General Machinery Hire Ltd v Ports Authority of Fiji [1994] FJHC 31; Hbc0492d.93s (31 March 1994)

IN THE HIGH COURT OF FIJI
At Suva
Civil Jurisdiction

CIVIL ACTION NO. HBC0492 OF 1993

Between:

GENERAL MACHINERY HIRE LIMITED
Plaintiff

- and -

PORTS AUTHORITY OF FIJI
Defendant

Mr. W. Morgan for the Plaintiff
Mr. T. Seeto for the Defendant

RULING

On the 10th of September 1993 the plaintiff company issued a Writ of Summons seeking declaration, damages and an order for specific performance of an agreement entered into with the defendant authority.

A month later the plaintiff company issued a summons seeking the entry of judgment in default of defence under Order 19 r.7 of the High Court Rules.

A week later on the 20th of October the defendant authority filed an affidavit sworn by its Acting Director General explaining its reasons for the delay and annexing a proposed Statement of Defence of which paragraph 2 reads:

"2. THE Defendant admits that an Agreement was signed between the parties hereto and dated 13 August, 1993 but further says that the said Agreement was entered into by the Defendant when specifically directed not to do so by the Minister under the exercise of his powers under Section 13 of the Ports Authority of Fiji Act (Cap. 181) and the execution of the said Agreement by the Defendant was therefore ultra vires and null and void."

In the light of the above affidavit and draft Statement of Defence learned counsel for the plaintiff company properly conceded that the Court could not ignore the same and proceed to judgment under the Rule. (See: Gibbings v. Strong [1884] UKLawRpCh 46; 26 Ch.D. 66, 69 per Earl of Selbourne)

Furthermore in Wallersteiner v. Moir [1974] 1 W.L.R. 991 where the plaintiff had obtained declarations in a default judgment, Buckley L.J. in discharging the declaratory orders observed at p.1029:

"It has always been my experience and I believe it to be a practice of longstanding, that the Court does not make declarations of right either on admissions or in default of pleading ... If declarations ought not to be made on admissions or by consent a fortiori they should not be made in default of defence ..."

Scarman L.J. for his part said at p.1030:

"But, when what is sought is a declaration, there is the risk of irremediable injustice: the Court has spoken and words cannot be recalled, even though later they be negatived; 'nescit vox missa reverti', Horace ... The power of the Court to give declaratory relief upon a default of pleading, of course, exists, but, for the reason crystallised by Horace in those few words of his, should be exercised only in cases which to deny it would be to impose injustice upon the claimant."

In the circumstances I am satisfied that the Court not only retains a discretion in the matter but also that it would be wholly inappropriate to grant the declaratory relief sought in the face of the draft Statement of Defence.

Nevertheless counsel argued that the proposed defence was not a proper defence on the merits of the plaintiff company's claim which was based on a contract which the defendant authority admits it had entered into and had subsequently suspended in writing.

In counsel's submissions the defendant authority had the necessary power and authority to enter into the contract and had done so and was therefore bound by it. It was no part of the plaintiff company's duty to acquaint itself with or verify the defendant authority's power to enter into the agreement which in any event had been partly-performed by it.

Needless to say counsel was constrained to argue that Section 13 of the Ports Authority of Fiji Act (Cap. 181) had no bearing on the plaintiff company's claim which was very simply one for breach of contract.

Learned counsel for the defendant authority on the other hand submits that the draft Defence raises a difficult question of law, namely, whether the agreement entered into by the plaintiff company and the defendant authority is valid and enforceable or whether the agreement entered into in direct contravention of a ministerial directive was ultra vires the defendant authority and therefore null and void ab initio.

In order to resolve the conflicting submissions it is necessary to refer briefly to the provisions of Section 13 of the Ports Authority of Fiji Act (Cap. 181) which provides:

"13. The Minister may, after consultation with the Authority, give to the Authority general or special directions, not inconsistent with the provisions of this Act, as to the policy to be followed by the Authority in the performance of its functions under this Act in relation to any matter appearing to the Minister to affect the interests of Fiji as a whole, and the Authority shall give effect to any direction so given."

This is a relatively common provision to be found in statutes that set up statutory corporations of which the Ports Authority of Fiji is undoubtedly but one example in this country. Furthermore and without necessarily deciding the issue as to the lawfulness or otherwise of any 'special direction' which the Minister may have given to the defendant authority, the section as worded, although 'discretionary' in so far as it relates to the Minister giving directions, is prima facie 'mandatory' on the part of the defendant authority in carrying out such ministerial directions.

In the leading case on the question of ultra vires contracts of a statutory corporation, namely, Ashbury Railway Carriage and Iron Co. v. Riche [1875] UKLawRpHL 13; [1875] 7 L.R.H.L. 653 Lord Cairns L.C. enunciated the relevant legal principles when he said at p.672:

"I assume the contract in itself to be perfectly legal, to have nothing in it obnoxious to the doctrine ... The question is not as to the legality of the contract; the question is as to the competency and power of the company to make the contract. Now I am clearly of opinion that this contract was entirely, as I have said, beyond the powers of the company to make the contract. If so, my Lords, it is not a question whether the contract ever was ratified or was not ratified. If it was a contract void at its beginning, it was void because the company could not make the contract."

The learned Lord Chancellor later cited with approval at p.673 the dictum of Blackburn J. in the Court of Appeal where the learned Justice said:

"I do not entertain any doubt that if, on the true construction of a statute creating a corporation it appears to be the intention of the legislature, expressed or implied, that the corporation shall not enter into a particular contract, every Court, whether of law or equity, is bound to treat a contract entered into contrary to the statute as illegal, and therefore wholly void, and to hold that a contract wholly void cannot be ratified."

In the light of the above dicta, the question raised in these proceedings is not the simple question whether or not the defendant authority had breached its contract with the plaintiff company as alleged but rather the more complex one of whether the defendant authority had power to make a contract which it had been specifically directed by the Minister not to enter into.

I am satisfied that the defendant authority has raised a defence on the merits to the plaintiff company's claim and accordingly the application is refused with leave to the defendant authority to file and serve its Statement of Defence within 7 days of the date hereof with costs in the cause thereafter the action is to follow its normal course.

(D.V. Fatiaki)
JUDGE

At Suva,
31st March, 1994.

HBC0492D.93S