Pacific Timber Developments Ltd v Consolidated Agriculture Fiji Ltd [1994] FJHC 40; Hbc0118d.94s (22 April 1994)

IN THE HIGH COURT OF FIJI
At Suva
Civil Jurisdiction

CIVIL ACTION NO. HBC0118 OF 1994

Between:

PACIFIC TIMBER DEVELOPMENTS LIMITED
Plaintiff

- and -

CONSOLIDATED AGRICULTURE FIJI LIMITED
Defendant

Mr. I. Fa for Plaintiff
Mr. A.R. Matebalavu for Defendant

RULING

On the 9th of March this Court granted ex parte to the plaintiff company an interlocutory injunction in the following terms:

"That the defendant by itself, its servants and agents be restrained from entering upon, dealing with or in any way alienating the land known as:

C.T. 23785 Lot 6 D.P. 5345 area of 3.2513 hectares (whole)

C.T. 23786 Lot 7 D.P. 5345 area of 3.2446 hectares (whole)

C.T. 23787 Lot 8 D.P. 5345 area of 3.2522 hectares (whole)

C.T. 23788 Lot 9 D.P. 5345 area of 3.2519 hectares (whole)

C.T. 23789 Lot 10 D.P.5345 area of 3.2466 hectares (whole)

AND are restrained from interfering with in any manner whatsoever with any chattels or property or improvement of the Plaintiff being situate on the above-mentioned Certificate of Titles being Lot 6, 7, 8, 9 and 10 on D.P. 5345 in any manner whatsoever until further order of this Court."

Liberty was also reserved to the parties to apply generally on 3 days notice.

On the 17th of March the defendant company by inter partes Notice of Motion sought the immediate dissolution of the injunction. It also sought various declarations to the effect that the various actions it took in rescinding a contract of sale and purchase were valid and entitled the defendant to re-enter and take possession of all lands the subject matter of the sale and purchase agreement.

The primary facts in this action are not seriously disputed. Briefly the parties entered into a sale and purchase agreement in which the defendant company agreed to sell 5 blocks of land to the plaintiff company for a total sum of $250,000. The agreement set out that the purchase price would be paid by an initial deposit of $150,000 with the balance of $100,000 payable in 3 instalments over a year and secured by a mortgage over Lots 8, 9 and 10. The agreement also provided as one of its 'Special Conditions':

"(iv) Upon execution of this agreement the purchaser shall be entitled to take possession."

In this latter regard it is common enough ground that the plaintiff company has paid $150,000 and has built part of its sawmill extensions on part of the land comprised in Lot 6.

Equally clearly the plaintiff company has defaulted in meeting the final 2 instalments of the purchase price on the due dates in terms of Clause 1 of the mortgage. Furthermore although the first instalment of $37,757.53 was paid by the plaintiff company such payment was late.

Clause 16 of the Sale and Purchase Agreement provides various remedial options open to the defendant company as vendor in the event of a "default in payment of any moneys when due ..." including:

"(b) May rescind this Contract of sale and thereupon all monies theretofore paid or under the terms of sale applied in reduction of the purchase money shall be forfeited to the vendor as liquidated damages;

(e) May re-enter upon and take possession of the said land and property without the necessity of giving any notice or making any formal demand."

Be that as it may on the 27th of January 1994 the defendant company through its solicitors notified the plaintiff company of its default in terms of the payment clause of the Sale and Purchase Agreement and sought "to be satisfied by PTDL that PDTL will fully meet its payment obligations under the contract of sale, time being of the essence of contract."

No response was forthcoming and on the 8th of February, 1994 the defendant company through its solicitors issued a Demand Notice demanding the payment within 7 days of $75,515.06 (i.e. the remaining 2 instalments) being the whole of the purchase price then unpaid.

To this Demand Notice there was a response from the plaintiff company which resulted in a reduction of the amount immediately payable and an extension of time within which to pay the balance. (See: letter dated 14th February, '94)

No payments were forthcoming however and on 3rd March '94 the defendant company issued a Notice of Recission rescinding the sale and purchase agreement and forfeiting all moneys paid by the plaintiff company "as liquidated damages".

Then by letter dated 7th March '94 the defendant company advised the plaintiff of its decision "to re-enter and take possession of all lands previously subject to the sale and purchase agreement between the parties" and requiring the plaintiff company forthwith to remove all its assets on the land and cease all activity. So much then for the primary facts of the case.

In his written submissions seeking the dissolution of the injunction learned counsel for the defendant company submits that the defendant company is merely exercising its contractual remedies as a result of the plaintiff company's persistent and continuing default and the court should not interfere with the parties contractual rights. Counsel also submitted that the injunction "was obtained irregularly by suppression of facts".

In this latter regard counsel refers generally to the facts pertaining to the defendant company's own delay and default in completing the transaction and in particular its continuing default in making various payments under the Sale and Purchase Agreement; its failure to fulfil its contractual obligations regarding the necessary documentation to give effect to the agreement; in introducing a third party into the agreement namely, Lotus Region Limited and in its failure to disclose the very limited nature of the encroachment of its mill on the land comprised in Lot 6.

I accept unhesitatingly the principle enunciated by Davies L.J. in Beese v. Woodhouse [1970] 1 W.L.R. 586 when he said in relation to ex parte applications at p.590:

"... it is fundamental to any ex parte application for an injunction that the party applying for it should show the utmost good faith in making the application and that the doctrine of unberrimae fidei in effect applies. There is no doubt that that is so."

But equally clearly I accept that not all facts are "material" so that its non-disclosure necessarily gives rise to a summary discharge of an ex parte injunction. As was succinctly put by Ralph Gibson L.J. in Brinks MAT Ltd. v. Elcombe [1983] 3 ALL E.R. 188 when he said at p.192, 193:

"... the material facts are those which it is material for the judge to know in dealing with the application as made; materiality as to be decided by the Court and not by the assessment of the applicant or his legal advisors."

In this case although undoubtedly the affidavits filed by the plaintiff company in support of its ex parte application did not expressly depose to the nature and extent of its default the various annexures attached to the affidavits discloses such default in sufficiently plain terms both as to amount and duration.

Equally although no mention was made of Lotus Region Limited in the plaintiff company's affidavits the "materiality" of this non-disclosure is not entirely clear other than to delay the completion of the relevant documentation.

As for the degree of encroachment of the plaintiff company's mill onto Lot 6, suffice it to say that having regard to the nature of the plaintiff company's clam this court did not and does not consider it such a material non-disclosure as to warrant dissolution of the ex parte injunction. So much then for the issue of non- disclosure.

I turn next to the question of whether or not the requirements for a grant of the injunction have been satisfied and whether the same ought to be continued.

The principles governing the grant of an interlocutory injunction were authoritatively laid down in the judgment of Diplock L.J. in the leading case of American Cyanamid Co. v. Ethicon Ltd. [1975] 1 ALL E.R. 505 at pp. 510 and 511. These may be conveniently summarised into the following 4 questions, namely:

(1) Is there a serious issue or question to be tried?

(2) Are damages an adequate remedy?

(3) Where does the 'balance of convenience' lie?

(4) Are there any 'special factors'?

In this case learned counsel for the defendant company argues that the defendant company was merely exercising its contractual remedies under the Sale and Purchase Agreement which was clear in its terms and effect in that it was a single indivisible contract for the sale of 5 blocks of land for an agreed purchase price to be paid according to an agreed payment schedule and of which the plaintiff company was in clear "unilateral default" to borrow counsel's phrase.

Counsel for the plaintiff company however submits that the contract read as a whole is divisible in so far as Lots 6 and 7 are concerned and in any event it was to receive title to all 5 lots upon execution of the sale and purchase agreement with the defendant company retaining its rights under the mortgage over Lots 8, 9 and 10.

In addition to the interpretation question, the Statement of Claim avers that the various clauses of the Sale and Purchase Agreement relied upon by the defendant company in its several notices are in effect 'harsh and unconscionable' and equity would grant relief against such provisions; furthermore the plaintiff company also pleads 'estoppel' and breach of the provisions of the Fair Trading Decree 1992 as separate and alternative causes of action. Needless to say the defendant company denies all the above in its Statement of Defence.

In Shiloh Spinners v. Harding [1973] A.C. 691 Lord Wilberforce discussed the power of a court in equity to relieve against the forfeiture when he said at p.722:

"Although the principle is well established, there has undoubtedly being some fluctuation of authority as to the self-limitation to be imposed or accepted on this power. There has not been much difficulty as regards two heads of jurisdiction. First, where it is possible to state that the object of the transaction and of the insertion of the right to forfeit is essentially to secure the payment of money; equity has been willing to relieve on terms that the payment is made with interest, if appropriate and also costs."

Lord Simon of Glaisdale in the same case was even more forceful when he said at p.726:

"The last hundred years have seen many examples of relaxation of the stance regarding contractual rights and obligations as sacrosanct and exclusive of other considerations:

... I would therefore hold that equity has an unlimited and unfettered jurisdiction to relieve against contractual forfeitures and penalties."

In this latter regard in John H. Kilmer v. British Colombia Orchard Lands Limited [1913] UKLawRpAC 8; [1913] A.C. 319 in which an agreement for the sale of land for a price to be paid in instalments at specified dates contained a clause of forfeiture both of the agreement and of all payments of past instalments of purchase money in case of default in punctual payment of any one instalment and time was declared to be of the essence of the agreement. The Privy Council in upholding the trial judge's order for 'specific performance' on the counter-claim of the defaulting purchaser said at p.325:

"The circumstances of this case seem to bring it entirely within the ruling of the Degenham Dock Case. It seems to be even a stronger case, for the penalty, if enforced according to the letter of the agreement, becomes more and more severe as the agreement approaches completion, and the money liable to confiscation becomes larger."

I observe that in the present case the plaintiff company on the defendant company's own admission has paid in excess of $187,000 (being slightly more than three quarters of the total purchase price) which it stands to lose if the court were to refuse equitable relief.

On the question of 'estoppel' I need only cite from the judgment of Lord Cairns L.C. when he said in Hughes v. Metropolitan Railway Co. [1876] UKLawRpCP 15; [1877] 2 A.C. 439 at 448:

"It is the first principle upon which all courts of equity proceed, that it will prevent a person from insisting on his strict legal rights - whether arising under a contract, or on his title deeds or by statute - when it would be inequitable for him to do so having regard to the dealings which have taken place between the parties."

In this regard the 'in-house' solicitor of the plaintiff company has deposed to various discussions, advices and subsequent actions of the plaintiff company which it is claimed raises 'equitable estoppel'. These are all denied in the submissions of learned counsel for the defendant company and in its Statement of Defence, but clearly this issue cannot be resolved either on the affidavit evidence or on the pleadings.

In the light of the above and mindful of the cautionary words of Diplock L.J. in the American Cyanamid case (op. cit) at p.510 to the effect that at this stage it is not part of the court's function to try to resolve conflicts of evidence on affidavit or to decide difficult questions of law, I find that the plaintiff company has succeeded in raising substantial issues of law and fact which ought to be tried.

I turn next to the question of the 'adequacy of damages' and the related question of the 'balance of convenience' and in this regard I note that the agreement under consideration is one for the sale and purchase of land for which the plaintiff company seeks 'specific performance' as its principal remedy.

As was said by the learned author of Equitable Remedies by Spry (3rd edn.) at p.59, 60:

"Whether remedies at law are adequate is determined on the same principles, whether realty or personalty, such as a chattel is involved. But land is property that has a fixed location and a special value, and ordinarily damages are not regarded as an adequate substitute for the right to acquire or dispose of an interest in it. Even indeed if the purchaser intends to purchase the land in question merely in order to be able to sell it later at a profit, damages will not be regarded as an adequate remedy for him. {Pianta v. National Finance and Trustees Ltd. [1964] HCA 61; [1964] 38 A.L.J.R. 232}."

In this case there can be little doubt that the land in question had for the plaintiff company, a "peculiar and special value" not only by its close proximity to the plaintiff company's existing operations but also in the plaintiff company's future expansion plans for its sawmilling operations and not to mention the admitted fact that part of its mill extensions had been built on part of Lot 6 at an estimated cost of $150,000.

For the defendant company it is deposed "that PTDL will not for an indefinite period of time meet its payment and other contractual obligations to CONAG in any event. A situation that CONAG cannot reasonably be expected to accept either in contract or as a business proposition." Further it is submitted that the defendant company ".. has incurred loss and damage in not meeting its banking payment commitments as a consequence of the plaintiff's unreasonable delay in not completing the contract as agreed between the parties."

In this latter regard I note that there is no suggestion that the lands in question have outstanding charges over them nor has the amount of the 'loss' or 'damage' been quantified nor has a relevant letter from the defendant company's bank been submitted, but in any event the defendant bank has already received the greater portion of the purchase price for the land and unlike the plaintiff company I am satisfied its claim should it ultimately succeed would be adequately compensated for by an award of damages.

In all the circumstances I am satisfied that the 'balance of convenience' favours the continuation of the injunction in preserving the status quo until the determination of the action. The application to dissolve the injunction is accordingly dismissed with costs in the cause.

(D.V. Fatiaki)
JUDGE

At Suva,
22nd April, 1994.

HBC0118D.94S