mr. and Mrs. Ozols, issued proceedings seeking to prevent any commercial development of the land. At that stage building work had been started. On 21 December 2001, Coventry J issued interim injunctions restraining further development work. The Minister was restrained from issuing any negotiator’s certificate or new lease to Cyclamen.
   
8. On 8 March 2002, Coventry J delivered his substantive judgement. He refused to make the declarations and orders sought and discharged the interim injunctions. In the course of his judgment (at p7) he recorded the position with regard to the lease:
   

Consent to the surrender of the lease of this land with a view of creating a new Commercial Tourism lease title was given by the Minister on 31st October 2000.

The Minister has not issued a new lease. He is awaiting the report of the Environment Unit concerning the impact of the proposed foreshore reclamation and the outcome of these proceedings, (Affidavit of Levi Tarosa dated 27 February, paragraph 8 and 9). Mr. Patterson, on behalf of the first defendants has sought a negotiators certificate in respect of the land it is proposed to reclaim. The first defendants have yet to conclude their foreshore reclamation application.

It is a matter of the various authorities to make their decision concerning the reclamation. It is for the Minister of Lands in the light of this judgment and the reclamation decision to decide whether or not to grant a negotiators certificate and what, if any, new lease or leases.

9. In April 2002, with Council approval, construction recommenced. On 28 May 2002, the Minister issued a negotiator’s certificate to Cyclamen which specified the leasehold title 11/0B31/048 and was "for reclamation purposes".
   
10. Over the succeeding months of 2002, Cyclamen continued to construct the development and complete various necessary steps towards obtaining a new lease which would include the reclamation.
    
11. On 24 October 2002, Mr. Douglas Patterson of Cyclamen’s agent, Island Property, wrote to the Director of the Department of Lands the following letter:
    

"Re: Cyclamen Ltd (Preparation of New Commercial/Tourism Lease Title)

Further to our meeting on 23rd October we confirm that the lessee Cyclamen Ltd Is now ready to draw up and register their new lease.

This was previously approved as well as the foreshore reclamation which is now completed.

The existing number is 11/0B31/048. The new title number is 11/0B31/076.

The new title has been revalued by the Government valuer to establish a new EMV (Estimated Market Value) of the land for the purpose of determining the annual lease rent. We would like to know if in creating this new lease any further costs are involved other than the new stamping and registration fees.

Please let us know as soon as possible or contact us if you require additional information.

No response has been received to that letter.

12. Over the following months, construction continued. In August 2003, Cyclamen obtained the relevant liquor licences and on 28 August 2003 opened a restaurant and bar at the premises.
    
13. On 15 September 2003, Cyclamen received a letter dated 21 August 2003 from the then Minister of Lands, Mr. Titek, which is set out in full below:
    

Re: Revocation of Consent to Surrender Title 11/0B31/048 dated 31 October 2000

It has come to my notice that Lease Title 11/0B31/048 now as it stands is a residential lease and not a commercial lease. I am also aware that you are currently building an avenue for commercial/tourism operation undertakings that in the current lease has default your current development lease conditions. This is a serious breach of condition in your current lease and could cause you financial loss as well as losing the property itself. While it is the Government’s priority to expand tourism facilities in Vanuatu and in particular, Port Vila, I as the Minister responsible for Lands, must ensure that typical business operations are carried out in appropriate lease classes and perhaps zonings.

In light of the above, I as Minister responsible for Lands hereby resolve as follows:-

1. Before I serve you forfeiture notice for breaching your current lease use for designated purpose only "residential", I instruct that you proceed to alter the use of the demised land from residential to commercial/tourism immediately.
2. The consent issued to you by former Minister back in the year 2000 is hereby revoked and pronounced null and void. You need to apply for a new consent through the Department of Lands outlining the development plans for your project.
3. The new commercial/tourism lease must cater for relevant and appropriate conditions, which would conform with the Land Leases Act, other applicable laws or by-laws and those that would not cause annoyance, or nuisance to your neighbourhood.
4. If you failed to comply as instructed, I will have no other options but to enforce Section 45 (a) and issue you forfeiture notice. I am giving you 3 weeks period the most to do so commencing on the date of this letter.
   

It is my amicable wish to see that you contact your tourist business operation in a commercial lease other than a residential lease and in a manner that conform with relevant provisions of the Land Leases Act.

I look forward to your seriousness in complying with my instructions.

14. Cyclamen stopped all work and trading at the site as a result of the letter. On 24 September 2003, Island Property wrote to the Director of Lands enclosing copies of a surrender of the existing lease and a new lease both executed by Cyclamen together with the relevant signing fees for approval and signature by the Minister. Unfortunately, a copy of the proposed new lease has not been put in evidence so the Court does not know the terms included in it except insofar as they can be deduced from the subsequent correspondence.
    
15. On 29 September 2003, Island Property wrote to the Minister, Mr. Titek, setting out the foregoing history in detail, stating that Cyclamen had in fact obtained all necessary approvals and had been ready to sign a commercial lease for a year. The letter asked the Minister to sign the new lease.
    
16. On 28 October 2003, the Minister gave a notice to Cyclamen under Section 45 of the Land Leases Act ("the Act") which is set out in full below:
    

Notice Under Section 45 of the Land Leases Act [Cap. 163]

Title: No: 11/0B31/048

To: Cyclamen Ltd

I hereby give you notice under Section 45 of the Land Leases Act [Cap. 163] that if you do not remedy he breach of your lease as specified below within 7 days of the date of this notice, I will take action to have your lease Title No. 11/0B31/048 forfeited.

Your use of the land the subject of lease Title 11/0B31/048 for commercial/tourism purposes is in breach of your lease, as the lease only permits you to use the land for residential purposes. Therefore, you must stop using the land for any purpose other than residential land, including the construction of commercial premise, within 7 days.

Dated: October 2003

Minister of Lands.

17. Further correspondence followed which culminated in a letter of 2 February 2004 from the Attorney- General to Cyclamen’s solicitors in which it was advised that the Minister was prepared to enter into a commercial lease but only on certain terms relating to the nature and size of the development. As to duration, Cyclamen had sought a 75 year term but the Minister was not prepared to grant that unless Cyclamen agreed to forego all claims it might have against the Council or the Government arising from the approvals given. Otherwise the duration offered was the balance of the existing 50 year term.
    
18. The terms offered were unacceptable to Cyclamen and this litigation followed. It has been marked by protracted interlocutory skirmishing.
    
19. The then Minister, Mr. Titek, explained his actions in a sworn statement dated 28 April 2006 in which he said:
    
    10. As the owner of the land, I as then Minister of Lands must make sure that the Minister as the owner of the land is entitled to ensure that his land is not used in such a way that would cause a nuisance to the neighbours or breach the law and or in breach of the conditions of the lease.
    11. The area where the Claimant has conducted commercial buildings is a highly residential area referred to as No. 1 Lagoon and there are residents living in this area whereby such an activity to be created by the claimant will surely create nuisance and disturbance to its neighbours.
    12. The Minister as the owner may re-take the land if the claimant commits a breach of its lease and fails to remedy the breached. There were conditions placed in the lease agreement."
        
20. Cyclamen filed a sworn statement by a consulting engineer, Mr. Qualao confirming that as at 23 December 2003 the development substantially complied with the conditions of the Council’s approval. His evidence was not challenged.
    

Remedies Sought

21. In its claim, Cyclamen sought remedies in respect of two decisions of the Minister. The claim identified the first as the "decision of 28 October 2003 embodied in a letter (of that date)". In response to questions from the Court as to exactly what decision was referred to, Mr. Daniel specified it as the decision to serve the Notice under s. 45 purporting to require Cyclamen to stop using the land for any purposes other than residential, including the construction of commercial premises.
    
22. The second decision impugned was identified in a similar way as the "decision embodied in a letter from the Attorney General to George Vasaris & Co of 2 February 2004". In discussions with the Court, Mr. Daniel specified that decision as being the decision of the Minister not to execute the commercial lease in the form presented to him by Cyclamen.
    
23. It was claimed that these two decisions were based on irrelevant considerations relating to matters outside the scope of his function and in all the circumstances were ultra vires.
    
24. Declarations to this effect were sought together with orders quashing the decisions impugned. However, discussion with counsel made it clear that what Cyclamen was ultimately seeking was an order or orders which would have the effect of requiring the Minister to sign a commercial lease on the terms presented to him by Cyclamen.
    

Submissions

25. The thrust of Cyclamen’s submissions was that the Minister was not permitted to take into account considerations relating to the development’s effect on neighbours or compliance with by-laws, planning approvals and other regulatory requirements.
    
26. As to effect on neighbours, it was submitted that the Minister was attempting to "go behind" the decision of Coventry J. in the case brought by the Ozols, and that the principle of res judicata applied to prevent him doing so.
    
27. As to compliance of the development with planning approvals, by-laws or other regulatory requirements, it was submitted that the evidence showed that the development complied with all approvals, but in any event these matters were not within the jurisdiction or the function of the Minister, but were issues for which the Council or other authorities had responsibility under the relevant legislation.
    
28. In a number of different ways, it was submitted that the Minister acted unfairly and unreasonably in purporting to stop construction and/or operation of the development and refusing to sign the lease presented when he had granted his consent to the replacement of the residential lease with a commercial lease at the beginning and had been well aware throughout of the continuing construction of the resort.
    
29. Ms. Molisa’s answering submission on behalf of the Minister was relatively brief and focussed on one point: that the Minister’s decisions were taken pursuant to his contractual rights as lessor of the land, that they were referable to private law only and that there was, therefore, no scope for judicial review of them. She cited a number of United Kingdom and Australian authorities in support of that proposition (which Mr. Hakwa supported).
    
30. Although, this issue had been clearly raised in the Defence filed in April 2004, it had not been addressed by Mr. Daniel in his written submissions. In his oral reply, he argued that the Minister was exercising a public function: the land was public land and the Minister was not acting in the capacity of a private person but by virtue of his office as a government Minister. He referred to Article 80 of the Constitution which provides that the Government may own land acquired by it in the public interest.
    

Discussion

31. The submission that the impugned decisions of the Minister are matters of private law only and not susceptible to judicial review is, if well-founded, a complete answer to the claim. It is therefore appropriate to address that submission at the outset.
    
32. It has long been recognised in jurisdictions which have derived their administrative law from English law that not every action of a government is susceptible to judicial review. There has to be a sufficient public law element in the act or decision under scrutiny. Matters relating purely to private or domestic law are not proper subjects of judicial review.
    
33. The relevant English authorities have been usefully collected and discussed in the very recent case cited by Ms. Molisa, R (Gamesa Energy UK Limited) –v- The National Assembly for Wales [2006] EWHC 2167 (Admin). It is clear from those authorities that a government or public body is able to negotiate and enter into commercial contracts in the same way as any other legal person and the fact that it does so, does not of itself impose any public law obligation additional to any private law obligations that exist.
    
34. To decide whether there is a public law element requires first an analysis of the nature of the two decisions impugned. The first was the decision to issue a notice under s. 45 of the Land Leases Act. The second was a decision not to grant a commercial lease to Cyclamen except on the terms specified by the Minister.
    
35. Section 45 is contained within Part VII of the Act, the part which is concerned with leases. It is one of a series of sections (43 – 46 inclusive) dealing with a lessor’s right of forfeiture. Section 45 provides that no lessor shall be entitled to exercise the right of forfeiture for breach until the lessor has served a notice in writing specifying the breach and requiring the lessee to remedy it within a reasonable period.
    
36. The whole of Part VII including s. 45 applies to lessors and lessees generally and is in no way specific to the Minister of whom there is no mention.
    
37. The giving of a notice under s. 45 cannot properly be described as the exercise of a statutory power. It is better described as the taking of a step prescribed by statute as a pre-condition for the exercise of the contractual right of forfeiture.
    
38. Nor is the decision by the Minister not to grant a commercial lease except on particular terms the exercise of a statutory power. Once the provisions of the Land Reform Act had been complied with by the grant of the original residential lease to the alienator, there were no further statutory provision governing the grant by the Minister of subsequent leases. His power to grant a subsequent lease arises from the fact that the government is the owner of the freehold of the land. It is the same power possessed by any other freehold owner of land.
    
39. The only fetters on that power contained in the Act relate to the maximum term of 75 years (s. 32), the requirement for registration in the prescribed form of leases for terms exceeding 3 years (s.35) and the requirement for leases to specify the purpose and use for which the land is leased and the development conditions, if any (s.38). The prescribed form (Land Records Form 4) does not stipulate any mandatory terms except for those required by s.38. Those provisions apply not just to the Government but to all lessors.
    
40. In this case, the governmental actions impugned relate to the Minister’s rights and obligations under the existing lease with Cyclamen and the negotiation of a substitute lease. They do not arise out of any statutory procedure but simply from the private law relationship of lessor and lessee.
    
41. Mr. Daniel argued that there is nevertheless a public law element here because the Minister was acting on behalf of the Government and was dealing with public land.
    
42. However, it is not sufficient to create a public law obligation that the Minister was acting for the Government and carrying out governmental functions: R (Menai Collect Ltd & Others –v- Department for Constitutional Affairs and Anor [2006] EWHC 727 (Admin) per Waller J.
    
43. In contrast to the position in New Zealand and Australia, there is no Vanuatu statutory enactment affecting the law relating to judicial review of administrative action. So the common law of England applying immediately before the Day of Independence continues to apply pursuant to Act 95 (2) of the Constitution. Part 17 of the Civil Procedure Rules of No. 49 of 2002 does, however, provide for procedural rules in relation to claims for judicial review.
    
44. Rule 17.4 provides that a person may file a claim claiming a declaration about an enactment or a mandatory order, a prohibiting order or a quashing order about a decision. A decision is defined in Rule 17.2 as meaning "a decision, an action or a failure to act in relation to the exercise of a public function or a non-public function". A "non-public function" is defined as meaning "a function whose exercise can infringe proprietary or contractual rights or jeopardise a person’s status or livelihood".
    
45. On the face of it, the Rule might be thought to extend the right to judicial review to matters of private law where it has not previously been recognised. However procedural rules made under s.30 of the Courts Act are not capable of altering the substantive law. In addition, the substantive law does recognise that, even in relation to purely commercial activities such as the negotiation of contracts, the actions of public entities may be subject to judicial review. But that is only if those actions are impugned on grounds such as fraud, corruption or unlawfulness: Mercury Energy Ltd –v- Electricity Corporation of New Zealand [1994] 2 NZLR 385 (PC); R (Cookson & Clegg Ltd) –v- Ministry of Defence [2005] EWUCA Civ 811. No such allegations are pleaded in this case.
    
46. I am satisfied that the decisions of the Minister which are challenged in this case are purely matters of private law not made within any statutory framework and not generally susceptible to judicial review. I am also satisfied that there is nothing in the nature of the challenge to them which would import a sufficient public law element to give a right of review.
    

Conclusion

47. That finding is sufficient to dispose of this claim. However in an effort to assist the parties in resolving the underlying difficulties between them, it may be helpful for the Court to canvas some wider aspects of the situation.
    
48. It is obvious from the discussion above that if there is some legal remedy available to Cyclamen to achieve its purpose of obtaining a commercial lease in the terms it wants, such remedy must lie in the private law of contract. On the evidence disclosed in the present claim, no remedy in contract would exist because the evidence does not establish a legally enforceable agreement to grant a lease on the specific terms which Cyclamen wants.
    
49. On the other hand, there are obviously serious questions about the Minister’s contractual rights under the existing lease and the validity of the s. 45 notice given the failure of the lease to specify what use is permitted. Even apart from that, it is difficult to see how the terms of the lease could prevent construction (as opposed to use) of buildings which could conceivably be used for residential apartments. Questions of waiver might also arise given that construction had been proceeding unchallenged for at least a year. The Court makes no findings on these matters but simply draws the attention of the parties to them.
    
50. Nevertheless, it is clear from the evidence that the Minister has always been prepared to grant Cyclamen a commercial lease of the land, just not one on Cyclamen’s terms. No doubt the Minister is keen to assist the development of Vanuatu’s tourism facilities. On Cyclamen’s side, it is obviously in its interest to complete and operate its development. So the parties in large part have a common goal.
    
51. However once litigation began, the parties seem to have given up any effort to negotiate a mutually acceptable solution. Instead they have devoted all their energy and resources to litigation which thus far has not produced a resolution.
    
52. Given their common goal of developing the country’s tourism facilities and the considerable extent of agreement in principle between them, the Court commends the path of mutually flexible negotiation as the way forward. That decision is, of course, for the parties themselves to make.
    
53. The claim for judicial review of the Minister’s decisions is declined. The Minister is entitled to costs to be agreed or fixed by the court.
    
54. The application for judicial review of the Council’s decisions remains. No doubt Cyclamen will wish to review its position generally in the light of this judgment. Leave is reserved to both Cyclamen and the Council to request a further case management conference when required.
    

Dated AT PORT VILA on 22 March 2007

BY THE COURT

C.N. TUOHY

Judge