Fiji Forest Sawmilling Company Ltd v Victory Tours Ltd [1993] FJHC 88; Hbc0111j.92s (1 October 1993)

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

ACTION NO. 111 OF 1992

BETWEEN:

FIJI FOREST SAWMILLING COMPANY LIMITED
a limited liability company having its
registered office at Sigatoka in Fiji
Plaintiff

AND

VICTORY TOURS LIMITED
a limited liability company having its registered
office at Nadi in Fiji
Defendant

Mr. H.K. Nagin: For the Plaintiff
Mr. P. Knight: For the Defendant

Dates of Hearing: 17th, 23rd June and 8th July 1993
Date of Interlocutory Judgment: 1st October 1993

INTERLOCUTORY JUDGMENT

The relevant facts and history of this matter up to 20th of August 1992 are set out in the Interlocutory Ruling of Ashton-Lewis J. of the 20th of August 1992 and which I gratefully accept. To recapitulate briefly, on the 13th of May 1989 the Plaintiff and the Defendant entered into a contract whereby the Plaintiff agreed to sell to the Defendant the property known as the Sigatoka Hotel described in Certificate of Title No. 11986 and the property known as "The Island Property" described in Certificate of Title No. 5217.

Prior to the 13th of May 1989 the Defendant had moved into possession of these properties as a tenant. The purchase price under the original Sale and Purchase Agreement was $305,000.00 but on the 24th of August 1990 the Plaintiff and the Defendant entered into a new Sale and Purchase Agreement which generally superseded and replaced the contract of 13th of May 1989. The consideration under the second contract was $413,000.00.

Completion of the sale was to have been by 24th of September 1990 but this was extended by mutual agreement a number of times.

Disputes arose between the Plaintiff and the Defendant as to whether there should be any reduction in the purchase price because of the alleged reduction in area of the properties in question and these are set out in the ruling of Ashton-Lewis J. As a result of these disputes, on the 3rd of April 1992 I granted the Plaintiff an Interim Injunction against the Defendant preventing the Defendant through its directors, servants or agents from re-entering the premises of the Sigatoka Hotel and in any way attempting to prevent the Plaintiff taking possession of the hotel and occupying it until further order.

I made the matter inter-partes and on the return date of the 15th of April 1992 both parties appeared before me and tried to settle their differences. They agreed to modify the Interlocutory Injunction to allow both parties to jointly manage and operate the hotel while the Plaintiff gave the Defendant a further thirty days from that date to complete settlement.

As Ashton-Lewis J. mentions on page 7 of his Ruling, by the 26th of May 1992 the Defendant had not been able to raise the necessary funds to settle the contract and relations between the parties had deteriorated badly with allegations and counter-allegations of violence and harassment being made by them against each other. As a result of this the Plaintiff applied to Ashton-Lewis J. for restoration of the Interlocutory Injunction I had given on the 3rd of April 1992. In his Ruling of the 20th of August the Judge ordered that the Injunction which I had granted should be restored and he made two other relevant orders:

(1) That an account be taken between the parties as to the amount paid by the Defendant to or on behalf of the Plaintiff for the purchase of the property from the date of the Defendant's entering into possession up to the date of the order, and that an inventory of the property be taken within twenty-one days jointly of the Defendant by counsel for the Plaintiff and Defendant.

(2) That all pleadings, discovery and pre-trial proceedings between the Plaintiff and the Defendant be completed within forty days with either party being thenceforth free to set the matter down for trial at the expiration of that time.

After delivery of the Interlocutory Ruling of Ashton-Lewis J. the Defendant through its then counsel the late Mr. S.M. Koya applied for a stay of proceedings under Section 5 of the Arbitration Act on the 27th of October 1992 and Mr. Koya filed written submissions in support of this Application on the 25th of February 1993.

Before the Plaintiff could reply to these submissions two events then occurred. The first was the unfortunate death of Mr. Koya on 15th April 1993 and the second which bears directly on the matter presently before me was the destruction by fire on or about the 6th May 1993 of the Sigatoka Hotel. It has been so described in an affidavit by Mahbub Masuk Ali the Managing Director of the Defendant sworn on the 2nd of June 1993 and as "completely destroyed" in an affidavit by Brij Ram a Director of the Plaintiff sworn on the 8th of June 1993.

Both these affidavits were sworn in support of and opposition to respectively a Summons issued on the 3rd of June 1993 by the Defendant's new solicitors seeking an order that Caveats lodged by the Defendant in respect of the two properties the subject of the Sale and Purchase Agreement be extended. In the affidavit filed on behalf of the Defendant Mr. Ali states that the Defendant is still ready and willing to complete the purchase of both properties but, because of the fire at the Sigatoka Hotel, requires an adjustment in the purchase price of the hotel property. Mr. Ali states that after the Defendant entered into possession of the Hotel it paid to Westpac Banking Corporation a total of $107,00.00 in reduction of the debt by the Plaintiff to the bank and on account of the purchase price.

Mr. Ali also deposes that under Clause 16 of the contract of 24th of August 1990 the Plaintiff acknowledged owing to the Defendant the sum of $9,000.00 which was to be paid on settlement and which has still not been paid to the Defendant.

In reply to this affidavit, Brij Ram on behalf of the Plaintiff opposes the extension of the Caveat on the ground of alleged intolerable conduct of the Defendant and its Directors consisting inter alia of the removal of chattels belonging to the Plaintiff from the hotel property. Mr. Ali claims that the Defendant cannot claim specific performance of the Sale and Purchase Agreement because in view of the ruling of Mr. Justice Ashton-Lewis it is res judicata.

Alternatively Mr. Ali claims that because of the fire at the Hotel on the 6th of May 1993 the doctrine of frustration applies to the contract and the Defendant is therefore not entitled to any extension of the Caveats. These affidavits have been discussed at some length in the oral submissions I have heard from Mr. Nagin and Mr. Knight and I shall now deal with these.

The Defendant accepts that because of the fire a significant part of the property does not now exist but says that this does not constitute repudiation of the contract by either party. The Defendant says that it still wishes to complete the purchase of the properties and if the Caveats are removed it will not be able to do so. It rejects any suggestions that the Plaintiff would be unduly prejudiced if the Caveats were extended until trial of the action. The Defendant claims to have a substantial interest in the properties, particularly the commercial or the hotel property, and submits that if the Plaintiff is allowed to sell the properties to a third party there would be an empty judgment as far as the Defendant is concerned.

The Defendant claims that it will be severely prejudiced if the Caveats are lifted because any sale would remove the only asset available to the Defendant should it eventually be successful in its claim for damages.

Counsel for the Plaintiff first submits that Caveats can only be registered to protect an interest in land and that when the Caveats in question here were originally lodged the Defendant had such an interest by the Sale and Purchase Agreement of the properties. It is submitted that at page 10 and 11 of his ruling Ashton-Lewis J. found that the Defendant had repudiated the contract. Counsel quotes three passages from His Lordship's ruling, the first on page 10, referring to the 13th of March 1992 as the date fixed for settlement by the Plaintiff reads thus:

"The 13th of March passed and the Defendant did not settle. The Defendant did not have the funds to do so. The Plaintiff's solicitor's letter of the 18th March acknowledged the Defendant's lack of loan funds and its inability to complete the contract and treated that as the repudiation of the contract by the Defendant."

At page 11 His Lordship said:

"After the 18th of March 1992 the Plaintiff saw itself as entitled to treat the contract as repudiated by the Defendant and was thus discharged from any further performance under it. The Plaintiff acted in the belief that it was entitled to go back into possession of the properties. The later consensual modification of the injunction by the parties on the 15th April 1992 and, the giving of another 30 days to the Defendant from that date to obtain loan funds to complete the purchase did not alter this position."

At page 12 His Lordship said:

"By the end of May the Defendant clearly did not have funds and was still not in a position to complete the purchase of the property."

Counsel submits that these are findings of facts by Ashton-Lewis J. and now cannot be disputed by the Defendant. I do not agree. In my judgment Ashton-Lewis J. is not making any findings of facts, as he could not in interlocutory proceedings, but is merely stating the position as seen by the parties on those dates. In fact the Defendant acknowledges that it did not have sufficient funds either then or even now to complete the contract but claims that this of itself is insufficient to prevent it seeking extension of the Caveats.

However the Plaintiff's main ground for opposing the present Summons is that the contract has been frustrated by the fire.

Counsel submits that even if the contract was not repudiated on 13th of March 1992 and even if I were to hold that Ashton-Lewis J. did not make any final findings on repudiation nevertheless I should hold that the contract is now at an end by a complete destruction of the hotel on the 6th of May 1993. Counsel points out that the Sale and Purchase Agreement relates mainly to the hotel.

Counsel refers particularly to the case of Taylor v. Caldwell [1863] EngR 526; (1863) 3 B & S, 826 where Blackburn J. discharged a contract for the letting of a music hall for the purpose of giving concerts on the accidental burning of the hall. Blackburn J. based his decision on the fact that he construed the contract as subject to the implied condition that the parties were to be excused in case, before breach, performance became impossible by destruction of the property concerned without default of the contractor.

This appears to be the first case until 1863 in which a court read into a contract an implied condition of impossibility of performance by events subsequent to the making of the contract. Later in National Carriers Limited v. Panalpina (Northern) Limited [1980] UKHL 8; (1981) A.C. 675 the House of Lords rejected the implied term test for reasons which need not be stated here.

Counsel for the Defendant accepts that frustration of a contract occurs when there is a total destruction of the property the subject of the contract but says that here there is no evidence of such total destruction. He mentions the apparent conflict as to the extent of damage to the hotel which I have previously mentioned and in any event points out that the Sale and Purchase Agreement here relates to two pieces of freehold land and that there is no evidence as to what has happened to the chattels included in the Schedule of the Agreement.

Here it is useful to note the actual terms of the Agreement. Clause 1 reads as follows:

"THE Vendor will sell to the Purchaser and the Purchaser will purchase the Commercial property, the Island property and the Hotel business at a price and on such terms and conditions as set forth hereunder:

(a) The price for the Commercial property and the Hotel business shall be the sum of $403,000.00 (FOUR HUNDRED AND THREE THOUSAND DOLLARS) and shall be paid in the manner set forth in this Agreement;

(b) The price for the Island property shall be the sum of $10,000.00 (TEN THOUSAND DOLLARS) and shall be paid in the manner set forth in this Agreement."

In my judgment although the business constituted by the Sigatoka Hotel was probably the main item contracted to be sold by the Plaintiff there can be no doubt that the parties accepted that the land on which the hotel was erected had some value although this is, in contrast to the Island property, not stated. I accept the submissions of Mr. Knight that at this stage the Court can not find that the contract has been repudiated until all evidence relating to this has been heard at the trial. It is true that at the moment at least the signs do not appear very favourable to the Defendant. Indeed, at the conclusion of the first two days' argument on the 23rd of June, I directed the Defendant to file and serve an affidavit by the Manager of any one of the major trading banks in Suva deposing that the bank was prepared to finance the Defendant to the extent necessary to complete the present contract of sale and no such affidavit was forthcoming when the hearing resumed on the 8th of July.

A copy letter was tendered from the National Bank of Fiji at Sigatoka to the Defendant dated 5th November 1992 indicating that on that date the bank was prepared to advance $470,000.00 subject to various securities to the bank.

Counsel for the Plaintiff naturally makes much of the fact that no affidavit has been filed by the Defendant in accordance with my order and submits that this is a very strong indication that no bank is prepared to assist the Defendant any further.

I accept that Caveats were never intended to protect any possible future judgment in damages and that their principal purpose is to protect a proprietary interest in land. However it seems to me that the Defendant does have at least some proprietary interest in the land itself on the Commercial property and without question in the Island property.

After giving the matter very careful consideration I am of the view that at the present time it would be wrong not to order an extension of the Caveats for three reasons:

(1) There is no evidence that the Plaintiff intends to sell the properties in the immediate future and therefore I consider it will not suffer any immediate prejudice if the Caveats are maintained.

Should the Plaintiff receive a firm offer to purchase the properties then it can return to the Court and renew its request that the Caveats be removed.

(2) Were the Court now to refuse to extend the Caveats this could result in the Defendant being left without any meaningful remedy should it eventually be successful at the trial.

(3) There is evidence that the Defendant has paid $107,000.00 towards the purchase of the properties and has bought chattels and equipment which were installed in the hotel and have not been returned following the fire.

In my judgment this constitutes a Caveatable interest which should not be removed at this stage. I therefore order that Caveat registered No. 318030 registered against Certificate of Title No. 5217 and Caveat registered 318066 registered against Certificate of Title No. 11986 be extended until further order.

I further order that all pleadings, discovery and pre-trial proceedings between the Plaintiff and the Defendant be completed within forty days and that either party may set the matter down for trial at the expiration of that time.

I finally order that there be no further interlocutory applications in this matter. I direct that the costs of this application be in the cause.

JOHN E. BYRNE
J U D G E

HBC0111J.92S