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Court name
Supreme Court
Case number
CS 249 of 2008
Counsel for plantiff
Frank Ally

Chetty and Others v Chetty and Another (CS 249 of 2008) [2011] SCSC 68 (21 October 2011);

Media neutral citation
[2011] SCSC 68
Counsel for defendant
Anthony Derjacques
Coram
Egonda-Ntende, CJ

IN THE SUPREME COURT OF SEYCHELLES HOLDEN AT VICTORIA

 

Civil Side No. 249 of 2008

 

Krishna Levi Chetty................................................................................................... Plaintiff No.1

Elvis Chetty .............................................................................................................. Plaintiff No. 2

Priscille Chetty ..........................................................................................................Plaintiff No. 3

 

versus

 

Mrs Mersia Chetty....................................................................................................Defendant No.1

Lea Raja Manikam Chetty........................................................................................Defendant No.2

 

 

Frank Ally for the Plaintiffs

Anthony Derjacques for the Defendants

 

JUDGMENT

 

Egonda-Ntende CJ

 

  1. The plaintiffs are the co-owners of an undivided seven-tenth of the land comprised as title V5495 and defendant no.2 was the co-owner of the remaining undivided three-tenths in the said property. Defendant no.2 transferred her three-tenths share to the defendant no.1 and the same was registered on 13th September 2006 for consideration. On 24th October 2006 defendant no.1 gratuitously granted to the defendant no.2 a usufructuary interest in the defendant no.1's three-tenths share in the property in question that defendant no.1 had purchased from defendant no.2. The plaintiffs on learning of the transfer offered in writing, in a letter dated 27th August 2008, to purchase the said three-tenths share for SR 3,150,000.00.

  2. The plaintiffs contend that in spite of their offer to purchase the defendant no.1's three-tenths share the defendant no.1 has failed to refused or ignored to sell or transfer to any one or all of the plaintiffs the undivided three-tenths share purchased from defendant no.2. The plaintiffs contend that they are desirous of purchasing the said three-tenths share from the defendant no.1, paying costs and all dues for registration. The plaintiffs therefore pray to this court for an order that the defendant no.1 to transfer to each of the plaintiffs one tenth share of her three-tenths share at the price of SR 3,150,000.00. The plaintiffs further seek the cancellation of the defendant no.2's usufruct in the undivided three-tenths share and costs of this action.

The defendant no.2 stated in her defence that she only sold the bare-ownership to the defendant no.1, retaining for herself, the usufructuary interest for her lifetime. An owner cannot be deprived of her right to transfer bare-ownership in her property to her daughter. The defendant no.1 further contends that the sum offered by the plaintiffs is grossly inadequate and extortionate and not a fair sum for the business, structures, buildings and land. They prayed for the dismissal of the amended plaint with costs.

  1. From the evidence adduced by all the parties the following facts are established and not in contest. The plaintiffs are the owners of seven-tenth share in the V5495, a property situate in the business district of Victoria. The defendant no. 2 was the owner of three-tenths of the said property. She transferred for value to the defendant no.1 the said three-tenths share by a deed of transfer dated 28th July 2006. The transfer was registered on 13th September 2006. The defendant no.1 granted to the defendant no.2 a usufructuary interest in the three-tenths share for the life time of defendant no.2 on 24th October 2006. By a written offer dated 27th August 2008 the plaintiffs offered to purchase the said property for SR 3,150,000.00 which offer the defendant no.1 did not accept.

  2. The issues for a decision in this case are three in my view. Firstly whether or not the plaintiffs are entitled to a transfer of the three-tenths of V5495 from the defendant no.1 to the plaintiffs. Secondly whether or not the sum offered to the defendant no.1 is the value of the said three-tenth of the V5495 at the time the offer was made in July 2008. And lastly in event that the answer to the previous two issues have been in the affirmative whether or not the plaintiffs are entitled to cancellation of the defendant no.2's usufructuary interest in the three-tenth belonging to the defendant no.1.

  3. The plaintiffs' rights in this regard stem from Article 834 of the Civil Code of Seychelles, hereinafter referred to as CCS. It states,

'In the case of the sale of a share by a co-owner to a third party, the other co-owners or any of them shall be entitled, within a period of ten years, to buy that share back by offering to such third party the value of the share at the time of such offer and the payment of all costs and dues of the transfer.'

  1. Mr Anthony Derjacques, learned counsel for the defendants, submitted that this provision was unconstitutional in so far as it deprived a party of his property without his consent, contrary to Article 26 of the Constitution. As Mr Frank Ally, learned counsel for the plaintiffs, pointed out, a co-owner of the land in indivision, is only entitled to a share in the profits, either income or its purchase price, rather than to the property itself. A co-owner in indivision cannot therefore assert a constitutional claim to the property in question. He is only entitled to his share in the income or the proceeds of its sale. I am satisfied that the plaintiffs are entitled under Article 834 of CCS to buy the said share of the defendant no. 1.

  2. I now turn to the second issue. The plaintiffs offered to the defendant no.1 the price of SR3,150,000.00 as consideration for three-tenth of V5495. In the defendants' written statement of defence this sum is rejected on the grounds that it is grossly inadequate and extortionate and not a fair sum for the business, structures, buildings and land. The plaintiffs brought two experts to support the price offered. The defendant brought one expert to show that the price offered is not the value of the three-tenth of the property in question.

  3. The defendant's expert, Ms Bastille, valued the property in question, giving it a value of SR 22,328,000.00. As was pointed out by Mr Frank Ally this valuation is at 27th September 2010 the date of the report, exhibit D2. Given that it does not reflect the value of the property at the time the offer was made two years earlier the report is not helpful in ascertaining the value of the property in question at the time the offer was made. We are therefore left with the 2 reports from the plaintiffs' experts, exhibit P10 and P12.

  4. Exhibit P12 states in part,

'Remarks: Notwithstanding the above [defects], the building is in fair state of repair and maintenance. However, it requires complete overhaul and urgent repair to some of the sewerage  pipes. The property is located in the busiest retail area of the Capital and enjoys on two main streets, giving it a high footfall for the shops on the ground floor. It can be said that the building in [is] an anchor building for the Market Street retail centre. This, combined with property values that have appreciated over the last few years, a property within this location is currently expected to fetch a rate of approximately SR5000M2 and above for the land only.'

  1. The report noted comparables for rental rates in the area and came to the conclusion that

'the average combined retail/office rates would be in general say R115 per M2. However, adjustments have to be made to take into account that: – A high number of vacant units can be observed. – Rental Income (information as provided by the owner) is about R49.50 per sq, m. which is rather low both for the area and the current market conditions. – The building is 25 years old and requires a complete upgrade or redevelopment to compete with new developments like the Sham Pen Tong Plaza and the renovated Premier Building. – The wiring system is outdated; there is limited power points and so need to be upgraded to current standards. – Finishes of the building are of minimum standard.'

  1. The report gave the overall value of the building and land as SR11,000,000.00. This is the highest value provided by the plaintiffs' experts. To arrive at this figure for the over all value of the property in question the expert determined 'the average combined retail/office rates would be in general say R115 per M2 and then made adjustments that brought this figure downwards by taking into account the following factors among others: (a) A high number of vacant units can be observed; (b) Rental Income (information as provided by the owner[Fiduciary – Plaintiff No.1] is about R49.50 per sq.m', which she observed, 'is rather low for both the area and the current market conditions.'; (c ) The building is 25 years old and requires a complete upgrade ( or redevelopment) to compete with new developments like the Sham Pen Tong Plaza and the renovated power Premier Building.

  2. Of significance is the fact that the expert has taken into account rental income which was 'rather low' for both the area' and 'the current market conditions'. This figure supplied by the owner [or the Fiduciary of the property, the plaintiff no.1] was R49.50 per square metre compared to the combined average for the area which the expert found to be R115 per square metre. The difference in my view is so wide as to distort the true market value of the property in question. The result that the expert came up with of SR11,000,000.00 having been derived as result of applying a rental rate that was totally out of line with the comparable rental income for the area cannot in my view represent the value of the V5495. This is more so as this expert during her testimony specifically asserted that comparable rates must be the true guide to the value of a property.

  3. The other plaintiffs' expert's report, exhibit P 10, used the expected income approach to come to a value of SR10,400,000.00, a figure less than that arrived at in exhibit P12. According to the testimony of the author, Mr Yumbu, the report used the rental income approach. It is the income values that were provided by the owner and which were supplied to the the author of the other valuation report (exhibit P12) that were the basis for this valuation as well. As it is clear that the rental income supplied by the owner was rather low for both the area and the then current market conditions it is clear that the result cannot clearly reflect value of the property valued.

  4. It may be understandable why the rents for the building were low. Many of the tenants from the evidence adduced in this case were companies owned by the plaintiffs. The defendant no.1 occupied part of the premises. The low rent was essentially due to the fact of occupation by family members. This came out clearly in the evidence of the defendant no.1. It may very well be a useful tax ploy to limit the income tax liability while boosting the business income of the family members. What ever the reason for the low rents, to take the same into account, in calculating the value of the property in question, rather than the comparables of the area, would lead to a value that is clearly less than the actual open market value of the property.

  5. Ms Bonnelame further took into account the high number of vacant units observed on the property to depress the value of the property. She does not provide an explanation why there were many vacant units on a property which is in the heart of the central business district of Victoria, noted for its high footfall. The report of Mr Yumbu does not specifically refer to this aspect. In his oral testimony he stated, 'My observation on site was that most of the units are occupied but there is a need for owners to do some reperation (repairs) on the building.' This observation by Mr Yumbu is inconsistent with the claim by exhibit P12 that there was a high number of vacant units. This aspect of a high number of vacant units does not merit mention or any attention in Mr Yumbu's report exhibit P10.

  6. The testimony of the plaintiff no.1 did not reveal that there was high number of vacant units. In cross examination this is what was stated on this subject.

'Q: How many units do you state it has? A: You have to be specific here Mr Derjacques. Q:How many tenants does the company have? A: There are 12 shops on the ground floor and there are 14 units on the first floor. Q: All paying rent? A: To start off most of them are paying but there are a few that are not.'

  1. What I am able to infer from the foregoing testimony of the plaintiff no.1 is that the problem was not occupancy but payment of rent in respect of a few tenants. All the shops and offices were occupied. Exhibit P12 takes into account the alleged high number of vacant units to adjust negatively the value of the property while there is really no high number of vacant units. Clearly this factor ought not to have been taken into account on a totality of the evidence adduced in this case. I can only conclude that this distorted the value of the property in question so as to make the value provided by this valuer significantly lower than the market value of V5495 at the time.

  2. It follows in my view once the overall value of the property did not reflect the market value of the property, the value of the three-tenths share of that property which was offered to the defendant no.1, likewise, is not the value of the three-tenths owned by the defendant no.1.

  3. For an action of this nature to succeed the plaintiffs must offer the value of the share owned by the defendant. That value must be the ascertainable open market value of the property. If the plaintiffs' offer is less than the open market value of the said share the action cannot succeed. A defendant is entitled to receive the value of his or her share in the property in indivision now being acquired by the plaintiffs. Without the correct value being offered such an action fails. I would answer issue no.2 in the negative. The plaintiffs did not offer to the defendant no.1 the value of her share of the property. This is evident on the evidence brought forth for the plaintiffs.

  4. Given my answer to issue no.2 it is unnecessary to consider the last issue, as to whether I should order cancellation of the usufructuary interest of the defendant no.2. Had the plaintiffs succeeded on issue no.2 I believe that it would have been inevitable to cancel the usufructuary interest, on the facts of this case, where the usufructuary interest was not subsisting at the time the defendant no.1 purchased the property but was in fact granted by the defendant no.1 after purchasing the property. However this is now a moot point.

  5. In the result I dismiss this action with costs.

 

 

Signed, dated and delivered at Victoria this 21st day of October 2011

 

 

 

 

 

FMS Egonda-Ntende

Chief Justice