Kinoo Sons Ltd v Mrs Bibi Sarah Hossen Abdool

Kinoo Sons Limited

Appellant

v.

(1) Mrs Bibi Sarah Hossen Abdool and

(2) The Conservator of Mortgages

Respondents

FROM

THE SUPREME COURT OF MAURITIUS

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JUDGMENT OF THE LORDS OF THE JUDICIAL

COMMITTEE OF THE PRIVY COUNCIL,

Delivered the 11th June 2002

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Present at the hearing:-

Lord Slynn of Hadley

Lord Steyn

Lord Hobhouse of Woodborough

Lord Millett

Lord Rodger of Earlsferry

[Delivered by Lord Rodger of Earlsferry]

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1. At the time of his death on 26 December 1974 Mr Ally Hossen Abdool owned three contiguous plots of land on David Street, Port Louis. He died intestate and his estate, including the three plots, passed to his ten children. One of his sons died intestate in 1982 and a daughter died intestate in 1986. In both cases their estates passed to their heirs on intestacy. The result was that by 1990 no less than twenty people were the joint owners of the three plots of land.

2. Article 812 of the Civil Code provides:

“Sous réserve des dispositions de l’article 768, nul ne peut être contraint à demeurer dans l’indivision, et le partage peut être toujours provoqué, nonobstant prohibitions et conventions contraires.”

3. Of the twenty joint owners all but two did not wish to remain in joint ownership and, in terms of article 812, they had a right to have the property divided among them - in practice to have it sold and to have the proceeds shared out among the former joint owners. One of the two who wished to remain in joint ownership was the defendant in the present proceedings, Mrs Bibi Sarah Hossen Abdool. The 18 joint owners therefore petitioned the Master of the Supreme Court of Mauritius for a licitation of the three plots in terms of section 97 of the Sale of Immoveable Property Act. Mrs Abdool was made a defendant in the proceedings. In terms of section 100 the petitioners filed in the Master’s Office the memorandum of charges (cahier des charges) under which they proposed to sell the property. The memorandum indicated that the property was to be sold in three lots, the second of which, Lot No 2, was described as “un immeuble terrain emplacement Rue David No. 32 de 97.44 mts de large sur ladite rue et de 129.92 mts de long …”. Lot No 2 is the subject of the present proceedings.

4. As required by section 100(2)(c), the memorandum set out the reserve price and the conditions of the sale. Article 12 of the conditions of sale was in these terms:

“The party/parties prosecuting the sale shall reserve to himself/themselves the right to deposit in the office of the Master and Registrar of the above Court to annexed to his Cahier des Charges, three clear days before the day of the sale a Memorandum of the changes regarding the property/properties to be sold and which may have occurred or been known at the date. The purchaser/ purchasers of the above described property/properties are warned that any of the co-owners may within a delay of one month from date of adjudication exercise a right of substitution of the purchaser or purchasers by making a declaration to the Master’s Office and this in compliance with Art 813 of Code Napoleon, Amendment Act No. 3 of Act No. 9 of 1983.”

On 13 April 1990, in terms of section 101(1)(a) notice was given to the defendant who was therefore made aware of the conditions of sale, including the terms of Article 12. Under section 102(1)(b) she had the right, within 30 days after the period for notice under section 101 had expired, to object to any of the clauses or conditions of the memorandum of charges. The defendant made no such objection.

5. The Master originally fixed the sale for 12 July 1990 but it was postponed in the hope that the matter could be settled and, in the end, the sale of Lot No 2 took place on 11 October 1990. The successful bidder was Mr You Nan Wong King Yuen, acting in his own name and in the name of five other persons. The Master awarded them the property comprising Lot No 2 and ordered them to pay the price of Rs 425,000. Four days later, on 15 October, the purchasers appeared before the Master and declared that the purchase had been made on behalf of Kinoo Sons Ltd, the plaintiffs in the present action. As a result of these steps the property in Lot No 2 was awarded to the plaintiffs.

6. The last sentence of Article 12 of the conditions of sale referred to article 813 of the Civil Code. In reality, the reference was, more precisely, to article 813-13:

“S’il y a lieu à l’adjudication de tout ou partie des droits d’un indivisaire dans les biens indivis ou dans un ou plusieurs de ces biens, l’avoué doit en informer les indivisaires par notification un mois avant la date prévue pour la vente. Chaque indivisaire peut se substituer à l’acquéreur dans un delai d’un mois à compter de l’adjudication, par déclaration au greffe ou auprès de l’avoué.

Le cahier des charges établi en vue de la vente doit faire mention des droits de substitution.”

Article 813-13 follows almost word for word the terms of article 815-15 of the French Code Civil on which it is modeled.

7. On 26 October 1990 the defendant appeared before the Master and declared that:

“in conformity with Article 813-13 and following of the Code Napoleon, she hereby SUBSTITUTES herself in lieu and stead of KINOO SONS LTD represented by Mr ISSOOF KINOO Chairman of its Board of Directors, as purchaser of the said property sold before the Master’s Bar in the above matter on the 11th day of October 1990, on outbidding for and in consideration of the sum of Rs 425,000.00.”

As a result of the declaration being transcribed, the Conservator of Mortgages caused the ownership of Lot No 2 to be transferred to the defendant’s name in the books and registers kept by him. The defendant thus became the owner of the property comprising Lot No 2.

8. In the present proceedings against the defendant and against the Conservator of Mortgages as co-defendant, the plaintiffs seek a judgment:

“(a) holding and decreeing that the declaration made by Defendant before the Master and Registrar on the 26th October 1990 … is null and void to all intents and purposes;

(b) holding and decreeing that the Plaintiffs are the purchasers of the immoveable property sold by LICITATION at the Master’s Bar, under Lot No 2 for and in consideration of Rs 425,000.00;

(c) condemning and ordering Defendant to pay to Plaintiffs the sum of Rs 100,000 as damages;

(d) decreeing that the transcription of the judgment of the Court in the present matter shall constitute a valid title for the Plaintiffs in respect of the ownership of the said immoveable property described under Lot No 2.”

On 5 November 1998 Balgobin J gave judgment for the plaintiffs. She held that the defendant’s declaration of 26 October 1990 was null and void and that the plaintiffs were the purchasers of Lot No 2. Her Ladyship further found the defendant liable to pay the plaintiffs damages of Rs 20,000. The defendant appealed and on 1 November 2000 the Court of Civil Appeal (Yeung Sik Yuen SPJ and Seetulsingh J) allowed her appeal. The court quashed the decision of the trial judge and declared that the transcription of their judgment was to constitute a valid title for the defendant.

9. On 29 January 2001 Pillay CJ granted the plaintiffs leave to appeal to their Lordships’ Board. At the hearing before the Board the plaintiffs were represented by Mr Jaunbaccus and Mr Ramdhun. Neither the defendant nor the co-defendant was represented.

10. Both article 815-15 of the French Civil Code and article 813-13 of the Civil Code of Mauritius are of fairly recent origin, the relevant amendments having been made in 1976 and 1983 respectively. They were part of a larger set of amendments regulating the rights of joint owners in considerable detail. To begin with, there was some doubt about the scope of articles 815-15 and 813-13. In particular, it appears to have been thought that the articles applied in a case like the present where joint owners sold all or part of the joint property itself. Two consequences were thought to follow. First, each of the joint owners was thought to have a right, within a month, to substitute himself for the purchaser of the property. Secondly, it was thought to be necessary to include a reference to this statutory right of substitution in the cahier des charges in order to meet the specific notice requirement in articles 815-15 and 813-13 and so to avoid the risk of the licitation being held to be invalid in terms of articles 815-16 and 813-14. In the present case indeed the reference to the right of substitution and to article 813 of the Civil Code may well have been included in Article 12 of the conditions of sale in the belief that the statutory right applied in the case of a sale of the joint property as such.

11. In France, however, the question of the scope of article 815-15 came before the first chamber of the Cour de Cassation in Epoux Assenat c Chabal 14 février 1989 D 1989 278, note Morin; RTD civ 1989 588, obs F Zénati. M Assenat and his wife owned certain property jointly. M Assenat had been sequestrated and the syndic in his sequestration brought proceedings to have the immoveable property sold and the proceeds divided between the syndic and Mme Assenat. The Assenats sought, however, to have included in the cahier des charges a mention of the right of substitution which joint owners can exercise under article 815-15. The lower court rejected the Assenats’ application and they sought to have the judgment set aside on the basis that the position was the same whether it was a sale of the rights of a joint owner or joint owners in joint property or the sale of the joint property itself. The Cour de Cassation upheld the decision of the lower court, however, on the ground that article 815-15:

“ne pouvait être appliqué qu’en cas d’adjudication portant sur les droits d’un indivisaire dans les biens indivis, et non sur les biens indivis eux-mêmes…”.

This decision has been followed in subsequent cases, for example, Evelyne Ecochard c Marie-Claude Esclozas Gaz Pal 1991 125, note A Piedelièvre.

12. Long after the relevant events in the present case, the same point came up for decision under article 813-13 of the Civil Code of Mauritius in Greedharee v Greedharee 1997 MR 35. The parties were a brother and sister who were joint owners, along with six other members of their family, of certain land in Duclos Street, Port Louis. The land was put up for sale by licitation at the request of the defendant and another joint owner. The land was adjudicated to a Mr Deonanun Hurry but three weeks later the brother purported to exercise a right of pre-emption and the proceedings and declaration were registered at the Supreme Court Registry. About a week later the sister did the same. The brother brought proceedings claiming that he was the true and rightful owner, having exercised the “droit de préemption” first. Lam Shang Leen J followed the French authorities and held that, where the common property itself, as opposed to rights in that property, was sold, article 813-13 did not apply. He accordingly dismissed the plaint and held that the sister also had no such right of pre-emption. He expressed his conclusion in these words (1997 MR 35, 39):

“It was through sheer ignorance that the clause was inserted and I would follow the trend of cases which decided that in the case of the sale of the undivided property, articles 813-12 and 813-13 find no application. Furthermore, the defendant having provoked a sale by licitation cannot, in my view, claim to have a right of pre-emption under article 815-13 of the Civil Code. It was open to the plaintiff to buy the share of the other co-heirs thereby avoiding the licitation. He cannot claim to be entitled to the right of pre-emption when the conditions for the application of article 815-13 of the Civil Code were not present.”

(Although in the report two of the references are to a non-existent article 815-13, it is plain from the context that his Lordship was intending to refer to article 813-13.)

13. Their Lordships are satisfied that article 813-13 does not apply to sales of the joint property as such. That conclusion is supported, in the first place, by the wording of the relevant provisions which refer to the adjudication “de tout ou partie des droits d’un indivisaire” and to “chaque indivisaire” (emphasis added). As has been pointed out in the comments on the French cases, on a sale of joint property the property ceases to be held jointly and there are accordingly no longer any joint owners. It follows that, when the sale has taken place, there are no longer any “indivisaires” who can qualify, in terms of article 813-13, to substitute themselves for the purchaser. Taking a wider view, their Lordships see both the right of pre-emption under article 813-12 in private sales and the right of substitution under article 813-13 in licitations as being designed to achieve the same policy aim, viz to allow joint owners to exclude from the joint property persons whom they would regard as unsuitable and as therefore likely to disturb the harmony among the joint owners. Where the joint property is being sold and the proceeds are being divided up, however, that is no longer an issue. The joint owners are going their separate ways and the law has no need to provide them with a right that is designed to prevent dispeace among persons holding property as joint owners.

14. Both the wording and the policy underlying article 813-13 point, therefore, to the conclusion that the right of substitution in terms of that article does not apply in a case like the present where the joint property itself is being sold. That was the conclusion of both the first instance judge and the Court of Civil Appeal. Their Lordships are satisfied that it is sound.

15. Before the Board counsel for the plaintiffs submitted that, once that conclusion was reached, the plaintiffs must succeed since, in making her declaration before the Master, the defendant had purported to exercise a non-existent right of substitution under article 813-13. And, he submitted, article 813-13 was the only possible basis for such a right of substitution.

16. The Court of Civil Appeal reached a different conclusion:

“We are of the opinion, however, that quite apart from the question of substitution under article 813-13 there was also the related and important question of whether a clause of substitution could be held valid independently, basing oneself on the intrinsic fact that it was a condition of the contract of sale as set out in the memorandum of charges. Section 100(2)(c) of the Sale of Immoveable Property Act provides that the memorandum of charges shall contain ‘the mise à prix and the condition of the sale’ and section 102(1)(b) allows an objection to be taken to ‘any of the clauses or conditions of the memorandum of charges’.

We are of the opinion that, in the absence of such an objection by anybody, especially by respondent no 1, the clause of substitution formed part and parcel of the condition of sale, regardless of the fact that the reference to the law, that is, to article 813-13 as the declared source of that right to a substitution, was wrongly stated. Since the intention of the parties to reserve a right of substitution to any co-owner was unequivocally reflected in the memorandum of charges, it clearly deserves to be protected by the court.”

In effect, the court held that the terms upon which the sale was carried out included a condition, independent of article 813-13, that any of the joint owners was to be entitled to exercise a right of substitution. Article 12 wrongly referred to article 813-13 as the source of that right but, especially since neither the respondent nor anyone else had objected to the condition, this inaccuracy should be disregarded. The clause of substitution formed part and parcel of the conditions on which the sale proceeded and upon which the plaintiffs purchased the property. The court should protect the intention which the parties had unequivocally expressed in the memorandum of charges.

17. Counsel for the appellant submitted that the Court of Civil Appeal had been wrong to hold that a right of substitution could subsist on a purely contractual basis. But the right of substitution is, in principle, no different from a right of pre-emption which, though expressly recognised by article 813-12, can certainly rest on a purely contractual footing. That being so, their Lordships see no reason why a right of substitution – which exists to achieve the same aims in the rather more complicated circumstances of a public sale by auction – should not also rest on a contractual foundation. That is indeed accepted in France where, according to a decision of the third chamber of the Cour de Cassation, even where no right of substitution under article 815-15 of the Code Civil applies, there may be a purely conventional right of substitution, resting on the terms under which the auction proceeded: Société Saint-Michel c M Rhein 3 mai 1989, Bull Civ, III, no 99, p 55; RTD civ 1990 683-684, obs F Zénati.

18. M Rhein and his wife jointly owned a house which was sold at auction, the cahier des charges including a power (“faculté”) on the part of each of the joint owners to substitute himself “en conformité des dispositions de l’article 815-15 du Code civil”. At the end of the auction the house was adjudicated to the plaintiffs, the Société Saint-Michel. M Rhein then made a declaration, in terms of the power in the cahier des charges, that he was to be substituted in the place of the plaintiffs. The plaintiffs brought proceedings against M Rhein to have his declaration declared null. The Cour d’Appel d’Aix-en-Provence dismissed the action. The plaintiffs applied to the Cour de Cassation to have the judgment set aside. They contended that, since article 815-15 did not apply to the sale of joint property as such, the clause of substitution, which was expressly said to be “en conformité des dispositions de l’article 815-15 du Code civil”, could not have any independent force. As a result, they argued, the lower court had violated article 1134 of the Code Civil. In any event, a clause which gave sellers who were joint owners the right by their own act to evict the purchaser under an adjudication was null and void under article 1628 of the Code. The Cour de Cassation refused the application and upheld the decision of the Cour d’Appel in these terms:

“Mais attendu qu’ayant relevé que le cahier des charges, établi en vue de la licitation ordonnée du bien indivis, comportait un droit de préemption et de substitution au profit de chacun des indivisaires, et retenu, pour donner effet à la clause inscrite dans le cahier des charges, que l’objet et la cause de cette convention n’étaient pas illicites et qu’aucune loi ou règle d’ordre public n’interdisait le droit de substitution prévu par les indivisaires au profit de chacun d’entre eux et librement accepté, la cour d’appel a, sans violer les textes visés au moyen, légalement justifié sa décision.”

19. The Cour de Cassation thus expressly recognised that there could be a right of substitution based simply on the agreement of the parties to the sale as expressed in the cahier des charges and freely accepted. Obviously, the purpose of such a right of substitution cannot be the same as the purpose of the right of substitution conferred by article 815-15, to preserve harmony among the owners of joint property. The purpose, rather, is to allow one of the former joint owners to keep the property in the face of a sale to an outsider. It is not hard to envisage that, particularly in a case like the present, of joint property descending by inheritance within a family, one of the joint owners may have a legitimate interest in trying to secure that he or she, rather than an outsider, should become the owner of the property when it is sold. Their Lordships refer to the discussion in Encyclopédie Dalloz Civil VI Indivision para 618 (F X Testu). At the very least, an objective of that kind would not be unlawful or contrary to public policy.

20. Moreover, the Cour de Cassation did not consider that a joint owner who exercised this contractual right of substitution would thereby be doing an act that had the effect of evicting the purchaser from his title, contrary to article 1628 of the Code Civil. As Zénati observed in his comment on the case (RTD 1990 684 – 685), from a technical standpoint the right of substitution can be regarded as operating more by way of a resolutive condition, dissolving the sale in favour of the purchaser, than by way of eviction. It therefore bears some similarity to the droit de réméré, which has always been regarded as valid in French law.

21. The approach of the Cour de Cassation has been followed subsequently. This is to be seen, for example, in a passage in the judgment of the Cour d’Appel de Bordeaux in Jean-Luc Piquemal et De Tamadis SCI c Claudette Laurent, 29 septembre 1994 unreported, to which counsel for the appellant referred the Board. Having stated that article 815-15 has no application in sales of the joint property itself, the court continues:

“Attendu, certes, que les indivisaires peuvent, d’un commun accord, déroger aux dispositions de ce texte en instituant, au bénéfice de chacun d’eux, un droit de substitution en cas d’adjudication portant sur les biens indivis eux-mêmes.”

22. Moreover, in the present case the Court of Civil Appeal cited a passage from an earlier edition of the Encyclopédie Dalloz Civil V Indivision no 55, which accepted the decision and reasoning of the third chamber in the 1989 case. The current article, cited above, also accepts that decision. It goes on (para 618) to point out that, in cases of adjudications at the instance of a creditor, the judges have accepted that the relevant clause should make the exercise of the right of substitution subject to prior consignation of the price. This is to avoid the problems caused by impecunious joint proprietors (especially the debtor’s spouse) seeking to assist the debtor by substituting themselves for third party purchasers. The fact that the judges are modifying procedures to cope with these difficulties shows that the French courts fully accept that the right of substitution can indeed apply in the case of sales of common property.

23. In Greedharee v Greedharee 1997 MR 35, 38, 39 Lam Shang Leen J described the 1989 decision of the third chamber as an “isolated case”. In the light of the judgment of the Cour d’Appel de Bordeaux and of the developments noted in the Encyclopédie Dalloz, that description must now be regarded as somewhat misleading if it is intended to suggest that the 1989 decision has not been accepted as part of the jurisprudence on the topic in France. Moreover, his Lordship appears to have thought (1997 MR 35, 38) that the Cour de Cassation had made article 815-15 apply in respect of the sale of an undivided property. In fact, as their Lordships have already pointed out and as the passage which the learned judge goes on to cite from the Encyclopédie shows, the decision proceeded on the basis that the right of substitution was exclusively contractual, resting on the terms of sale. Their Lordships can discern no reason why in the law of Mauritius, just as in the law of France, the joint owners should not be able to insert a term in the conditions of sale reserving a right of substitution which will operate purely on a contractual basis and independently of the statutory right under article 813-13.

24. The Court of Civil Appeal held that the effect of Article 12 of the conditions of sale in this case was indeed to embody such a contractual right of substitution and that the defendant had validly made her declaration in terms of that right. Counsel for the plaintiffs submitted, on the other hand, that, even if such a contractual right of substitution was recognised in the law of Mauritius, Article 12 did not contain such a right and, in any event, the defendant had not exercised a contractual right. The express terms of her declaration as set out in the plaintiffs’ pleadings, and not contradicted by the defendant, showed that she had purported to make a declaration in conformity with article 813-13. That being so, the defendant’s declaration was void.

25. The validity or invalidity of the declaration made by the defendant must depend on whether she in fact had the right to make such a declaration and not on her belief as to the source of that right nor on the way in which the right was described in Article 12. Thus, in the 1989 case the Cour de Cassation held that M Rhein had an independent contractual power to make a declaration, which he had validly exercised by making his declaration of substitution using the power set out in the cahier des charges, even though that power was expressly said to be “en conformité des dispositions de l’article 815-15 du Code civil”. That being so, the critical question in this case is whether, despite the reference to article 813, Article 12 of the conditions of sale embodies an independent contractual right to make a declaration of substitution. If it does, then the defendant had the right to make the declaration before the Master. Her declaration will accordingly be valid, even though she mistakenly thought, and said, that she was making it in terms of article 813-13.

26. In any given case the answer to this question must depend on the particular terms of the relevant clause in the conditions of sale. Their Lordships have just noted that in the 1989 case the juges de fond in the lower court held in effect that, despite the reference to the power of substitution being in conformity with the provisions of article 815-15, the clause should be interpreted as conferring an independent contractual power of substitution. The Cour de Cassation considered that they had been entitled to do so. On the other hand, in Jean-Luc Piquemal et De Tamadis SCI c Claudette Laurent the tribunal de grande instance came to the opposite conclusion on the wording of the particular clause in that case. The Cour d’Appel de Bordeaux were satisfied that the lower court had been entitled to do so. The clause in question provided that “chaque indivisaire peut en l’application de l’article 815-15 du Code Civil se substituer à l’acquéreur …”. The Cour d’Appel held that, although the parties could have agreed to derogate from the terms of article 815-15 and create a contractual right of substitution, that was not in fact what had happened:

“dès lors que la clause dont se prévaut Madame LAURENT se réfère expressément à l’application de l’article 815-15 du Code Civil et qu’il ne résulte ni des termes de cette clause ni d’aucun autre élément que les indivisaires aient, d’un commun accord, inscrit de déroger aux dispositions dudit article”.

Mr Jaunbaccus submitted that the Board should apply the same approach in this case. The conclusion should then be that Article 12 contained nothing more than a reference to the statutory right of substitution under article 813-13 and that the parties had not agreed to create any other right of substitution.

27. Their Lordships acknowledge that, on one view, Article 12 could be regarded as simply containing a warning or notification that the joint owners would have the power of substitution conferred by article 813-13. But they note that the right of substitution is first stated and then, much as in the 1989 case, is said to be in compliance with the article of the Civil Code. In this respect the wording is significantly different from that being interpreted in the Bordeaux case. When a commercial condition of sale of this kind falls to be interpreted, much may depend on the background, including the practice of licitations, with which the judges of the Court of Civil Appeal are inevitably much more familiar than their Lordships. The Board would therefore hesitate to depart from a construction of Article 12 which those judges adopted after due consideration of the relevant factors.

28. In reaching their view the Court of Civil Appeal had regard to the fact that the defendant was notified that there would be a power of substitution and that no-one objected to the terms of the clause. Similarly, the plaintiffs purchased the property when they were well aware of the provision in Article 12. In these circumstances the Court of Civil Appeal were satisfied that the right of substitution formed part and parcel of the conditions of sale, notwithstanding that the basis of that right was wrongly stated. That is undoubtedly a conclusion which they were entitled to reach, especially since the appellants’ approach involves giving no effect whatever to what appears to have been the clear intention of the parties to the sale, that on the sale of Lot No 2 the (former) joint owners were to have a right of substitution. In all the circumstances the Board find no reason to depart from the interpretation adopted by the Court of Civil Appeal.

29. For these reasons their Lordships dismiss the appeal.