Finegan v Technical Education Centre Pty Ltd [1991] FJHC 62; Hbc0472d.1991s (5 December 1991)

IN THE HIGH COURT OF FIJI
(AT SUVA)
CIVIL JURISDICTION

ACTION NO. 472 OF 1991

BETWEEN:

ALAN JOHN FINEGAN
of Suva, Businessman.
Plaintiff

AND

TECHNICAL EDUCATION CENTRE PTY LIMITED,
a limited liability company having its
office at Suva.
Defendant

Mr. R. Inoke: for the Plaintiff
Miss Gwen Phillips: for the Defendant

Dates of Hearing: 1st, 15th, 16th, 17th, 18th, 22nd and
25th October 1991
Date of Ruling: 5th December 1991

RULING

I have before me a Motion to dissolve an interim injunction which I granted the Plaintiff on the 1st of October 1991. In support of the Plaintiff's ex parte motion to obtain the injunction the Plaintiff swore an affidavit dated the 30th of September 1991 in which he alleged that he was a Director of the Defendant and had been appointed Managing Director pursuant to company resolution earlier this year. At the time of his employment he was employed as a software engineer by Honeywell (Fiji) Limited during which time he decided to establish a Technical Education Centre (TEC) to train people to a degree of literacy in computer software and hardware operations.

Whilst at Honeywell he had as his assistant a lady by the name of Cynthia Koi with whom he discussed his idea from time to time. In the course of those discussions Miss Koi mentioned a former work associate of hers a Mr. Isireli Kaisau whom she suggested as a possible partner in the enterprise as he was an indigenous Fijian.

Subsequently, the Plaintiff left his employ with Honeywell and had discussions with Isireli Kaisau (hereinafter referred to as "Kaisau") and Cynthia Koi (hereinafter referred to as "Koi") as a result of which he states it was agreed that each would share one-third of the proposed business and that Isireli Kaisau would be given his third in return for raising loan capital from the Fiji Development Bank. It was also agreed that Kaisau would share his third share with his sister Sera Kaisau.

The Plaintiff stated that pursuant to the agreement to form and run TEC he prepared a feasibility study for finance approval and gave it to Kaisau who in turn took it with a loan application to the Fiji Development Bank. In a later affidavit sworn on the 16th of October 1991 in response to the affidavit of Isireli Kaisau filed herein on the 10th of October 1991, the Plaintiff admitted that the feasibility study which he mentioned in his first affidavit was in fact a draft as he did not have the original and final draft which was given to Mr. Kaisau for lodging with Fiji Development Bank. The Plaintiff also stated in his first affidavit that on the 20th of October 1990 following a meeting between the Kaisaus, Koi and himself an agreement was signed on the 29th of October 1990 under which it was resolved that the Plaintiff would be employed as Managing Director together with his son Gerard Finegan who would be retained as a teacher and system engineer. I observe, as does as Isireli Kaisau in his affidavit of 10th of October 1991, that the agreement of the 29th of October 1990 exhibited to the Plaintiff's first affidavit contains no mention of Gerard Finegan.

The Plaintiff then alleged that on the 10th of January 1991 he formally accepted an offer to become the principal and manager of TEC and thereafter he and his son Gerard began the construction of the layout of TEC which was an empty hall and that they worked six days a week for sixteen hours a day to fit out the premises as an institution for teaching computer skills. The whole operation took three weeks.

Classes commenced in February 1991. The Plaintiff says that he provided all notes, lesson plans, software and syllabuses which were and are still the property of his son, Gerard and himself. He further claims that there was no contribution from either of the Kaisaus or Koi. The latter claim is not denied by Kaisau but the former is, Kaisau stating in his affidavit that all material and equipment used and owned by TEC was purchased with finance obtained from the Fiji Development Bank in Kaisau's name. Kaisau further alleges that the Plaintiff has not expended any money and/or used any property owned by him in facilitating the running of TEC.

The Plaintiff then alleges in his first affidavit that soon after the establishment of TEC and the beginning of classes by himself and his son, Gerard a series of disturbances involving Kaisau began in which Kaisau came to the premises of TEC and made demand for money for himself and took items such as software, disks and computer materials without signing for them or justifying the need to take them. The Plaintiff says that he became worried by these incidents that Kaisau was doing harm to the image and integrity of TEC and that he also had taken a company car before it was registered and insured. He then makes allegations about attending a meeting of the Board of Directors of TEC on the 18th and 24th of April 1991 when it was resolved to have Kaisau return the vehicle and to cease disrupting the business of TEC as he alleges. He further claims that the vehicle had to be seized from Kaisau and then sold for $7,000.00. The meeting of the 24th of April 1991 was the last Board Meeting Kaisau attended until the 28th of September 1991. All these allegations are denied by Kaisau. The Plaintiff then alleges that from April 1991 until the date on which he swore his first affidavit the activities of TEC flourished but he claims that there was a constant shortage of funds upon reconciling the Bank balance with the computer bank reconciliation. The Plaintiff suspected that Koi was responsible for this and following an audit of the books a sum of approximately $490.00 was missing.

As a result of this Koi was suspended at the instigation of the Plaintiff and the Plaintiff claims that shortly after her suspension Kaisau removed various receipt books, and cheque butts and then called at the Plaintiff's home and demanded the return of all property belonging to TEC. The Plaintiff was handed a letter by Kaisau notifying him of his suspension. The Plaintiff then made various other allegations against Kaisau and states that on the 23rd of September 1991 a meeting of the Board was convened at which the suspension of Koi was confirmed and a resolution requiring a complete audit was passed. Kaisau refused to deliver the missing documents.

An urgent Board Meeting was then called for 28th of September 1991 at the premises of TEC. The meeting was presided over by the Chairman and was attended by all Directors. The Plaintiff claims that as a result of Kaisau's persistent refusal to hand over all receipts and cheque butt books he resigned and left the meeting but that after he left the Plaintiff was terminated summarily without any opportunity of being heard and he was further ordered to return all TEC goods to the premises by 2.00 p.m. on 30th of September 1991. He sought urgent legal advice immediately following his suspension and as a result has brought these proceedings. He claimed that unless a Receiver was appointed and interim relief given to the Plaintiff the affairs of the company would suffer severe detriment. The Plaintiff claimed in his affidavit that unless he was given an order by the Court allowing him to continue to operate the company pending an audit and the receiver's report "the company will fold and a valuable technical industry will be lost." He also claimed that unless he were given relief and allowed to remain in the management of and teaching in TEC the business of several valuable clients would be withdrawn. The Plaintiff also claims that there are no expressed terms under his contract of employment regarding termination.

On the basis of the Plaintiff's first affidavit, I granted him the interim relief which he sought and made an order in the following terms:

(1) That the Defendant, its servants and agents be restrained from interfering with or removing or disrupting the contract of service and the employment of the Plaintiff with the Defendant pending further Order.

(2) That the Defendant, its servants and agents be restrained from removing from the premises of the Defendant at viz. 1st Floor 113 Marks Street, Suva any equipment computer programs and records or item being the property of the Plaintiff.

(3) That the Defendant, its servants and agents be restricted from interfering with the Defendant's Bank accounts and financial facilities until further Order.

(4) That the Defendant, its servants and agents be restrained from notifying orally or in writing or by facsimile transmission the Immigration Department as to the purported termination of the Plaintiff in circumstances such that his work permit might be rendered liable to revocation.

(5) That the Defendant, its servants or agents be restrained from implementing all resolutions passed at the meeting of the Defendant held on 28 September, 1991 until further Order.

(6) That the Defendant, its servants or agents be restrained from interfering with or harassing the Plaintiff and his family.

I further ordered that the Defendant be served with a copy of the order and all supporting documents by the 15th of October and the matter be adjourned until the 18th of October. The latter order however proved unnecessary because on the 10th of October the solicitors for the Defendant issued a Notice of Motion now before me seeking orders to dissolve the injunction granted on the 10th of October and the delivery to the Defendant by the Plaintiff of all materials belonging to the Defendant company which the Plaintiff is said to have removed from the premises of the Defendant company. Because of the alleged urgency of the matter I listed it for hearing inter partes on the 15th of October and gave the Plaintiff leave to file and swear any affidavit in reply to that filed on behalf of the Defendant on the 10th of October, if he considered it necessary. The hearing actually began before me on the 16th of October. There had by then been filed two further affidavits, the first by Isireli Kaisau on behalf of the Defendant sworn on the 10th of October and the second, another affidavit by the Plaintiff sworn on the 16th of October. It is necessary to refer to these affidavits and then the submissions of counsel.

In reply to the Plaintiff's affidavit Isireli Kaisau claims to be the principal shareholder and director of the Defendant and that the only other shareholder and director contained in the Company's Articles of Association is his sister Sera Baleisaqani. Kaisau exhibits to his affidavit copies of a letter dated the 18th of September 1991 from the Registrar of Companies to the National Bank of Fiji stating that according to the Company Registry's records the sole shareholders and directors of the Defendant are Isireli Kaisau and Sera Baleisaqani who is also secretary of the company. The Registrar also annexed to his letter a copy of the Particulars of Directors filed in his office confirming the above. The Registrar also states in his letter: "As shareholders and directors Isireli and Sera are the proper persons in whom the full authority and power of the company is vested."

Kaisau denies that the Plaintiff has ever been a director of the Defendant company but says that following the incorporation of the company on the 19th of November 1990 the Plaintiff was appointed by the directors of TEC as Principal and Manager of the company and that for this purpose Kaisau obtained a work permit from the Department of Immigration and a teaching licence from the Ministry of Education to facilitate the Plaintiff's employment with the company. Kaisau exhibits a copy of the Plaintiff's work permit granted on the 30th of January 1991 and valid until the 21st of January 1994. The permit describes the Defendant as the Plaintiff's employer and the Plaintiff's title is principal. Clause 1 of the terms and conditions reads:

"(1) That the employee shall be employed solely by the employer stated and on the duties set out in the application for the permit. Any variation shall require a written application to the Permanent Secretary."

Clause 6 reads:

"This permit shall become void on expiry or immediately on the breach of any of the conditions stated on the application or on this permit. The permit must be surrendered immediately it becomes void."

Kaisau claims that the Plaintiff had become employed by the Defendant and remunerated accordingly for work carried out before and after its incorporation, including preparation of teaching materials and renovations carried out at its premises at 113 Marks Street, Suva. He also states that before the Defendant company was formed Koi and the Plaintiff informed Kaisau that they were unable to raise the necessary capital to float the company. Kaisau therefore agreed to execute a mortgage over land owned by him to secure an advance in the sum of $118,950.00 given by the Fiji Development Bank to indigenous Fijians. He exhibits a copy of the Bill of Sale entered into to secure the loan on the 24th of December 1990. This describes Kaisau, Sera Baleisaqani, the Plaintiff and another person, whose signature is indecipherable to me, as directors although I note that in his affidavit Kaisau says that for all intents and purposes the only directors and shareholders of TEC are himself and Baleisaqani.

He asserts, which is now not denied by the Plaintiff, that the feasibility proposal mentioned by the Plaintiff was a draft only and Kaisau annexes to his affidavit a true copy of the proposal that accompanied his loan application to the Fiji Development Bank.

He says that before the company was formed it had never been agreed that the Plaintiff's son, Gerard be employed by the company. It was after its incorporation that the Plaintiff suggested that his son be employed as teacher and systems engineer after fraudulently representing to the directors that Gerard was a graduate in Computer Science and qualified teacher. Kaisau says that as he and his sister believed that it was true, they agreed that Gerard be employed after a valid work permit and teaching licence were obtained. However, as the Plaintiff observes, the feasibility proposal exhibited by Kaisau refers to Gerard in six places under the heading of "Expenditure" as earning or to earn an annual salary of $20,000.00. Whether or not this is significant will be a matter for the trial of this action if it ever eventuates.

Kaisau then makes numerous allegations of fraudulent conduct by the Plaintiff in the use of company funds which the Plaintiff either denies or seeks to explain in his second affidavit of the 16th of October.

Kaisau states that as a result of his increasing concern regarding the company affairs during September 1991, on the 20th of September 1991 the directors of the Defendant wrote to the Plaintiff outlining their dissatisfaction with his running of TEC and informed him that he was suspended from his duties as from that date. I comment here that the particulars of dissatisfaction alleged by Kaisau and his sister in their letter are in the most general terms. For example they claim grave misconduct by the Plaintiff, allege that they have evidence and information to support such claim and express the belief that the Plaintiff may be in breach of his contract. How reliable these assertions prove to be can only be resolved at the trial after Kaisau and his sister give evidence and are cross-examined.

Kaisau also claims that since the Plaintiff's dismissal the Defendant has continued to operate its business concern and honour its outstanding contracts with various named companies or organisations. The Plaintiff in turn in his second affidavit asserts the contrary but again this question can only be resolved at trial and not now. Kaisau claims that if the injunction is allowed to continue the Defendant may possibly collapse financially. He also alleges that the Plaintiff has misled the Court in that he has omitted to disclose material information and has given the Court false and misleading information.

In his second affidavit the Plaintiff alleges that Kaisau has continued to ignore this Court's order and to that end I have listed for hearing on the 12th of December next a motion for committal of both Kaisau and Cynthia Koi. I am informed by counsel for the Defendant that the motion will be opposed.

The Plaintiff also states that as a result of the actions of Kaisau and Koi he has had to break fixed term deposits in Australia losing valuable interests and has had those funds transferred to Fiji to support his family and pay rent, telephone, electricity and other expenses. Further he says he is not allowed to be employed other than by TEC and that if the injunction is lifted he will suffer great hardship when the real likelihood of the Defendant not being able to compensate for the loss in the event he is successful in his claim. Finally he states: "It is now abundantly clear that the TEC will not be operational without my son and I being allowed back in."

The above then is as brief an outline as I have considered it possible to make of the allegations made by the parties in their lengthy affidavits. I now turn to the submissions of counsel.

Submissions of Counsel and the Law

The Defendant has submitted eight grounds on which it claims I should dissolve the injunction. These are:

(1) The balance of convenience lies in discharging the injunction;

(2) The Plaintiff has not disclosed material facts;

(3) The Plaintiff has not shown that damages are an inadequate remedy in lieu of the granting of the injunction;

(4) So far as the Defendant is concerned damages are an inadequate and unquantifiable remedy;

(5) The status quo is not being preserved by the injunction but is deteriorating to the extent that the Defendant is facing extreme difficulty in operating as a viable enterprise.

(6) It is unclear what right the Plaintiff is seeking to protect, and whether there is any legal basis to his alleged rights;

(7) It is clear that there will be a large amount of evidence at the trial of this action and therefore the proper course is for the Court to order a speedy trial and not to continue the injunction;

(8) The Plaintiff's remedies lie elsewhere namely in an action for damages for breach of contract and/or unfair dismissal.

I have considered the submissions made by both parties which satisfy me that this is not an easy case. However I have reached certain conclusions as best I can on the wealth of evidentiary material presently before the Court and very full oral and written submissions of counsel. I now state my conclusions.

Although the Plaintiff claims that he is a director of the Defendant, on the balance of probabilities I am not satisfied at this stage that he is. There is evidence that he was employed as a principal and managing director of the Defendant and that his work permit was issued to him as a principal of the Defendant. This seems to be confirmed by the records of the Registrar of Companies.

Whether or not there was ever an agreement that the Plaintiff be made a director of the Defendant is a matter for evidence at the trial but I observe that the Plaintiff accepted the position of principal and manager of the Defendant in his endorsement of the letter by the Defendant to him dated the 10th of January 1991. If the Plaintiff disputed that he was only to be principal and manager and not also a director of the company I fail to see why he did not make such a claim much earlier than he has. In my view, and of course this is only tentative at this stage because no witnesses have been cross-examined, the Plaintiff should have informed the Defendant that he could not accept its offer unless he was also appointed a director of the company. He has failed to do this.

In any event if the Plaintiff claims that he should have been appointed a director and has suffered loss by not being so appointed, in my view his proper remedy is in damages. In some ways the facts in this case are similar to those in Sam Speight v. Rewa Co-Operative Dairy Co. Ltd., Action No. 311/90 in which I gave a ruling on the 30th of November 1990.

In that case the Plaintiff claimed that he had a valid three year employment contract with the Defendant and that he had been wrongfully dismissed. He sought an order for re-instatement and a direction that the Defendant appoint no General Manager to fill Mr. Speight's position as Chief Executive or Managing Director of the Defendant until the holding of an Extra Ordinary General Meeting by the company. As I said in my second ruling in that case the fact was obvious that the Defendant no longer wanted the Plaintiff to serve it any more. I held that if he were correct in his claim to have been wrongfully dismissed he should pursue his action for damages for wrongful dismissal. In my view that could also be said about the Plaintiff in the instant action.

In some ways the facts in the instant case are similar to those in Bainbridge v. Smith [1889] UKLawRpCh 85; (1889) 41 Ch. D. 462 which I mentioned in my second ruling in Speight. The Court there held that even though a proposed Managing Director of a company had the qualifications required by the Company's Articles, since the company did not want him despite his qualifications, the Court would not compel the company to employ the Plaintiff.

Cotton L.J. said:

"But I think it right to say that in my opinion, and I believe that my learned Brother agrees with me, if the company says that even if the Plaintiff has the qualification they do not desire him to act as one of their managing directors, we should not grant any injunction, because it would be contrary to the principles on which this Court acts to grant specific performance of this contract by compelling this company to take this gentleman as managing director, although he was qualified so to Act, when they do not desire him to act as such. But the only order we at present make will be to direct the motion to stand over, the injunction being suspended until further order on the Defendants' undertaking to call a general meeting without delay, and submitting the question which I have proposed to the decision of that general meeting."

Again in British Murac Syndicate Limited v. The Alperton Rubber Company Limited, (1915) Ch. 186, Sargant J. distinguished Bainbridge v. Smith from the case he was then trying. However, in Francis v. Kuala Lumpur Councillors (1962) 1 W.L.R. 1411 Lord Morris of Borth-y-Gest speaking for the Privy Council at pages 1417-1418 said this:

"In their Lordships' view, when there has been a purported termination of a contract of service a declaration to the effect that the contract of service still subsists will rarely be made. This is a consequence of the general principle of law that the courts will not grant specific performance of contracts of service. Special circumstances will be required before such a declaration is made and its making will normally be in the discretion of the court. In their Lordships' view there are no circumstances in the present case which would make it either just or proper to make such a declaration."

Allowing for the difference in facts between Bainbridge v. Smith and Francis v. Municipal Councillors of Kuala Lumpur I am of the opinion in this case that the Plaintiff's remedy lies in damages and not in continuing the injunction. It is patently obvious that the directors of the Defendant and the Defendant itself do not want the Plaintiff in their employ any longer. Mr. Inoke for the Plaintiff alleges that the Plaintiff is not just a mere employee. He says that his expertise is in fact the most valuable asset to the Defendant. He has contributed substantially physically and mentally. It may be that the Plaintiff would be and has been a valuable asset to the Defendant but I cannot ignore the fact that the Defendant is still operating contrary to the prognostications of the Plaintiff.

Mr. Inoke relied in support of his claim that damages were an inadequate remedy for the Plaintiff on the case of Elias Panteleimon Armaos and Peter William Whiffin v. Marshall Richard Swadling C.A. No. 79 of 1989.

However in my judgment this case is clearly distinguishable from the present. The reason why Mr. Justice Palmer in Armaos' case held that damages would not be adequate for the Plaintiff was that there was evidence that no new licences were being granted so that if the injunction had been dissolved the Defendant would have been free to sell its Sawmilling Licence and the Plaintiff would have lost a substantial right thus determining at least a part of the action at the interlocutory stage.

It is however misleading to state, as counsel for the Defendant does, that by granting the present injunction the Court has re-instated the Plaintiff without a full hearing. That is not so; no order for re-instatement has been made. The Defendant has simply been directed not to interfere with the Plaintiff's contract of service until further order. The Court has not directed the Defendant to re-instate the Plaintiff.

Counsel for the Plaintiff mentioned the English Court of Appeal decision of Hill v. C.A. Parsons & Co. Ltd. (1971) 3 ALL E.R. 1345 where the court held that although the normal rule was that a contract of employment would not be specifically enforced, in the particular circumstances of that case the court refused to confine the Plaintiff to a remedy in damages.

The facts in Hill's case were very different from those in the instant case for the following reasons:

(i) It was a test case.

(ii) The Plaintiff had only three more years to receive a pension for the whole of his employment with C.A. Parsons & Co. Ltd. It was important for him to serve until the end of his time, because his pension had been on his average salary.

(iii) The case involved a union dispute. The Defendant had been pressured by a Trade Union into issuing letters of termination to employees when it did not wish itself to terminate Mr. Hill's employment.

(iv) The case came under the United Kingdom Industrial Relations Act 1971 and the court held that the employer's action in purporting to dismiss Mr. Hill was in breach of Section 7 of the Act.

In a later decision, Chappell & Others v. The Times Newspaper Limited & Others (1975) 2 ALL E.R. 233 the Court of Appeal distinguished Hill v. C.A. Parsons & Co. Ltd.

The facts in Chappell were briefly that the employer company had informed the Trade Union that unless it stopped disruptive actions by union members employed by the company the employers would treat any such employee union members has having terminated their contracts of employment. The Plaintiffs sought an injunction restraining the employer from terminating their employment under their contracts of employment. Their application was refused by the Court. At page 239 Lord Denning M.R. said:

"The general rule is that the Court will not order specific performance of contracts of employment. If there is a wrongful termination by one side the remedy of the other party is in damages only. That has been the law for a very long time."

The other members of the Court agreed.

Counsel for the Defendant also relied on the case of Bentley-Stevens v. Jones and others (1974) Ch. D. 653 in which Plowman J. refused an application for an interlocutory injunction on the grounds that the Court would not grant such an injunction in respect of irregularities which could be cured by proper processes. In that case the Plaintiff had been removed from the Board of Directors of a company and claimed that this had been done irregularly. At page 655 Plowman J. said:

"Even assuming that the plaintiff's complaint of irregularities is correct, this is not a case in which an interlocutory injunction ought to be granted. I say that for the reason that the irregularities can all be cured by going through the proper processes and the ultimate result would inevitably be the same. In Browne v. La Trinidad (1887) 37 Ch. D.1 at p.17 Lindley LJ said:

'I think it is most important that the Court should hold fast to the rule upon which it has always acted, not to interfere for the purpose of forcing companies to conduct their business according to the strictest rules, where the irregularity complained of can be set right at any moment.'"

In my view similar considerations apply to this case.

In all the circumstances therefore but particularly because there is an admission now by the Plaintiff that the Defendant is still carrying on business despite the Plaintiff's predictions to the contrary I consider that the injunction can no longer remain but that the Plaintiff should be allowed to pursue an action for damages against the Defendant as quickly as possible. I note that the Plaintiff has not yet delivered any statement of claim and to ensure as early a trial as possible I now make the following orders as to procedure:

(1) The Plaintiff to deliver a statement of claim no later than 14th January 1992;

(2) Defence to be delivered by 21 January 1992 and any reply by the Plaintiff by 28th January 1992;

(3) Any discovery of documents required by the parties to be given mutually in the form prescribed by the rules of this Court by 12th February 1992.

Thereafter the action to be set down for trial in accordance with the rules and to be given a speedy trial.

Although I cannot direct the Immigration authorities here not to take any action against the Plaintiff arising from the fact that he is no longer employed by the Defendant I express the hope that the authorities will take no action to terminate his stay in Fiji until the final determination of this action, subject of course to the Plaintiff being able to satisfy the authorities that he is able to support himself. I consider that my order of the 1st of October 1991 should now be varied in the following way:

Paragraph 3: The Defendant be at liberty to open and operate any other account necessary for it to continue its operations and be at liberty to take any overdraft facilities offered by its bank which it considers desirable for the effective running of its business.

Paragraph 5 of the order of the 1st of October should now be deleted.

Costs will be in the cause.

John E. Byrne
J U D G E

HBC0472D.91S