Société Royal Gardens et Compagnie & 138 Others v The Mauritius Revenue Authority

[2010] UKPC 11

Privy Council Appeal No 0050 of 2009

JUDGMENT

Société Royal Gardens et Compagnie & 138 Others

v 

The Mauritius Revenue Authority 

From the Supreme Court of Mauritius 

before 

Lord Phillips

Lord Rodger

Lord Walker

Lord Brown

Lord Clarke

JUDGMENT DELIVERED BY

Lord Brown
 ON

29 June 2010

Heard on 29 April 2010

Appellant  

Mr Ivan Collendavelloo,, SC

Michael King Fat        

(Instructed by MA Law LLP)                      

Respondent

Philip Baker QC

Rajeshsharma Ramloll

Marika Lemos

(Instructed by Royds

Solicitors LLP)

LORD BROWN : 

1.                 This is a most unusual case. In a nutshell the facts are these.   The appellant taxpayers, consequent on certain transactions and arrangements, claimed various capital allowances whereby they showed tax losses for the year 1994/1995.  The Commissioner of Income Tax (since replaced by the respondent Revenue Authority) thought the purpose of these arrangements to have been tax avoidance and by letter dated 24 June 1999 determined accordingly that they were void pursuant to section 44 of the Income Tax Act 1974 (the Commissioner’s first determination).  By the same letter the Commissioner also adjusted the losses in any event from Rs196,111,885 to Rs111,361,885 pursuant to sections 28A and 32A of the 1974 Act (the Commissioner’s second determination).  The taxpayers appealed against both these determinations to the Tax Appeal Tribunal (since replaced by the Assessment Review Committee) which on 20 December 2002 upheld their appeal with regard to the first determination.  By letter dated 24 January 2003 the Commissioner maintained his second determination and stated that the appellants’ tax liability would be adjusted accordingly.  The appellants sought judicial review of that decision on the ground that it contravened the final and binding effect of the Tribunal’s unappealed determination of 20 December 2002.  By judgment dated 30 April 2008 the Supreme Court (Matadeen SPJ and Balgobin J) dismissed that application, holding that the Tribunal’s determination was binding on the parties only to the extent that there had been a determination on the issue in question and that there had been no such determination on the second issue.

2.                 The taxpayers now appeal to the Board by leave of the Supreme Court granted on 15 January 2009.  It may at once be noted that before their Lordships the appellants speedily disavowed any contention that the second issue had in fact been determined by the Tribunal so as to be chose jugée (their essential argument before the Supreme Court).  Rather they contended that at some stage before the Tribunal’s determination (which followed a series of written and, finally, oral submissions) the Commissioner was to be regarded as having abandoned his second determination so as to become estopped from subsequently reasserting it after the Tribunal failed to deal with it.  The respondent Revenue Authority for its part submitted to the contrary that it was rather the taxpayers who should be regarded as having abandoned their appeal against the Commissioner’s second determination and, since it had been for them to make good their appeal, the second determination was accordingly conclusive against them.

3.                 With that brief introduction, their Lordships must now return to the facts albeit with no need to recount these in any great detail.  There were in all 139 appellants before the Tribunal although, as the Board will later explain, the appeals of the last four came to be adjourned.  The first appellant was constituted as a limited partnership on 20 January 1994, with the second to ninth appellants (the third to ninth also being limited partnerships) as associates.  The tenth to one hundred and thirty-ninth appellants were the associates of the third to ninth appellants.  Thus the first appellant was largely a partnership of partnerships.

4.                 On 27 April 1994 the first appellant purchased from Blue Sun (Mauritius) Ltd (in compulsory winding up) the leasehold interest in, and uncompleted buildings and structures of, a proposed hotel (The Mariya Hotel) for the sum of Rs110m. By 30 June 1994 the first appellants had spent a further Rs150,123,363 towards the completion of the hotel (which was finally completed in December 1994) and for the purchase of plant, equipment, furniture and fittings.  

5.                 On 3 August 1994 the third to ninth appellants exchanged their interests in the first appellant for shares in the second appellant so that the first appellant became a wholly-owned subsidiary of the second appellant.

6.                 In its income tax return for the year of assessment 1994/1995 the first appellant claimed investment and initial allowances of the total capital expenditure incurred, Rs260,123,363, its tax computation for that year showing in the result a tax loss of Rs196,111,885.

7.                 Since partnerships in Mauritius are transparent for tax purposes, this loss was apportioned to the remaining appellants and the individual and corporate appellants duly made claims in their tax returns to set off their respective shares in this loss against their taxable incomes.

8.                 As already stated, the Commissioner decided that through these various transactions the appellants had entered into an arrangement one of the purposes of which was the avoidance of tax whereby it was considered void pursuant to the provisions of section 44 of the 1974 Act.  The Commissioner concluded that the proper person to whom the relevant losses for the year were attributable was the second appellant so that the losses showing in the returns of the other appellants would be disregarded and their chargeable income recomputed and made subject to notices of assessment. The letter then concluded: 

“You will also note that the losses as at 30 June 1994 transferrable from Ste Royal Gardens to Royal Gardens Ltd have been adjusted to Rs111,361,885 in accordance with sections 28A and 32A of the Income Tax Act 1974 ie initial and investment allowances claimed on the purchase consideration of the leasehold rights and uncompleted buildings and structures have been disallowed.  Moreover, the ‘ski lane’ has not been taken into consideration for computing capital allowances as it does not qualify for such allowances.”

9.                 Notices of assessment followed dated 28 June 1999.  On 12 July 1999 the appellants objected to these on the ground that they wrongly disregarded the claimed losses.  On 11 October 1999 the Commissioner rejected these objections, maintained his assessments and reminded the appellants of their right to appeal to the Tribunal under section 4 of the Tax Appeal Tribunal Act 1984.

10.             The appellants duly did appeal and there followed a succession of written cases, written submissions and, on various dates between 21 March 2000 and 30 May 2002, oral submissions by the respective parties.  The great majority of these submissions plainly went to the first issue – as to whether the arrangements were designed essentially or at least partly for tax avoidance – the issue on which the appellants succeeded.  But some at least went to the second issue, the extent of any claimable allowances.  Their Lordships think it unnecessary to refer to the detailed cross-fire of submissions in order to demonstrate this.  Rather it seems to the Board quite apparent from passages in the Tribunal’s (40 page) determination itself.  For example, on the very first page of the determination, having noted that “[t]he Commissioner felt that the main purpose or one of the purposes behind that course of conduct was tax avoidance and should therefore be considered null and void”, the Tribunal continued:

“The Commissioner further felt that, consequently:

(i)              The losses for assessment year 1994/95 are attributable to Royal Gardens Ltd and not Appellants and consequently, the losses shown in the return of the Société Royal Gardens have to be disregarded and the share of losses of the associates have to be considered to be nil.

(ii)            The capital expenditure allowance for hotel construction (section 28A) and the investment allowance (section 32A) on the purchase consideration of the leasehold rights and uncompleted buildings and structures claimed by Société Royal Gardens should also be disallowed.”

The use of the word “consequently” at the start of that quotation is somewhat puzzling: paragraph (ii) necessarily assumed the failure of the Commissioner’s case under paragraph (i).  But the reference to paragraph (ii) clearly showed that issue (ii) was still in play.

11.             Later in their determination the Tribunal set out extracts from the competing submissions including the following from the appellants’ written submissions: “Contention of the respondent 

. . .

The initial allowance of 50% and the investment allowance of 25% should not be allowed on the purchase consideration of the leasehold rights and the costs of the uncompleted buildings and structures.

. . .

In answer thereto, it is submitted that 

. . .

(ii)            Capital expenditure was incurred by Société Royal Gardens et Compagnie for the acquisition of physical assets (ie the uncompleted building of what was to have become Mariya Hotel) and completion of the hotel building.  As at 30 June 1994 there was no income produced.

(iii)          The Société is, according to the provisions of the Income Tax Act 1974 (ie sections 2, 9(2), 9(4), 28A, 32A(1) and 28A(8), duly entitled to investment and initial allowances on the whole cost of the construction of the hotel building (ie the sum of Rs110m incurred for the acquisition of the uncompleted hotel building and the completion costs).”

12.             It is equally apparent to the Board, however, that the Tribunal never decided this second issue.  Their determination ends as follows:

“Finally we wish to conclude by perhaps stating the obvious: we accept the evidence led by appellants as true and we are satisfied that they have discharged the burden of proving that the transactions, considered by the Commissioner as an antiavoidance scheme under section 44, were genuine commercial transactions and that the tax benefits were only incidental and not the result of any scheme. . . .

Last but not least the respondent in spite of the efforts, has not been able to establish that the documents were a ‘mere façade or cloak’ for some other transaction and therefore a sham.

We therefore determine all the above appeals in favour of appellants.

Appeal allowed.”

13.             Following the Tribunal’s determination of 20 December 2002, the Commissioner, as already stated, by letter dated 24 January 2003 maintained his decision on the second issue and stated that the appellants’ tax liability would be adjusted accordingly.  It was that decision which the appellants unsuccessfully challenged by a judicial review application to the Supreme Court, whose decision dated 30 April 2008 is in turn now under appeal to the Board.

14.             The Supreme Court correctly recognised that the Tribunal had not decided the second issue and that the appellants could not, therefore, “invoke before [them] the principle of ‘res judicata’ or ‘autorité de la chose jugeé’.”  Their no less critical but altogether more doubtful conclusion, however, was that the appellants had in effect abandoned their case on the second issue.  That conclusion emerges clearly from the following passages in the Supreme Court’s judgment:

(i)               “The Tribunal found that it could do no better than reproduce verbatim some of those documents . . . which . . . set out the case for the applicants but not before making this statement: ‘It is worth mentioning that the other issues relating to the relevant Income Tax Act, time barred assessments, ski land, etc, have neither been pressed nor submitted upon by Appellants.  We are therefore relieved from determining these issues’.”

(ii)            “[T]he issue of disallowance of capital allowances was neither pressed nor decided upon by the Tribunal.”

(iii)          “No evidence was adduced by the only witness for the applicants before the Tribunal on the issue of capital allowances; nor was that issue of capital allowances pressed before the Tribunal.  And accordingly there was no finding from the Tribunal on that issue.”

15.             The suggestion in the third of those passages that no evidence had been adduced by the appellants on the issue of capital allowances is a surprising one.  Mr Masson, himself an appellant, the appellants’ only witness (indeed the only witness before the Tribunal since the respondent called none) gave all the evidence necessary for a decision on the second issue.  That issue fell to be decided on the undisputed facts as a pure question of law, in particular by reference to sections 28A and 32A of the 1974 Act, so far as material as follows:

“28A Allowances for Hotels

. . . (3) In computing the capital expenditure incurred on the erection of any building, no account shall be taken of expenditure incurred on the acquisition of, or of rights in or over, any land, . .

.”

“32A Investment Allowances

. . .

(2) No deduction shall be allowed under subsection (1) [a deduction by way of investment allowance of 25% of the capital expenditure incurred on the acquisition of new machinery and plant] in respect of expenditure incurred in the acquisition of any machinery or plant which is - (a) used or second-hand at the date of its acquisition; . . . ”

Was the Supreme Court right to have understood the Tribunal to be saying, in the extract from their determination quoted in the first of the above three passages, that the issue of capital allowances had “neither been pressed nor submitted upon by Appellants”?  This is the critical question.

16.             Although their Lordships can readily see how the Supreme Court came to their understanding – indeed the very fact that the Tribunal never did determine the issue of capital allowances may tend to suggest that they thought the appellants had abandoned their case upon it – we are not in the end persuaded that this was correct.  It is apparent from careful examination of the various written and oral submissions that the issue relating to capital allowances was not an issue “relating to the relevant Income Tax Act” (that concerned rather a point raised by the appellants as to which Income Tax Act should apply), nor an issue as to whether the assessments were time-barred (another point raised by the appellants), nor, obviously, as to the ski lane (the construction of which, as the appellants’ written submissions expressly accepted, had not even been started in the relevant year).  Unless, therefore, this important second issue in the appeal was encompassed within the word “etc”, it was not to be regarded as an issue “neither ... pressed nor submitted upon” by the appellants which the Tribunal were therefore relieved from determining.  Given that this issue was itself worth, we are told, some Rs5.6m in net tax liability and given, as shown above, that the appellants had already outlined their case upon it in writing, their Lordships do not think the word “etc” capable of bearing so heavy a weight in the present context.

17.             What, then, of the appellants’ contention that it is rather the respondent who must be regarded as having abandoned his case on the second issue, ie his fall-back position that if the claimed losses are not to be totally disregarded, they are at any rate to be reduced?  In support of this argument the appellants pray in aid two passages in particular in the Tribunal’s determination.  First this:

“The respondent took the perilous decision of raising assessments on the sole ground that what was done amounted to antiavoidance and therefore contravened section 44 of the Income Tax Act 1974.  No alternative ground was given and this, at his risk and peril.  Therefore, although the issues may have been raised in the Statements of Case or address of Counsel, we cannot, in fairness, go into issues not raised by the assessment letter issued by the Commissioner, as they are irrelevant.”

Secondly, the appellants rely upon the concluding words of the determinations already quoted, particularly the final line: “We therefore determine all the above appeals in favour of Appellants.”

18.             Again, however, the Board is not persuaded that the respondent is properly to be regarded as having abandoned his case on the second issue.  The reference to antiavoidance in section 44 being “the sole ground” of the assessments can be seen on examination to relate to the respondent’s decision to  confine his anti-avoidance case to section 44, leaving no room for any other attack on the validity of the underlying transactions. And the Tribunal’s concluding sentence about determining all the appeals in favour of the appellants is simply a reflection of the fact that by an earlier direction the Tribunal had consolidated the appeals of all the appellants. Besides these considerations, in the respondent’s case too it would have been odd for him to have abandoned his case on the second issue: a large sum of money was at stake and he clearly had a properly arguable case upon it.

19.             In the result, the Board concludes that neither party abandoned their case on issue 2, that the issue was accordingly live before the Tribunal and properly therefore should have been decided. It appears that each party read the determination through rose-tinted spectacles, interpreting it in its own favour with regard to the second issue.  Plainly, in hindsight, once it emerged that the parties were in dispute about the outcome of the appeal, they should sensibly have returned to the Tribunal and asked for their decision upon this outstanding issue.

20.             What, then, should now be done?  As it seems to their Lordships, this second issue remains outstanding to this day and ought now finally to be resolved.  In their judgment of 30 April 2008 the Supreme Court noted that the Tribunal had “excluded the appeals by the last four applicants as they had raised other issues in addition to those canvassed in the appeals by the first 135 applicants” and that, as for these four, “their appeals are still pending before the Assessment Review Committee which has now taken over from the Tribunal.”  Written submissions invited from the parties subsequent to the oral hearing of this appeal in Mauritius on 29 April as to which tribunal should now hear and determine any outstanding issue (submissions, incidentally, noting that two of the four last appellants have now reached agreement with the respondent regarding the other issues) suggest that there is some doubt whether the outstanding issue as to capital allowances should be remitted to the Assessment Review Committee or the Supreme Court. Having considered these submissions the Board concludes that the appropriate course here is to allow this appeal to the extent of setting aside the Supreme Court’s order and substituting for it an order on the judicial review application that the issue as to capital allowances be now remitted to the Assessment Review Committee for final determination (to be heard, as that Committee may direct, before, with or following the appeals of any of the last four of the original appellants whose appeals remain outstanding); and further that, if that Committee decide that after all they have no jurisdiction to determine this issue (a question to be decided primarily by reference to the further submissions now before the Board and without prolonged further argument), the issue be instead decided by the Supreme Court of Mauritius.  Their Lordships further conclude that, neither party having succeeded fully on this appeal (or on the judicial review challenge), subject to written submissions to the contrary by either party within 28 days, there should be no order as to costs either before the Supreme Court or before the Board.

21.             Essentially by way of footnote the Board think it salutary to invite the attention of the profession to paragraph 6-11 of Chapter 6 of Potter and Prosser on Tax Appeals (1991):

“Given that the Commissioners’ determination is binding on the parties only in relation to the issues raised on the appeal, it will sometimes be important in connection with a dispute between the taxpayer and the Inland Revenue to identify the issues which were raised and resolved in a previous appeal.  The starting-point is the taxpayers’ notice of appeal which is supposed to specify the grounds of appeal; but it is unfortunately common practice for a notice to omit to specify the issues and instead to state baldly that the assessment is ‘excessive and estimate.’  Even where the notice of appeal is more explicit, further issues may have emerged in the course of the hearing.  It is clearly in the parties’ interests to ensure that a note is made before the end of the hearing of all those issues, not only those which the Commissioners are being asked to resolve, but also those which have been raised but conceded by one side or the other.  A copy of the notice should be given to the Commissioners to incorporate in some form in their decision.  Then there should be no difficulty in identifying the issues raised on the appeal.  Where, as in most appeals, particularly those heard by General Commissioners, this has not been done, it may be necessary to consider the pre-hearing correspondence between the parties and the parties’ notes of the hearing in order to find out what the Commissioners actually decided.”

The importance of that paragraph hardly requires emphasis in the circumstances of the present case.   Had its wise words been observed, a great deal of dispute, delay and expense would surely have been avoided. 

N. Parsooramen & Co Ltd v Mrs Fatma Bibi Mahmood Nahaboo, Shereen Bibi Mia Ayoob Sorefan, Ameenah Bibi Mia Ayoob Sorefan, Oomar Mia Ayoob Sorefan, Mohammad Yusuf Mia Ayoob Sorefan

[2010] UKPC 10

Privy Council Appeal No 0062 of 2009

JUDGMENT

N. Parsooramen & Co Ltd

V

Mrs Fatma Bibi Mahmood Nahaboo

Shereen Bibi Mia Ayoob Sorefan

Ameenah Bibi Mia Ayoob Sorefan

Oomar Mia Ayoob Sorefan

Mohammad Yusuf Mia Ayoob Sorefan

From the Supreme Court of Mauritius

before 

Lord Phillips

Lord Rodger

Lord Walker

Lord Brown

Lord Clarke

JUDGMENT DELIVERED BY

Lord Walker ON

29 June 2010

Heard on 25 April 2010

 

Appellant

Maxime Sauzier

Danielle Lagesse

(Instructed by Blake Lapthorn)

Respondent

Not represented

LORD WALKER : 

1.                 This appeal is concerned with rights in or over a piece of tarmacadamed roadway, about 35m long and about 8m wide, in the Impasse Pot de Terre, Curepipe.  The Court of Appeal referred to the land as “the space” in order to avoid any element of pre-judgment in the expressions “road” or “roadway”, and this judgment generally follows the same course.  The central issue in the appeal is the status of all or part of the space as a public road as defined in the Roads Act 1966 (Act 29/66 – “the Act”).

2.                 By section 2 of the Act “road” means “any highway, and any other road to which the public has access and any public place to which vehicles have access and includes any bridge, ford, culvert or other work in the line of such road” and “public road” means any road of a class described in section 3.  Section 3(1) divides roads into four classes:  (a) motorways (b) main roads (c) urban roads and (d) rural roads.  Section 3(3) provides:

“Notwithstanding any other enactment, urban roads shall be all roads within the boundaries of a proclaimed town which are not motorways or main roads and have either been dedicated to public use or have been accepted as a regular maintenance responsibility of a local authority other than a district council.”

It will be necessary to come back to this definition.

3.                 At trial Matadeen J held that the whole of the space had become a public road, and dismissed the claim of the plaintiff, Dr Mia Ayoob Sorefan to limit the extent of the public road to a strip 10 ft (that is, about 3m) wide.  Dr Sorefan died before judgment, but his estate pursued an appeal.  The Court of Appeal held that the whole of the space was in the ownership of Dr Sorefan’s estate, but that a strip on its south side, 18 ft (that is, about 5.5m) wide had become a public road.  The present owner of the land on the south of the space, N Parsooramen & Co Ltd (“Parsooramen”) appeals to the Board. The Municipality of Curepipe, originally the second defendant, and the Commissioner of Police, originally the third defendant, are co-respondents to the appeal but have not appeared. 

4.                 The Court of Appeal gave a helpful summary of the relevant geography.  The following account is based on the Court of Appeal’s summary, but is expanded to explain the most important changes in the physical features of the area that have occurred during the past half-century, so far as relevant to the issues to be decided.

5.                 “Impasse” is a synonym for “cul de sac” (what the English traffic authorities would designate as “no through road”) and that is what the Impasse was in 1958 when Dr Sorefan first acquired (under community of property with his wife) about 60 perches of undeveloped land in the area.  At that time the Impasse was a short and narrow piece of roadway off the Royal Road, Curepipe.  It went down the side of what is now the Monoprix supermarket but did not then provide a path for vehicular traffic, as it now does, to Queen Elizabeth II Avenue.  Instead it ended with the undeveloped land purchased by Dr Sorefan in 1958.  In the 1970s Dr Sorefan became interested in developing part of the land by the erection of shops and flats.  He seems to have had extensive discussions with the planning authorities during 1974 and 1975.

6.                 Ultimately by a letter dated 19 December 1975 the Municipality’s Administrative Commission approved plans submitted by Dr Sorefan on behalf of Nafyros Ltd (a family company of his which was to be the head tenant of the proposed building)

“on the condition that the road running in front of the aforesaid construction be built at the promoters’ own expenses and in conformity with the terms contained in the annexed schedule with the exclusion of clause no. 6 and to the satisfaction of this Municipality.”

The annexed schedule was a standard-form typed document headed “Specifications et Conditions Generales pour la construction des chemins et des drains aux nouveaux morcellements.”  It set out detailed specifications for the construction of roadways and (in para 6, which was omitted) drains.  Paragraph 1. (Largeur) provided

“Le chemin à être créé aura une largeur totale de dix pieds (10) pieds d’un parement à l’autre”.

The italicised words and figure were completed in ink.

7.                  Dr Sorefan’s case attached a good deal of weight to a document (exhibit “P7”) which was a ground floor plan on a scale of 1:96 prepared by ZAC Associates (Architects).  There are however some difficulties about this plan.  It was dated 14 December 1974, and there is some evidence (in particular the minutes of a meeting of the Administrative Commission on 22 July 1974) to indicate that the proposals changed from time to time.  Moreover the plan cannot be related to any feature which then existed on the ground, and it showed the space as having a width of 35 ½ ft (over 10m) between the face of the proposed building and the southern edge of the proposed road (which is shown as 19 ½ ft wide, including a narrow footway).

8.                  There is some documentary evidence that the discussions about the development which took place in 1974 and 1975 involved the owners of the supermarket, who were interested in obtaining vehicular access to Queen Elizabeth II Avenue.  The Municipality also had a proprietary interest, since it owned land between Dr Sorefan’s land and the Avenue. The fact that the Impasse is no longer a cul de sac but a busy one-way street (with traffic travelling from the Royal Road towards the Avenue) has no doubt had much to do with the tensions which led to these proceedings.

9.                  Dr Sorefan’s proposed development was carried out to the north of the disputed space.  The building (referred to at trial as the Nafyros Building) has a ground-floor arcade which acts as a covered pavement for pedestrians.  Dr Sorefan’s case at trial was that he paid for the construction of a roadway covering the whole width of the disputed space and that it remained his property, but that (as he conceded) the southern strip of the space (10 ft, or just over 3m wide) was intended to be dedicated, and has been dedicated, as a public road.  As the Court of Appeal commented, it was not until Dr Sorefan’s reply to the Municipality’s defence that his case became clear.

10.             At some stage another building with a similar ground-floor arcade was erected on the south side of the disputed space, opposite the Nafyros Building.  There was no documentary or oral evidence as to the date of its construction but the land to the south had certainly been developed by 1987, when it was sold, with a building erected on it, to Parsooramen for 2.5 million rupees.  On the occasion of this sale the land was subject to a report (not a full survey) by a Mr Chamroo.  In his report dated 9 June 1987, in the course of describing the boundaries, the surveyor referred to the disputed space as 

“Un chemin de huit mètres (8.00m) de large entretenu [maintained] par la Municipalité de Curepipe”.

This description was repeated in the deed of sale dated 15 July 1987 from Dr Sorefan to Parsooramen.

11.             When cross-examined about this by Mr Domaingue on behalf of Parsooramen, Dr Sorefan insisted that only a strip 10ft wide had been dedicated as a public road; the rest, he said, was private land available as a parking place to those whom he allowed to park.  He said that the surveyor had made a mistake.  Further cross-examined by Mr Bhuckory on behalf of the Municipality, he said that the mistake was made because there was then (that is, in 1987) no marking on the road.  He accepted that after about 1980 (when the original surfacing first began to need attention) the Municipality might have patched his parking area, as well as the strip he regarded as having been dedicated, where patching was needed.  

12.             The judge, who saw and heard the witness, made this finding:

“Be that as it may, the plaintiff had finally to concede that the 8-metre wide road had indeed been accepted as a regular maintenance

responsibility of the second defendant and this, ever since its creation.”

The Court of Appeal did not accept this:

“The Judge went wrong when she concluded that Dr Sorefan had conceded that the road was a maintenance responsibility of the Municipal Council.  She may have been swayed by the answer to the very last question put to Dr Sorefan in cross-examination –

Q. I also put it to you that you have, therefore, no interest in the matter and that anything concerning the public road is a matter for the local authority, that is, for the Municipality of Curepipe.  Any action concerning that road can only be taken by the Municipal Council.  Do you agree?

            A.        Yes.

There were three questions in one and it would not be in order to infer that Dr Sorefan, after having consistently maintained his property rights on the space, except for the road, to have accepted that he had no interest in the matter and that the Municipal Council had taken over maintenance responsibility [for] the whole space with his consent.”

13.             On this point, as on several other points, Dr Sorefan’s oral evidence was far from satisfactory. Almost the whole of his evidence in chief (apart from the production of documents which were made exhibits) consisted of short answers to leading questions put to him by his counsel.  It may be that the witness’s age and state of health led the judge to be so indulgent towards leading questions (as already mentioned, Dr Sorefan died before judgment had been given) but the result has been that his own account of the relevant events is exceedingly sparse.  In particular, there is no evidence as to what road markings (if any) were put in place when the roadway was first constructed and metalled by Dr Sorefan’s contractor in 1977 (the contract with the contractor was made in June 1977).  His own counsel, Mr Montochio QC, observed at one point,

“Nobody wants to take the responsibility of the markings which had been done, neither the Police nor the Municipality nor the parties.”

(The transcript says “parkings” but “markings” must have been intended).

14.             The only evidence about road markings relates to much more recent years.  There is documentary evidence in the form of photographs taken in 1995 from an upper floor of the Nafyros Building showing chevron-pattern lines painted on each side of the one-way street, which runs along the centre (the parking spaces being in front of both the Nafyros Building and the opposite hotel building).  On one photograph (exhibit “P19”) the markings in front of the hotel have been partially obliterated, apparently with black paint.  Dr Sorefan mentioned this in producing the exhibit, but did not say whose hand held the paintbrush.  Other documentary evidence (in the form of an official log of road repairs) indicated that the Impasse was to be resurfaced in March or April 1995.  It may be that the photographs were taken soon after the resurfacing and the painting of new road markings had taken place.

15.             There is also documentary evidence that on 28 November 1995 the Municipality’s Town Surveyor’s Department served notice on Nafyros Ltd stating that it had “unlawfully placed road markings on Impasse Pot de Terre,” and requiring their removal.  The company promptly sent (as a “mise en demeure”) a counter-notice of objection containing the following paragraphs:

“3. The said markings are in fact found on a portion of land belonging to the lessor of Nafyros Ltd.

4.                 The lessor of the said property did submit in or about the year 1977 to the Municipality of Curepipe site plans indicating car parking facilities to be found on the land belonging to the lessor of the abovenamed party.

5.                 The Municipality of Curepipe did request the lessor of the abovenamed party to provide parking facilities on his land and made it one of the conditions for the granting of a building permit.

6.                 The building permit was issued only when the owner agreed to provide parking facilities and indicated same on the plans submitted to the Municipality in or about the year 1977.

7.                 The said markings were found on private land and were not placed by Nafyros Ltd.”

If the year 1977 is correct, it suggests that the plans cannot have been or included exhibit ‘P7’.

16.             There is also documentary evidence that on 3 June 1998 Dr Sorefan’s attorney served a second mise en demeure on Parsooramen, the Municipality and the Commissioner of Police.  That was the precursor to these proceedings.

17.             That concludes the summary of events down to the issue of proceedings on 4 August 1998.  The Court of Appeal’s reference to Dr Sorefan “having consistently maintained his property rights on the space, except for the road” seems to be based primarily on the events of 1995 and 1998 mentioned in the three previous paragraphs.  Against that, he had in 1987 executed a deed of sale referring to a road 8m wide maintained by the Municipality.

18.             The trial took place on 24 May 2005, with final submissions on 2 June 2005.  Matadeen J gave judgment on 6 July 2007.  She attached weight to the reference in the 1987 survey and deed of sale to the 8m road being maintained by the Municipality; to what she took to be Dr Soferan’s own concession of the point; and to the whole of the disputed space having been accepted as a regular maintenance responsibility of the Municipality since its construction.  She concluded that the plaintiff had failed to prove his case and she dismissed the whole claim with costs.

19.             Dr Sorefan’s heirs appealed to the Court of Appeal, on the grounds that the judge had erred both in her findings of fact and in law (disregarding the principle of res inter alios acta and misapplying the Act).  The Court of Appeal (Yeung Sik Yuen CJ and Bhaukaurally J) sought to resolve the “factual imbroglio” by going back to 1974.  It noted that the relevance of exhibit ‘P7’ had not been seriously contested (whereas before the Board the appellant’s counsel drew attention to the difficulties already noted).  The Court referred to the incidents in 1995 and 1998 as evidence “that every time his private property rights fell to be threatened, Dr Sorefan would protest and take appropriate action.”

20.             The Court of Appeal agreed with some of the judge’s conclusions but held that her judgment was nevertheless flawed.  The Court made four main points:

(1)             Dr Sorefan was not claiming an exclusive right over the whole 8m width, as the judge had supposed (perhaps from reading the statement of claim alone without reference to the reply).

(2)             The Court considered that the evidence fell short of establishing that the space had been accepted as a regular maintenance responsibility of the Municipality for the purposes of section 3(3) of the Act.

(3)             The Municipality had not followed the statutory procedure for turning a private road into a public road under section 60 of the Act.

(4)             The incorrect description in the deed of sale of the 8m roadway as maintained by the Municipality could not confer rights on Parsooramen, still less on the Municipality.   

The first of these points is clearly correct, but is not determinative.  The last point is also correct so far as it goes, but the statement about the maintenance of the roadway is evidence, and in the Board’s view important evidence, of Dr Sorefan’s state of mind and intentions when he executed the deed of sale (an important document to which he must be supposed to have paid close attention).

20.             The other points relate to the Act.  Since the respondents did not appear, the Board did not have the benefit of full argument on the Act, and they feel some reluctance at deciding points of construction on the Act that may be of some general importance in Mauritius.  They think it better to go no further than is necessary in order to dispose of this appeal.

21.             It is appropriate to repeat section 3(3) of the Act:

“Notwithstanding any other enactment, urban roads shall be all roads within the boundaries of a proclaimed town which are not motorways or main roads and have either been dedicated to public use or have been accepted as a regular maintenance responsibility of a local authority other than a district council.”

The word “or” suggests that there are two processes by which a roadway can become a public road of the urban class: dedication or acceptance as a regular maintenance responsibility of the highway authority.

22.             In construing section 3(3) and other relevant provisions of the Act the Board approaches the statute on the basis that although parts of it are framed with regard to conditions and needs that are particular to Mauritius, others are clearly based on English statutes going back to the Highway Act 1835 and the Private Street Works

Act 1892. The former Act gave statutory force to the English common law doctrine that a public highway was created by dedication by the owner and acceptance of the dedication by the local inhabitants at large (later represented by the appropriate highway authority).  Dedication was occasionally effected by an express declaration but was much more often inferred from long, continuous and uninterrupted use by the public: see Folkestone Corporation v Brockman [1914] AC 338; also Hale v Norfolk

County Council [2001] Ch 717, para 18, where Chadwick LJ said,

“It is trite law that a public right of way over land may arise either at common law, under the doctrine of dedication and acceptance, or by reason of some statutory provision….”

23.             It was not suggested that dedication of a highway was historically part of the law of Mauritius, but the language of sections 3 and 5 of the Act indicates that the doctrine of dedication of highways has, by statute, become part of the law of Mauritius, as it has in other territories outside England: see Permanent Trustee Company of New South Wales Ltd v Campbelltown Municipal Council (1960) 105 CLR 401, 420.  In order to be complete, dedication requires acceptance by the highway authority (Director of Public Prosecutions v Jones (Margaret) [1999] 2 AC 240, 256).  Otherwise a highway authority could be saddled with heavy liabilities as a result of dedication of a road in a very bad state of repair.

24.             The Private Street Works Act 1892 (now embodied, in England, in Part XI of the Highways Act 1980) deals with the circumstances in which a highway authority may require a street to be made up at the expense of the residents and then adopted as a public highway (so that future maintenance will fall on public funds).  This may happen against the wishes of one or more individual frontagers so long as the majority of the frontagers are in favour. Part III of the Act (sections 49 to 61) contains a similar code covering these matters.  They reflect democracy in action as between the frontagers living on a private road (typically in a new urban development), and a balance between the future advantage of the road being adopted (so that there is no further private expense) against the immediate detriment (the initial cost of bringing the road up to the requisite standard being shared between the frontagers).  It would be a mistake to consider section 60 of the Act in isolation, as may have occurred in the courts below.  The provisions in Part III of the Act explain the wording “Subject to this Act” at the beginning of section 5(3) (public money not to be spent on private roads).

25.             This background helps to explain the word “or” in section 3(3).  The maintenance of all public roads is among the responsibilities of the various highway authorities (under section 4 of the Act) and so the use of the word “or” is in a sense redundant.  There is an overlap between the two limbs of section 3(3).  But the most likely explanation is that the first limb of section 3(3) is directed mainly to roads of some antiquity (whose dedication may have been inferred from long-continued public use) and the second limb is directed mainly at the special provisions in Part III of the Act.

26.             The Board is in full agreement with the Court of Appeal that the procedures in Part III of the Act, if invoked, must be followed strictly, since they may involve compulsory acquisition from some (but not a majority) of unwilling frontagers: Chadee v Beeharry [2004] SCJ 126.  But the Court of Appeal seems, with respect, to have been too ready to dismiss the possibility that Dr Sorefan had, by acquiescence between 1977 and 1995, raised an inference of an intention to dedicate the whole of the disputed space as a public highway.

27.             As already noted, the whole of the disputed space was made up, apparently as a roadway, in 1977.  The whole of it was repaired by the Municipality from 1980 (when repairs were first needed), at first by regular patching and then (in 1995) by a complete resurfacing.  There was no clear evidence at trial of any marking out of parking spaces until the photographs taken in 1995, and it seems likely that Dr Sorefan was not troubled about the matter until 1987, when he sold the southern part of the property and the hotel on Parsooramen’s land began to attract more parked cars.  It is not as if Dr Sorefan was an absentee landlord: his family company was head tenant of the Nafyros Building, and he himself seems to have had consulting rooms there.  He must have been aware of what was going on, and he spoke with feeling, in his evidence, about the taxi marrons which were high-jacking what he regarded as his parking space.

28.             Some of these points may be regarded as no more than inferences from the scanty evidence put before the judge at trial.  But as she said, it was for Dr Sorefan to prove his case on the balance of probabilities.  Section 5(5) of the  Act (dealing with burden of proof) seems hardly in point as it is dealing with the case where a private party is seeking to throw the burden of maintenance onto a reluctant highway authority, which is the opposite of the case here.  Even if section 5(5) were in point, the unequivocal statements in the 1987 survey and the deed of sale (a formal document executed by Dr Sorefan) and the other circumstances mentioned above would discharge that burden.

29.             For these reasons the Board allow the appeal and restore the order of Matadeen J.  The estate of Dr Sorefan must pay the respondents’ costs in the Court of Appeal and the appellants’ costs before the Board.