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Harris v Nauru Phosphate Royalties Trust [2007] NRSC 1; Miscellaneous Cause No 16 of 2005 (19 January 2007)

IN THE SUPREME COURT OF NAURU

Misc. Cause No. 16/2005

BETWEEN:

JOSEPH BARROT HARRIS
Plaintiff

AND:

NAURU PHOSPHATE ROYALTIES TRUST
Defendant

Mr Darryl Williams for the Plaintiff
Mr Nathan Moshinsky QC for the Defendant

DECISION

Joseph Barrot Harris claims to be entitled to the sum of $3,803,239.14 being the balance unpaid of $5m due to him under a Presidential Order dated the 16th December 1994 and made pursuant to S.19A of the Nauru Phosphate Royalties Act. The defendant Trust admits that various payments have already been made to the plaintiff but asserts they were made by mistake. It has counterclaimed for the return to it of $720,000.

It may be that an enquiry will be necessary to establish precise amounts. Whatever the amounts may be does not affect the issues in the action.

The plaintiff called no evidence, relying on the Presidential Order to make his case. Mr Williams did, however, as part of his opening hand to the Court, without objection from Mr Moshinsky, a bundle of documents. The bundle itself was not immediately marked as an exhibit although three documents from it were later tendered by consent - the Presidential Order of 16th December 1994, a copy of the will of Roy Degoregore and a letter dated 19th July 2004 from the Secretary of the Nauru Phosphate Royalties Trust to the Hon Kinza Clodumar MP. During an adjournment I took the opportunity to read through the whole bundle. Subsequently I told Counsel I had read it and thought several of the documents not separately tendered to be relevant to their arguments. I invited tender of the bundle by consent.

Mr Moshinsky demurred saying he had not had the opportunity to read through the bundle (even though he had two instructing solicitors with him and by then the defence have had the bundle for a day and a half). I offered to disqualify myself if Mr Moshinsky considered I may have been improperly influenced. Mr Moshinsky declined the offer. Finally, as the situation should be made regular, I allowed Mr Williams to tender the bundle, absent Mr Moshinsky’s consent. It is marked Exhibit P7.

The defendant has raised seven points of defence which I shall consider.

So that they may be understood, I set out section 19A of the Nauru Phosphate Royalties Act and the Presidential Order:

Section 19A:-

PAYMENT OF PRINCIPAL IN SPECIAL CIRCUMSTANCES

19A (1) Where the President is satisfied that a beneficiary of the Nauruan Landowners Royalty Trust Fund (in this section called "the Fund") is a person who is

(a) the sole owner of a Portion of land in respect of which he is a beneficiary of the Fund; and

(b) has no living next of kin (other than a spouse) who would in the normal course of events have any expectation of inheriting from the estate of the beneficiary (whether according to the customs and usages of the Nauruan people or otherwise); and

(c) is a person of such age that the likelihood of such circumstance changing appears to the President to be remote

the President may by order consent to a request by such beneficiary that part of the interest of the beneficiary in the Fund be paid to the beneficiary at such time, in such amount, and at such place as the President in his order may direct.

(2) The Trust must upon receipt of an order of the President made in accordance with sub-section (1), give effect to that order.

The Presidential Order:-

Nauru Phosphate Royalties Trust Act 1968-1990
(Section 19A)

Presidential Order

WHEREAS Section 19A of the Nauru Phosphate Royalties Trust Act 1968-1990 provides that where the President is satisfied that a beneficiary of the Nauruan Landowners Royalty Trust Fund ("the Fund") is a person who is

(a) the sole owner of a Portion of land in respect of which he is a beneficiary of the Fund; and

(b) has no living next of kin who would in the normal course of events have any expectation of inheriting from the estate of the beneficiary; and

(c) is a person of such age that the likelihood of such circumstance changing appears to the President to be remote

the President may by order consent to a request by such beneficiary that part of the interest of the beneficiary in the Fund be paid to the beneficiary at such time, in such amount, and at such place as the President in his order may direct;

AND WHEREAS Roy Degoregore, a beneficiary of the Fund, has requested that part of his interest in the Fund be paid to him;

NOW, I Bernard Dowiyogo, President, being satisfied that the said Roy Degoregore is a person who meets all of the aforesaid criteria and having given due consideration to his request, consent thereto

AND I HEREBY DIRECT –

1. THAT the Nauru Phosphate Royalties Trust do pay to the said Roy Degoregore from his interest in the Fund the sum of five million dollars ($5,000,000);

2. THAT THE SAID SUM BE PAID AS FOLLOWS –

As to the sum of $700,000 on December 23, 1994;
As to the sum of $2,500,000 on April 2, 1995;
As to the sum of $1,800,000 on June 1, 1995; and

3. THAT each payment be paid to the said Roy Degoregore at Westpac Bank, 139 Collins Street, Melbourne, Australia.

Dated this 16th day of December 1994

(Sgd) Bernard Dowiyogo, President

In paragraph 7 of the Further Amended Defence the defendant pleaded that section 19A is ultra vires. That defence was abandoned, not argued. I accept that section 19A is a valid enactment.

The Trust made various payments pursuant to the Order both before Roy Degoregore’s death on 24th August 1996 and since.

The deceased and later the plaintiff relied on getting funds from the NPRT and changed their position on that reliance. Letters in the bundle of documents, Exhibit P7, shew that. Examples: the letter of 21st March 1996, Alexander Robertson to Mr N Fernando, Administration Manager NPRT (at pp 30-31): the letter of April 16th 1996 from Baker & McKenzie, Solicitors, to Alexander Robertson Property Consultants Pty Ltd (at p. 34): the letter of July 10th 2001 to Mr Alex Deiye, Chairman NPRT, signed by Mr Kinza Clodumar, Chairman and Joseph B Harris on behalf of 118 Burke Street Pty Ltd (at pp 54-55).

I come now to each of the seven points of defence.

1. Mr Moshinsky submitted strongly that the Court had an obligation not merely to accept the President’s satisfaction but to make its own assessment as to whether the three requirements in section 19A had been satisfied. I doubted that. How could the Court make its own assessment 10 years later? Mr Moshinsky replied, "Easy. Listen to the evidence the defendant will adduce".

He offered seven witnesses to shew that the President had been "plain wrong" – the words he adopted during his final address - to be satisfied that Roy Degoregore had "no living next of kin who would in the normal course of events have any expectation of inheriting from" his estate.

I set out from my notes of evidence the names and summarise the evidence of each:-

Kelvin Hubert

mother lived with deceased: they were not married.
"Adopted" – no papers of adoption
[an informal adoption]

Anne Hubert

"looked after me as a father"
Don’t know of formal documents
[An informal adoption)

Juanita Dick

Relative according to my mother
(Half third cousin once removed)
(Her mother) and deceased had a common grandfather: their grandfather had two wives: she and the deceased descended from different grandmothers
"Mother told me she and deceased cousins – same grandfather"

Nellinda Dedanang

"believe related" – a distant cousin – not sure of common ancestor

Abigail Gloria Jeremiah

didn’t know him personally but his de facto was related to her.

I am sure each of these ladies and gentleman came to the Court to give truthful evidence and were frankly telling me the truth. All but Abigail Gloria Jeremiah were beneficiaries under the Will. Yet I found the evidence of Juanita, Nellinda and Abigail vague and confusing. They themselves seemed uncertain of ancestry and relationships. Mr Moshinsky conceded that he had the onus of proving relationship. Even on the balance of probabilities I could not find that, based on their evidence, he has discharged the onus.

Bagadouwe Doubug is Chairman of the Nauru Lands Committee. He explained that if there is an intestacy the Committee calls a meeting of family members. Adopted children inherit in the same way as natural children. "Sometimes the Committee considers children not formally adopted as formally adopted". There have been three to four cases in his five years as Chairman.

Customary adoption – if I want to adopt that other person’s child – ask that person – if agrees then child becomes son or daughter. (In deceased’s situation) would regard that child as part of family.

Not call distant cousin to a meeting. Customary adoption – normally by agreement. When woman moves into relationship and she has children, then children would automatically become children of man. If they separated – woman automatically take children. If formally adopted – if not formally adopted mother take children. Informal adoption would come to an end. Children not adopted by deceased, went with mother. Under old customs it was permanent: relationship of care and support – wouldn’t be regarded as adoption. (From my notes of evidence).

Joslin Dageago has been Secretary of the Lands Committee for two years. He acknowledged that Mr Doubug has had more experience than he. Since early youth Joslin has been interested in drawing family trees. His grandmother had a collection of family trees which became his on her death. He has transcribed them into a book of his own. He has added later generations to the tree. No one has checked his work and he admitted he had found mistakes.

I concluded that Mr Dageago’s work did not help me to understand various family relationships nor was it sufficiently reliable to use. Mr Dedeang also brought to the Court a Land Dispute book with really old records going back to German times but it did not seem to be relevant to the issues in this case.

Based on the evidence of Mr Doubug and Mr Dageago I could not find that Kelvin and Anne Hubert were adopted children of the deceased.

In his turn Mr Williams reminded me of the Adam and Eve principle - if we look far enough we find that we are all related, however distantly: even more immediately true in a small community such as Nauru.

A line must be drawn somewhere. There seems to be no law in Nauru to guide me: nor any definite evidence in this case. The word "distant" was used but never defined. Although they do not apply in this case I am inclined to follow the rules for distribution on intestacy in section 16 of the Succession, Probate and Administration Act 1976. Being guided by them, none of the witnesses – even if I felt I could rely on the accuracy of their evidence – could be described as other than "distant" relatives and not entitled to inherit.

Mr Moshinsksy’s last witness on this point was Mr Reuben Kun. I have no hesitation in accepting his evidence. Mr Kun was himself Chairman of the Trust a few years ago. The Trust made the payments to the deceased because the payments were ordered by the President. In cross examination Mr Kun said the President. Bernard Dowiyogo, was himself a lawyer, experienced in land cases. Bernard Dowiyogo had a good understanding of the rules of family relationships and kinship. In addition the President had good legal advice.

Having made the only enquiries Mr Moshinsky suggested I should make and after hearing the evidence he adduced, I cannot find that Roy Degoregore had "living next of kin who in the normal course of events" would "have any expectation of inheriting".

It is noteworthy that none of those suggested as relatives has ever come forward to make a claim.

I am fortified by Mr Kun’s evidence and find that the President’s assessment as expressed in his Order of 16th December 1994 was correct.

So far so good for the plaintiff. I now consider Mr Moshinsky’s other arguments.

Before I come to them I should mention that there was one witness whose evidence I found unsatisfactory. Mr Roland Kun was Chairman of the NPRT from October 2004 to November 2006. In giving evidence Mr Kun was at times evasive. For example, it was quite clear (although he denied it) both from his evidence and from the letter of 23rd July 2004 to Paul Bannon, Secretary NPRT from Graham Sherry of Baker & McKenzie (Exhibit D2 and Exhibit P7 p. 70) that the Trust’s primary consideration in refusing to make further payments has been financial:-

....it is with some concern therefore that we notice in the PKF Report dated 22 June 2004 relating to Nauru Phosphate Royalties Trust Fund Number 2 and other entities. At page 8 of that Report an assertion is made that "...for the purpose of assessing the insolvency of NPRT, ....the amount will not be payable in the foreseeable future, particularly given the 10 year time period that has already elapsed since the Presidential Order was made".

Only after that were legal objections such as mistake raised for the first time. Yet my notes of Mr Kun’s evidence:-

I wanted to have a good idea of the status of the fund – the value of the Fund so that I could determine the value of deceased estate interest. Deceased paid just under $2m. Didn’t make decision on any one issue – accounting and legal considerations.

I don’t concede that the primary reason the Trust will not pay is financial.

Payments – my first concern was to ensure that there was sufficient money in his Ronwan account to make the payments to the Estate. Afterwards I became concerned about legal issues – questioned total legality: then sought legal advice.

Roland Kun said "the NPRT was under the impression the Court would advise the beneficiaries" of their rights to join in the action: this erroneous impression even though the Trust must have had legal advice since before 5 January 2006 when the original Defence was filed. Kun said no one on Nauru knew about this action and it was only the day before the hearing that steps were taken to notify people.

I cannot accept that the defendant and its legal representatives did not know of the correct procedure for a person to take who wanted to intervene nor that an action such as this was not known about in so small a community as Nauru.

In contrast to other witnesses upon whose evidence I find I could not rely only because they were vague and simply did not know, I felt that Roland Kun was not trying to be of assistance to the Court but rather to be putting what he considered to be the best case for the defendant. I do not rely on Roland Kun’s evidence on any matter unless corroborated in some way.

2. The second of Mr Moshinsky’s arguments is that the deceased’s only remedy to oblige the Trust to pay out under the Presidential Order would have been an action for mandamus as the Order did not confer a right of property on the deceased. The deceased, when payments were not made in accordance with the timetable in the Order, did not apply for mandamus. The time for seeking mandamus had expired before Roy Degoregore died. Time could have been extended but it was not. When Roy Degoregore died he had already lost his right. Accordingly he had nothing to leave to his heirs.

Mr Williams submitted in reply that the Order does not require anything but the payment of money: it could be enforced by action against the Trust. Contrary to Mr Moshinsky’s submission it is a chose in action.

"The meaning of the expression (chose in action) has varied from time to time but it is now used to describe all personal rights of property which can only be claimed or enforced by action but not by taking physical possession" (4 Halsbury, 3rd edition, page 478). A chose in action upon death passes to the personal representative of the deceased: a chose in action is inheritable and the plaintiff has inherited this chose in action.

I am glad to be able to accept Mr Williams’ submission. It would be so absurdly complex as to be unjust if the deceased had had to go to the Court to enforce his rights in the way Mr Moshinsky suggested.

3. Mr Moshinsky argued that because the payments were not made precisely in accordance with the timetable in the Order then the whole Order became invalid. Some payments had been made, at the direction of the deceased and later of the plaintiff, to a company, 118 Bourke Street Pty Ltd and so all the payments became bad. Mr Moshinsky did not cite any authority for these propositions and I reject them. Looking through the bundle of documents one sees that the deceased and later the plaintiff allowed postponement of payment to suit the convenience of the Trust. It would be monstrous to suggest that by so doing they forfeited their right to payment.

4. Mr Moshinsksy next argued that the expression "Ronwan Account" has acquired a special meaning in Nauru. A person’s "Ronwan Account" means all the monies standing to that person’s credit in the books of the Trust: the deceased used that expression in his will: the balance of the $5,000,000 payable under the Order was part of his Ronwan Account: he must have meant that balance to be included in the expression "Ronwan Account" which under his will (Exhibit P7 at pp 39-41):

K) RONWAN ACCOUNT:

To be distributed proportionately as per 7 Day Call Account.

The only evidence that "Ronwan Account" has acquired a special meaning was in the evidence of Roland Kun.

Ronwan Account – backbone of an entity – ability for community to stand. Ronwan Account – refer to total Ronwan Statement – to give them a statement of how much they have.

Even if I felt I could rely on Mr Kun’s evidence – which I cannot – that is so vague as not to be sufficient to justify Mr Moshinsky’s argument.

Certainly the Trust did not see this $5m in the light suggested by Mr Moshinsky. The Consolidated Balance Sheet Reconciliation as at 30th June 2005 (Exhibit D1) shews the amount separately under the heading "Ronwan Capital Repayment – R Degoregore". The balance unpaid is $3,800,313.94.

Monies payable under the Presidential Order did not pass under K) of the will.

5. Mr Moshinsky submitted that his client had made the payments under a mistake of law and was entitled to have them back. The amount counterclaimed is $720,000. As I have concluded that the monies have not been paid under any mistake, that the deceased and now the plaintiff have been entitled in law to the payments made, strictly there is no need to deal with this but in deference to Mr Moshinsky’s arguments, I do.

Lord Ellenborough CJ in Bilbie v Lumley (1802 2 East 469) based his decision on the maxim "ignorantia juris non excusat". As Lord Hope of Craighead said in Kleinwort Ltd v Lincoln Council ((1998) 4 All ER 513 at 559):-

....there is now wide support for the view that the maxim is out of place in this field and that it cannot serve as the foundation for the rule barring recovery of moneys paid under a mistake: .....

The old rule that money paid under a mistake of law is not recoverable has been abandoned in many jurisdictions.

There is no need for me to do more than set out part of the head note in Kleinwort’s case (at p. 514a):

The mistake of law rule should no longer form part of English law since a blanket rule of non-recovery, irrespective of the justice of the case, could not sensibly survive in a rubric of the law of restitution based on the principle of unjust enrichment coupled with the defence of change of position. The law should now recognize that there was a general right to recover money paid under a mistake, whether of fact or law, subject to the defences available in the law of restitution such as the defence of change of position, .....

Their Lordships referred to the decision of the High Court of Australia in David Securities Pty Ltd and Others v Commonwealth Bank of Australia ((1992) 175 CLR 353). In that case the majority (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ) after consideration of the history of the rule that money paid under a mistake a law is not recoverable said:-

The rule precluding recovery of moneys paid under a mistake of law should be held not to form part of the law in Australia. In referring to moneys paid under a mistake of law, we intend to refer to circumstances where the plaintiff pays moneys to a recipient who is not legally entitled to receive them (at p. 376).

They went on to say:-

If we accept the principle that payments made under a mistake of law should be prima facie recoverable, in the same way as payments made under a mistake of fact, a defence of change of position is necessary to ensure that enrichment of the recipient of the payment is prevented only in circumstances where it would be unjust (at p. 385).

The rule both in England and in Australia now is that moneys paid under a mistake either of fact or of law may be recoverable but it is a defence to recovery that "the payee has adversely changed his position in reliance on the payment" (David Securities at p. 354, head note (3)).

Mr Moshinsky acknowledged that the law in Nauru is English law as at 1st January 1968 when the old rule was still regarded as the law in England. He pointed out that the Custom and Adopted Laws Act 1971 provides that English law is adopted "only so far as the circumstances of Nauru and the limits of its jurisdiction permit". He urged me to conclude that Nauruan law should be developed, brought up to date, to follow the present position in England and Australia.

It would be an unwise judge in a small jurisdiction such as Nauru to ignore a development like this in jurisdictions the decisions of which are strongly persuasive here. Besides, the High Court of Australia, on appeal, would likely correct me! I accept that irrespective of whether mistake is one of law or of fact, provided the payee has not adversely changed his position in reliance on the payment, moneys paid under mistake are recoverable.

None of this helps Mr Moshinsky’s client. First, it made no mistake in paying the moneys and second the payee, the defendant by counterclaim, changed his position in reliance on the payments.

6. Mr Moshinsky relied on the decision of Donne CJ in Constitution Reference No. 1/86 the effect of which is that all moneys in the NPRT are Government moneys and may not be paid out without Government authority. These moneys should not have been paid out because there was no Government authority for the payment. I reject the argument. Section 19A of the Act is subsequent to the decision of Donne CJ and itself gives all necessary authority needed for payment once a Presidential Order has been made.

7. In his final address Mr Moshinsky took the point that the plaintiff had called no evidence to prove the estate of Roy Degoregore to have been fully administered. He submitted that the plaintiff as a mere beneficiary had no standing to bring the action: unless it be proved that administration was complete, only the Curator of Estates as Administrator could bring an action: the Curator should have been the plaintiff.

Mr Williams’ response was that after 10 years it could safely be assumed that administration was complete: the plaintiff could properly sue in his own name. I accept Mr Williams’ argument.

However, even at this stage, if counsel for either party wishes to call evidence on the matter I would allow him to do so. If as a result I were to find that the estate was not, at the date of the issue of the Writ, 8th November 2005, fully administered, I would entertain an application to substitute the Curator of Estates as plaintiff in place of Joseph Barrot Harris. The Court has power of amendment by Order 17 of the Civil Procedure Rules. Subject to argument, I consider the issues, irrespective of the plaintiff being either the Curator or Mr Harris, to be the same.

The plaintiff succeeds on claim and counterclaim. I shall hear counsel before I make orders.

Dated the 19th day of January 2007

THE HON ROBIN MILLHOUSE QC
Chief Justice