Privy Council Appeal No 26 of 2007.

(1) GUY LEBON

(2) CLAUDE BONNENFANT Appellants

v.

AQUA SALT CO LIMITED Respondent

FROM

THE SUPREME COURT OF

MAURITIUS
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JUDGMENT OF THE LORDS OF THE JUDICIAL

COMMITTEE OF THE PRIVY COUNCIL

Delivered the 4th February 2009

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Present at the hearing:-

Lord Hoffmann
Lord Rodger of Earlsferry
Lord Walker of Gestingthorpe
Lord Mance
Sir Jonathan Parker

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[Delivered by Lord Hoffmann]

1. This appeal arises out of an action for possession of a dwelling house and
garage standing on 15 perches of land at Les Salines, Roches Noires
(“the house”). The transactions which gave rise to the dispute took place
between 1980 and 1983 and the dispute itself goes back to 1984. The
trial took place over a number of days between July 2000 and March
 2002 and judgment was delivered on 6 June 2002, ordering the
defendants to deliver up possession. An appeal to the Supreme Court was
dismissed on 27 April 2006. The defendant appeals to the Privy Council.

2. Some of the facts are obscure, partly because of the deaths of two
important participants in the relevant transactions and the fading of the
memories of others and partly because some questions were not explored
at the trial. What seems clear enough is that in November 1981 Mr
Gujadhur Jingree agreed to sell the house to the first Defendant Mr Guy
Lebon, who purchased as agent for his step-brother, the second defendant
Mr Claude Bonnenfant. Mr Jingree’s testimony on the point was
unavailable because he died some years before the trial, but Mr Lebon
gave unchallenged evidence about the agreement and produced a
document dated 28 November 1981, signed by Mr Jingree,
acknowledging the receipt from “Guy Lebon de la part de Mr Claude
Bonnefant” of Rs 55,000, “représentant la vente d’un terrain de 15
perches avec un maison en ciment…la Saline à Roches Noires. Le contrat
sera fait a la fin de decembre 1983.”

3. Equally clear is that Mr Jingree did not have title to the land. However,
the land on which the house stood was part of an old salt works covering
9 arpents and 35 perches (“the salt works”), owned at the time by a
company called Black Rocks Ltd. Mr Lebon said at the trial that Mr
Jingree had shown him a bordereau which he said evidenced an
agreement by which he had agreed to buy the salt works. A document
was produced purporting to be a sale or agreement for sale dated 27
November 1980 by which Black Rocks agreed to sell the salt works to
Mr Jingree and his wife for Rs 250,000, of which Rs 50,000 had been
paid. There was much dispute over the authenticity of this document (as
to which the judge in the end made no finding) but there seems to be no
doubt on two points; first, that, as the judge found, it did not pass title to
Mr Jingree and secondly, that there must have been some contractual
arrangement between Black Rocks and Mr Jingree, which has been
variously characterised as an option to purchase or an uncompleted
agreement. The existence of such an arrangement is supported by Mr
Lebon’s unchallenged evidence that he lent Mr Jingree the Rs 50,000 to
pay the first instalment of the price, raising the money by a loan from his
bank guaranteed by Mr Jingree. The evidence is not altogether clear but it
seems that Mr Jingree must have repaid the loan out of the proceeds of
sale of the house.
4. Presumably the lengthy period which Mr Jingree’s agreement with Black
Rocks allowed for completion was to enable Mr Jingree to raise the rest
of the money to buy the salt works. He did so by finding three other
investors: Mr Lim, Mr Toon and Mr Hart de Keating, who agreed to
participate with him in the formation of a company to acquire the land. It
was called Aqua Salt Co. Ltd (“Aqua”) and was incorporated on 15
December 1983 with a memorandum of association declaring that its
main object was to produce salt. The share capital of Rs 500,000 was
divided into 5,000 shares of Rs 100 each: one Promoter’s Share A
(allotted to Mr Lim), three Promoters’ Shares B (allotted to Mr Toon, Mr
Jingree and Mr Hart de Keating) and 4996 Ordinary Shares, allotted as to
1599 each to Mr Toon and Mr Hart de Keating and as to 899 each to Mr
Lim and Mr Jingree. The Promoter’s Share A gave Mr Lim the right to
be managing director and the Promoters’ Shares B gave each of the other
three the right to a seat on the Board.

5. On 16 December 1983 Mr and Mrs Jingree executed a document by

which they formally renounced their interest in the salt works, declaring
that they would have no claim against Black Rocks or against Aqua,
which was “due to purchase [the property] very shortly.” That suggests
the previous existence of a contract of purchase or at any rate a right to
buy of which the Jingrees were the beneficiaries. Completion of the sale
by Black Rock to Aqua for Rs 250,000 in fact took place on 10 February
1984 by the execution of a notarised deed, which was subsequently
registered.

6. It is not altogether clear what the other shareholders knew of Mr

Jingree’s dealings with Mr Lebon or even the fact that he and his family
were in occupation of the house. It appears from the pleadings in a case
brought in the Mapou Magistrates’ Court against Mr Lim, the managing
director of Aqua, that he was quick off the mark in taking possession of
the land comprised in the sale of the salt works. Mr Lebon alleged that on
15 December 1983, two days after the formation of Aqua, Mr Lim put
building materials on the right of way by which the occupants of the
house obtained access to the main road. On 4 February 1984 he entered
upon the land and threatened to demolish the garage which Mr Lebon
was building. On 6 February 1984 Mr Lebon commenced his
proceedings against Mr Lim personally, asking for an injunction to
require him to remove the obstruction from the right of way and to
 restrain him from interfering with Mr Lebon’s quiet possession.

7. Mr Lim also died before the commencement of the trial, so his account of
these events is lacking. It is suggested that Mr Lim must have learned of
the sale by Mr Jingree to Mr Lebon from the process served upon him a
few days before the execution of the deed of sale in favour of Aqua. But
the plaint says nothing about such a sale. It appears to have been
carefully drafted to assert no more than a possessory title.

8. It appears that Aqua retaliated by applying in the Supreme Court for a

writ of habere facias possessionem in respect of the house, relying upon
the title which it had acquired from Black Rocks. The affidavits sworn in
these proceedings were produced at the trial but do not appear to have
been made part of the record. Their Lordships are therefore obliged to
piece together their contents as best they can from fragments which were
read in court and went onto the transcript. Mr Lim swore the founding
affidavit dated 20 March 1984; there was an affidavit in answer from Mr
Lebon dated 23 May 1984 and a reply from Mr Lim dated 7 June 1984.
Mr Lebon’s evidence appears to have been that Mr Jingree had purchased
the salt works from Black Rocks, including the 15 perches on which the
house was built, and then agreed to sell the 15 perches to Mr Bonnenfant
on 28 November 1981. Mr Lim’s reply was to accept that Mr Jingree
had agreed to buy the salt works but to aver that “the sale…was made
under certain conditions viz (a) the sale was made under conditions
suspensive (b) the authentic deed of purchase to be drawn up on
payment.”

9. Rather oddly, Mr Lim’s affidavit in reply appears to have denied that the
house had formed part of the salt works. It appears up to that point to
have been assumed by everyone that it did; Mr Lebon had so asserted in
his affidavit, attempting to establish a chain of title from Black Rocks
through Mr Jingree. Quite why Mr Lim should have suggested that Mr
Jingree had sold Mr Lebon some other piece of land with a concrete
building must remain a mystery. Perhaps it reflects a garbled explanation
he was given by Mr Jingree, who may have had some difficulty in
explaining to the other investors for the first time that he had sold off the
house. But there appears to their Lordships to be no doubt that the house
and its 15 perches formed part of the salt works owned by Black Rock
and sold to Aqua.
10. The judgment of Espitalier-Noel J in the habere facias possessionem
proceedings, delivered on the 2 November 1984, is instructive because it
is based on affidavits sworn at a time when the relevant events were
fairly recent and all the participants were alive. He said:
“The evidence as it stands sufficiently reveals the following: In
1981, Gujadhur Jingree agreed to sell the fifteen perches
together with the concrete building thereon existing to Claude
Bonnenfant who paid the agreed purchase price of Rs 55,000
and occupied the property, either by himself or through the
respondent, his proxy.

Gujadhur Jingree had himself previously purchased from Black

Rocks Co Ltd the property of 9A35 perches…subject to the sale
being perfected by an authentic deed of sale being drawn up on
payment in full by Jingree of the purchase price.

This being the case, it is common ground that Bonnenfant could

only acquire a valid title to the property … from Jingree on the
latter perfecting his own purchase from Black Rocks Co Ltd.

This Jingree did not do. He renounced his purchase from Black
Rocks Co Ltd on the 16th December 1983, three days after the
applicant company (Aqua Salt Co Ltd) was formed of which he
(Jingree) was a promoter, one of three (or four) shareholders,
and a director and it was the company which, on the 10th
February 1984, by notarial deed, purchased the 9A 35 from
Black Rocks Co Ltd.

The defence raised by the respondent to the effect that the

applicant company was well aware of Jingree’s commitment
towards Bonnenfant and would have acted in fraudulent
collusion with Jingree in purporting to purchase the property in
its own name, seriously, I find, questions the genuineness itself
of the applicant company’s title – a matter requiring canvassing
in court.

The present application is accordingly refused with costs.”

11. Their Lordships consider that this judgment identifies the issue
with economy and precision. Section 5 of the
Transcription and Mortgage Act 1863 provides that ―
“…no right in immoveable property under a deed or judgment
shall be maintained against a third party whose rights are
secured by law over the immoveable property to which the deed
or judgment applies, unless the deed or judgment has been
transcribed.”

12.Even if they were deeds (which they do not appear to have been), neither
the agreement between Black Rocks and Mr Jingree nor the agreement
between Mr Jingree and Lebon were transcribed. In terms of the statute,
therefore, they do not enable Mr Lebon to maintain any right against
Aqua.

13. In English law, that may have been the end of the matter (see Midland
Bank Trust Co Ltd v Green [1981] AC 513) but the law of Mauritius,
like most systems based on civil law, provides an exception for cases in
which the purchaser is in bad faith. The position is clearly explained by
Caunhye J in the recent case of Soobramanien v Jogoo (15 February
2007). After setting out the effect of section 5 of the 1863 Act, he said:
“But that is not the end of the matter…Where the beneficiary of
a promesse de vente has failed to transcribe the deed, he can
still safeguard his rights if he can prove that the second
purchaser knew at the time of his purchase that the land was
already the subject matter of a sale agreement to another
person. The following excerpt from Encyclopédie Dalloz
Droit Civil [Vol VIII Vo Promesse de Vente] clearly explains
the position:

171…Si le vendeur aliène l’immeuble au mepris de la promesse

non publiée, et si le tiers acquéreur publie son acquisition, le
bénéficiare du premier ‘compromis de vente’ se trouvera en
principe évincé…

172 Cette dernière solution reçoit, cependant, exception au

cas où le bénéficiare parvient à prouver que le deuxième
acquéreur connaissait, au moment où il a acheté, l’existence de
la vente initiale; il a été jugé en ce sens que l’acquisition d’un
 immeuble, en connaissance de sa vente antérieure, est
constitutive d’une faute ne permettant pas à l’acheteur
d’invoquer les règles de la publicité foncière.”

14. Hence the issue identified by Espitalier-Noel J, namely, whether, at the

time it bought the salt works, Aqua had knowledge of the previous
agreement to sell the house to Mr Lebon. The judge appears to have
taken it for granted that Mr Lebon was the beneficiary of a promesse de
vente and that seems to their Lordships correct. The case of
Soobramanien, to which reference has already been made, shows that an
agreement to sell is for these purposes a promesse de vente even though it
provides (as in the agreement between Black Rocks and Mr Jingaree) that
payment will be by instalments and that an authentic deed of sale will be
executed only after the full price has been paid. The agreement between
Mr Jingaree and Mr Lebon was undoubtedly a promesse de vente which
obliged Mr Jingaree to get in the title from Black Rocks and transfer
ownership to Mr Lebon or his principal Mr Bonnenfant. Their Lordships
consider that Mr Lebon was thereby entitled to exercise whatever rights
Mr Jingaree had against Black Rocks in respect of the 15 perches and to
be treated as bénéficiare of the promesse de vente in respect of that land.

15.At the eventual trial of the action before Lam Shang Leen J, the issues on
the pleadings were, first, whether Mr Lebon had acquired title to the land
and secondly, whether, as alleged in the amended defence and
counterclaim, Jingaree, as a director of Aqua, had “mala fide and de
connivance” with Aqua renounced his rights to allow Aqua to purchase
“irrespective of the defendant’s rights to the 15 perches…” The judge
had no difficulty in finding that Mr Lebon had not acquired title. The
document evidencing the sale by Black Rocks to Jingaree was probably
not a deed and in any event had not been transcribed. The same was true
of the sale by Jingaree to Mr Lebon. In this respect, the judge came to
the same conclusion after a lengthy trial as Espitalier-Noel J had done on
affidavit evidence eight years earlier.

16.The more difficult question was whether Aqua had known of the sale to
Mr Lebon. For this purpose, it was necessary to decide, first, whose
knowledge was attributable to Aqua and secondly, whether as a matter of
fact, that person or those persons knew of the sale.

17.The judge found as a fact that no member of the Board, other than Mr
 Jingree himself, had known of the sale:
“I further find that the defence has failed to prove on a balance
of probability that there was a conspiracy between Mr Gajadhur
Jingree and the plaintiff company to deprive [Mr Bonnenfant]
of 15 perches of the land belonging to Black Rocks Ltd. It is
insufficient to say that Mr Gajadhur Jingree was a shareholder
and founder member of plaintiff company to infer that the
plaintiff company was therefore a party to a conspiracy to
dispossess [Mr Bonnenfant] of land for which he had effected
payment to Mr Gajadhur Jingree. Mr Hart de Keating was
adamant that the plaintiff company through its representatives
had in good faith purchased 9A35 perches of land from Black
Rocks Ltd which was duly represented and I do not doubt his
words.”

18.The Supreme Court affirmed these findings. Mr Birnbaum QC, who

appeared for the appellants, invited the Board to hold that these
concurrent findings of fact were wrong. Mr Hart de Keating should not
have been believed. Their Lordships think that this is a hopeless
submission. There is nothing in the transcript which appears to their
Lordships to cast the slightest doubt on Mr Hart de Keating’s veracity.
On the contrary, it supports the judge’s opinion that he was a reliable
witness. Mr Birnbaum also said that the judge should have found that Mr
Lim knew about the previous sale. Again, there is nothing in the
evidence which would support such a finding.

19. The issue is therefore a very narrow one. The one person who
undoubtedly had knowledge of the earlier sale was Jingree. Is his
knowledge attributable to Acqa? Was Lam Shang Leen J right in saying
that it was “insufficient to say that Mr Gajadhur Jingree was a
shareholder and founder member of plaintiff company”? If that is right,
then the appeal must fail. On the other hand, if Mr Jingree’s knowledge
counted for this purpose as the knowledge of Aqua, then Aqua did not
acquire the land in good faith and Mr Lebon’s promesse de vente is
enforceable against it.

20. Their Lordships feel some difficulty about dealing with this question
because it does not appear to have been raised in quite this form in any of
the courts below, although the way in which Lam Shang Leen J
formulated his reasons suggests that it had been submitted on behalf of
 Mr Lebon that it would be sufficient to say that Mr Jingree was a
shareholder and founder member of Aqua. But the point was not argued
before the Supreme Court or mentioned in the appellants’ printed case
before the Board. In fact their Lordships regrettably feel bound to record
that neither they nor the Supreme Court received from the respective
counsel representing the appellant the assistance they were entitled to
expect. In the appellant’s opening submissions to the Board, no reference
was made to the Mauritian law protecting the beneficiary of a promesse
de vente against a subsequent purchaser with knowledge of his contract.
The authority to which their Lordships have referred was produced by
counsel for the respondent. And at no stage has there been any discussion
of what, in the case of a corporate purchaser, would count as the
knowledge of the company.

21.After careful consideration, however, their Lordships have decided that

they should decide the point. It is a point of law arising out of undisputed
(or indisputable) evidence. There would be no prejudice to the
respondent which cannot be compensated by an appropriate award of
costs. On the other hand, to refuse to consider the matter could be an
injustice to the appellants.

22. A corporate body can have knowledge only by the attribution of the
knowledge of a natural person. The principles upon which one decides
whose knowledge should count as the knowledge of a corporate body
were discussed by the Privy Council in Meridian Funds Management
Asia Ltd v Securities Commission [1995] 2 AC 500. The Board said at p
507 that if a given rule of substantive law (such as the rule that a
purchaser of land who knows of a prior sale will not take free of the
rights of the first purchaser) applies to a company, the question of whose
knowledge counts as that of the company will depend upon the
interpretation and purpose of the substantive rule:
“given that [the substantive rule] was intended to apply to a
company, how was it intended to apply? Whose act (or
knowledge, or state of mind) was for this purpose intended to
count as the act etc. of the company? One finds the answer to
this question by applying the usual canons of interpretation,
taking into account the language of the rule (if it is a statute)
and its content and policy… [T]he rule of attribution is a matter
of interpretation or construction of the relevant substantive
rule...”
23. Thus, in the Meridian case itself, the substantive rule required a company
to notify the Securities Commission when it knew that it was the holder
of more than a certain number of shares. The Board decided that for the
purposes of this rule, the persons whose knowledge should be attributed
to the company were those who had authority to acquire the shares.
Otherwise the policy of the rule would be defeated (p 511):

“Companies would be able to allow employees to acquire

interests on their behalf which made them substantial security
holders but would not have to report them until the board or
someone else in senior management got to know about it. This
would put a premium on the board paying as little attention as
possible to what its investment managers were doing.”

24. An earlier example of the application of these principles is Al Ajou v

Dollar Land Holdings Ltd [1994] 2 All ER 685, in which the knowledge
of the chairman that money received by the company had been obtained
by fraud was attributed to the company. More recently, in Jafari-Fini v
Skillglass Ltd [2007] EWCA Civ 261, the question was whether
information that a bribe had been paid to one of the parties had “come to
the attention” of a company for the purposes of a provision in a financing
agreement which required it to make full disclosure of all such
information material to the agreement. It had in fact come to the attention
of only one of the directors. In the Court of Appeal, Moore-Bick LJ said
(at paragraph 98):
“The question in the present case is whether information which
comes to the attention of one director, but which he has not
shared with the rest of the board, is to be treated as information
in the possession of the company. .. In general…I think that
information relevant to the company's affairs that comes into
the possession of one director, however that may occur, can
properly be regarded as information in the possession of the
company itself. In my view that presumption informs the
present contract and points to the conclusion that information in
the possession of [the director] relating to the bribe is to be
regarded as information in the possession of [the company]
itself.”
25. The rule that a second purchaser with actual notice of the first purchase
cannot rely upon the requirements of public notice by transcription or
registration is based, as the Encyclopédie Dalloz puts it, upon the
proposition that reliance on those requirements would be a “faute” on the
part of the first purchaser. It would be inequitable for him to rely on
them, because he already had all the information which transcription
would have given him. It is therefore necessary to ask which rule of
attribution would best serve the purpose of this rule. If one of the
directors knows of the previous sale at the time of the purchase but omits
to tell the other directors and allows the sale to go ahead, would it be
equitable for the company to be able to rely on the lack of transcription to
override the rights of the earlier purchaser?

26.Their Lordships consider on the facts of this case, the substantive rule
requires the knowledge of Mr Jingree to be attributed to Aqua. There is
no reason why the general principle formulated by Moore-Bick LJ should
not apply. The formation of the company was the means by which Mr
Jingree exploited the agreement he had made with Black Rocks three
years earlier. If he had been able to raise the money himself and obtain
title by authentic deed, he would undoubtedly have been bound by his
agreement with Mr Lebon. In the event, the purchase was made by the
company. But Mr Jingree was a promoter, director and substantial
shareholder. It is true that he did not represent the company before the
notary, but that was a mere formality. What matters is that the company
purchased by virtue of the arrangements he had made with Black Rocks
and that he was a director at the time of the purchase. It may have been a
breach of his duty to the company and the other investors not to disclose
that he had sold the house, but that should not give the company better
rights against Mr Lebon than he alone would have had. In those
circumstances, their Lordships consider that Mr Jingree’s knowledge
should be attributed to Acqa, which was therefore bound by the sale to
Mr Lebon.

27.Their Lordships will therefore allow the appeal and declare that Mr
Bonnenfant is entitled as against Aqua to the execution of an authentic
deed transferring ownership of the house and garage on the 15 perches
sold to him pursuant to the 1981 contract with Mr Lebon. The parties
have 14 days in which to make submissions in writing on costs.