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High Court of Fiji |
IN THE HIGH COURT OF FIJI
(SUVA)
CIVIL JURISDICTION
ACTION NO. HBC0555 OF 1994
BETWEEN:
KARIM'S LIMITED
PLAINTIFF
AND
FEEDERS SEAFOOD LIMITED
DEFENDANT
Miss Tamara for Plaintiff
Mr. Jamnadas for Defendant
RULING
This is an application by the Plaintiff for an Order restraining the defendant either by itself or by its servants or agents or otherwise howsoever from proceeding with the Sale, Leasing, Charter of the vessel Feeders II and for the immediate return of the said vessel to the plaintiff pending the hearing and determination of this action on the grounds contained in the affidavits of Karim Buksh f/n Madar Buksh filed in support.
This case arises out of an alleged illegal seizure of the vessel Feeders II by the Defendant citing breach of contract by the Plaintiff, to wit a Charter Contract (contract) between the parties executed on 26th day of November, 1993.
I regret that the delivery of this Ruling has taken rather longer than I would have wished.
Several Affidavits were filed by both parties which I have perused and find that most matters deposed to are not relevant for the purpose of this present application, as they substantially affect the merits of the case and ought properly be raised at the substantive hearing.
It may, however, be of great assistance to repeat here the whole of the Contract in view of the Claim and counter claim; and allegations of breaches of contract by both parties.
CHARTER CONTRACT
THIS CONTRACT made and entered into this 26th day of November, 1993 by and
BETWEEN FEEDERS SEAFOODS (FIJI) LTD (FSF) a duly registered company having its registered office at Suva, (hereinafter called the Owners) of the one part
A N D KARIM'S LIMITED (KL) a duly registered company having its registered office at Suva, (hereinafter called the Charterer) of the other part.
WHEREAS
NOW IT IS HEREBY AGREED AS FOLLOWS:
Clause 1 Charter
Clause 2 Charter Period
The charter period of Feeders Seven Seas No.2 shall commence on 1st January, 1994 and terminate on 31st December, 1996 and the charter period on Feeders Seven Seas No.1 shall commence on 1st February, 1994 and terminate on 31st January, 1997.
Clause 3 Fishing Operation
During the period of this charter Karim's Limited shall operate and manage the vessel entirely at its own discretion. Providing however, that Karim's Limited shall always operate the vessel with due regard to the principles of safety at sea and good maritime practice and shall not operate the vessel in a manner prejudicial to the owner's interest. The owner accepts that wear and tear of the vessel its equipments and machinery is part of the process of the fishing operation.
Clause 4 Charter Fee
Karim's Limited shall pay the owner a sum of $4,000.00 (FOUR THOUSAND DOLLARS) per month per vessel. This fee shall include hire of the vessel, its machinery and equipments. The fee shall be paid monthly, in advance, on the first day of each month to the account designated by the owner and shall be the sole remuneration payable to the owner.
Clause 5 Expenses borne by the Charterer
Clause 6 Disposal of Catch
The whole catch of the vessel shall be the sole property of Karim's Limited who shall dispose of the catch entirely at its own discretion. However, preference shall be given for the sale of by-catch to Feeders Seafoods Fiji Ltd at wholesale or better prices.
Clause 7 Inventories
At the time of delivery to Suva a inventory shall be taken of all the ships stores, fishing gear, consumables, fuel and oils. The inventory shall be recorded and valued by mutual agreement. At the termination of the charter, another inventory shall be taken and items consumed by the vessel between the two inventories shall be replaced or reimbursed to the owner by the Karim's Limited. Items surplus to the first inventory shall be paid or returned to Karim's Limited by the owner.
Clause 8 Modification
In the event of any unforeseen event affecting the business or policy of Karim's Limited or should the policy of the Government of Fiji require modifications to this contract the matter shall be discussed and settled amicably between Karim's Limited and the owners.
Clause 9 Governing Law and Arbitration
Clause 10 Assignment
Karim's Limited and the owner shall not assign pledge or otherwise dispose of their rights or obligations under this contract without the prior consent of the other.
Clause 11 Karim's Limited's Obligations
Clause 12 Binding
This contract shall be binding upon Karim's Limited and the owner and their respective successors.
Clause 13 Severeability
The provisions of this contract shall be deemed to be servable and any invalidity to any provision to this contract shall not affect the validity of the remaining provisions of this contract.
IN WITNESS WHEREOF the parties of this contract have caused this Contract to be executed in duplicate of same tenor by their duly authorised respective officers or representatives as of the day and year mentioned in the preamble of the Deed and each counterpart shall be deemed as an original of this contract.
DATED at Suva this 26th day of November 1993.
Signed for and on behalf )
FEEDERS SEAFOOD FIJI LIMITED ) (sgd).
in the presence of )
(sgd).Solicitor, Suva
Signed for and on behalf )
KARIMS LIMITED in the ) (sgd).
presence of )
(sgd).Solicitor, Suva
On receipt of the vessels as per the said contract the Plaintiff started its operation from January and February, 1994 with Feeders No.I and Feeders No.II (vessels) respectively. It continued its operation till 30th November, 1993, when it entered into a Supplementary Agreement (Agreement) stated below.
THIS AGREEMENT is made the 30th day of November 1993.
BETWEEN: FEEDERS SEAFOODS (FIJI) LIMITED a duly registered Company having its registered office at Suva (hereinafter referred to as "FSF") of the one part
A N D: KARIM'S LIMITED a duly registered Company having its registered office at Suva in Fiji (hereinafter referred to as "KL") of the other part
WHEREAS by an Agreement in writing dated the 26th day of November, 1993, FSF and KL entered into a Charter Contract in respect of FSF's motor vessels namely Feeders Seven Seas No 1 and Feeders Seven Seas No 2 ("the said vessels").
AND WHEREAS FSL and KL have agreed to enter into this agreement in addition to and notwithstanding the provisions contained in the said Charter Contract.
THEREFORE IT IS HEREBY agreed between the parties that:-
(1) KL will pay to FSF fifty per cent (50%) of the nett profits from the charter of the said vessels.
(2) The nett profit shall be calculated on the basis that all expenses arising out of the running and maintenance of the said vessels are deducted from gross proceeds and to include a management fee of three per cent (3%) of the gross proceeds.
(3) KL will provide FSF an account of all income and expenditure for each fishing trip undertaken by KL.
(4) All payments under this agreement shall be paid within thirty (30) days after delivery of all fish supplied to the Processor.
(5) All payments due to FSF by KL shall be paid under the direction of FSF.
IN WITNESS WHEREOF the parties thereto have executed these presents the day and year aforementioned.
Signed for and on behalf of FEEDERS )
SEAFOODS (FIJI) LIMITED in the ) (sgd).
presence of )
(sgd).Solicitor, Suva
Signed for and on behalf of KARIM'S )
LIMITED in the presence of ) (sgd.)
(sgd).Solicitor, Suva
After the signing of Agreement the relationship between Plaintiff and Defendant continued to be cordial and amicable until differences emerged and Agreement was subsequently cancelled by the Plaintiff by a letter dated 18th July, 1994.
In this Ruling I shall only deal with the parts of the Affidavits filed by both parties which are, in my view relevant to the application by the Plaintiff for a Restraining Order and the return of Feeders II, and I am grateful to both solicitors for providing me with authorities, which I found very useful and also for their forceful arguments on behalf of their respective clients Mr. Karim Buksh, a director of the Plaintiff, in his Affidavit of 22nd November, 1994, said that as a result of the cancellation of the Agreement, Feeders I was returned to the Defendant. On or about 25th October, 1994 a dispute broke out between the Plaintiff and Defendant, regarding the processing of fish, purchase of ice and baits. He denied that the Plaintiff had breached any conditions of the Contract regarding the above matters. He approached Mr. Ian Chute a director of the Defendant to resolve the issues amicably or alternatively resort to arbitration in accordance with Clause 9 of the Contract. Mr. Chute refused to resort to arbitration.
On 18th November, 1994 Feeders II was anchored at the private jetty of Fiji Fish Company Limited when at about 4.30p.m. Mr. B. Chute a brother of Mr. Ian Chute came to the Fiji Fish Factory to repossess Feeders II. A few moments later Mr. Ian Chute's son Mr. Adrian Chute was seen around the Fiji Fish Compound. They were advised to leave but refused. The Police was called and the police officers who arrived at the scene managed to sort things out and left. A little while later Mr. A. Chute returned on Feeders I with hired men and were successful in seizing Feeders II.
The police officers from Lami Police Station arrived at the scene and directed Mr. A. Chute to return Feeders II but he in return argued that his action was justified, and as tension rose, Mr. Buksh allowed Mr. Chute to take away Feeders II to avoid any ugly scene. As a result of the illegal seizure of the Feeders II, Mr. Buksh, said that the Plaintiff has suffered serious losses and damages. He concluded that in response to a letter from Defendant's solicitors he claimed that the Defendant owes $173,500 plus interest to the Plaintiff.
Mr.Ian Chute, Managing Director of the Defendant in his Affidavit dated 17th January, 1995, denies that the Defendant had committed any breach of the Contract but contended that Plaintiff had committed the following breaches under the terms of the said Contract:-
(a) Failure to pay charter fees of $26,400;
(b) Failure to pay for ice and bait supplied to the Plaintiff to the value of $6,253.30;
(c) Failure to pay for fishing gear and the equipments supplied to the Plaintiff - $29,200;
(d) Failure to insure the vessel;
(e) Failure to sell by-catch to the Defendant;
(f) Failure to promptly and properly attend to repairs and damages caused by the Plaintiff;
(g) Failure to provide proper accounting of fish sales.
Mr.Chute denies that the Agreement was cancelled as stated by the Plaintiff but because the Plaintiff had failed to adhere to the terms of the Agreement. He said that Mr.Buksh did not ask him to settle any dispute amicably, but because the Plaintiff ignored the Defendant's concern at the Plaintiff's breaches the Defendant had no alternative but to seize Feeders II, to avoid any further financial loss and other damages, and to protect its property. Mr. Chute maintained that Mr.Buksh gave the Feeders II back to Defendant voluntarily after some argument. The Defendant denies that the Plaintiff had suffered any loss, as according to the financial reports supplied by the Plaintiff to the Defendant, the Plaintiff had been making substantial losses. The Defendant owes Plaintiff no money and therefore any alleged off-setting of money owed was improper and a breach of the Contract as Clause 5 of the Contract was quite specific in stating the responsibilities of the Plaintiff in up-keeping, servicing and maintaining the vessel at its expense, hence the Plaintiff improperly tried to off-set expenses relating to Clause 5 of the Contract. The Plaintiff failed to give all information expected of him to the Defendant as the reports given were not supported by receipts and vouchers showing expenses which were legitimate, and did not include any by-catch figures. The Defendant did not agree to obtain insurance cover for the vessels as this was clearly the Plaintiff's responsibility under the Contract. It was also the responsibility of the Plaintiff under the Contract to maintain the vessel and that allegations of negligent of workmanship by Carptrac mentioned in paragraph 33 of the Plaintiff's Affidavit was not the responsibility of the Defendant. The Plaintiff at no point during any negotiations on disputes mentioned arbitration and continued to commit breaches outlined above. The Plaintiff had clearly breached his obligations to purchase ice and bait from the Defendant as the ice and bait were offered to Plaintiff in accordance with Clause 11G of the Contract. The Defendant denies that the Plaintiff had paid all monies owed to the Defendant after deducting credits given to the Plaintiff, the Plaintiff still owes the Defendant a sum in excess of $60,000. Defendant denies any settlement of monies owing by the Plaintiff in paragraph 36 of Plaintiff's Supplementary Affidavit. The Plaintiff's claim is frivolous and vexatious and an abuse of process of the Court, because the Plaintiff in seeking an equitable remedy has not disclosed all material facts and has attempted to state irrelevant issues by including unsubstantiated matters which are not material to this action and therefore Plaintiff's application should be dismissed with costs.
As I have stated before, this case is full of allegations and counter-allegations as shown by the Affidavits filed by both Mr. Karim Buksh for the Plaintiff and Mr. Ian Chute for the Defendant, which contain most matters which are not really material to this application. There is also the Statement of Claim by the Plaintiff and the Counter-Claim by the Defendant.
I believe the factual material which are required for this application are quite adequately provided in the Affidavits of both parties.
I shall now deal with the arguments advanced by both Miss Tamara for the Plaintiff and Mr. Jamnadas for the Defendant.
Miss Tamara argues that the Defendant owes no lease money to the Defendant since June, 1994. The Accounts between the parties were reconciled in November, 1994 and the balance sum was paid by the Plaintiff to the Defendant and therefore the Defendant is estopped from claiming any monies from the Plaintiff.
The Defendant has failed to produce evidence that there were breaches of the Contract. A breach or breaches of conditions of the Contract does not give power or authority to the Defendant to take the vessel by force or by any other means. Clause 9 of the Contract specifically states "that any dispute arising out of or in connection with this contract which cannot be settled by mutual accord of the owner and Karim's Limited shall be finally settled by arbitration" and Defendant has failed to comply with the said provision.
The Defendant's debt with its creditors is very high and it lacks credibility within the business community and any undertakings by it regarding damages must be carefully viewed by this Court.
Miss Tamara further argued that since the Defendant owes substantial sums of money to the Plaintiff the mandatory injunction applied for by the Plaintiff should be granted until the final determination of this case as damages is not a sufficient remedy in this case. It will be generally material to consider whether more harm will be done by granting or by refusing an injunction - Granada Group Ltd v. Ford Motor Company Ltd (1972) F.R.S. 103.
Miss Tamara concluded that more harm will be done to the Plaintiff if the Injunction is not granted and urged that the relief sought by the Plaintiff be granted.
Mr.Jamnadas for the Defendant in reply submitted that the Plaintiff had committed the following breaches of the Contract:-
(1) no payment of charter fees under the agreement;
(2) failure to insure the vessel;
(3) failure to offer by-catch to the Defendant;
(4) failure to purchase bait and ice from the Defendant;
(5) failure to insure the vessel.
(6) failure to comply with the supplemental agreement and subsequent arrangements;
(7) failure to provide proper breakdown of income and expenditure of fishing trips.
The breaches by the Plaintiff have resulted in the Defendant filing a Counter-Claim against the Plaintiffs for the sum of $64,753.30.
The Defendant is challenging the Plaintiff's application on the following grounds. Firstly it is the Defendant's argument based on the principle of injunctive Law that it had the right to forfeit the vessel due to the fundamental breach of the Contract and also breaches of conditions of the contract. Mr.Jamnadas argued that the breaches by the Plaintiff were such that the Contract became meaningless to the Defendant and the Plaintiff in not insuring the vessel had put the Defendant's property at great risk.
Mr.Jamnadas referred to the case of Hong Kong Fir Shipping Company Limited v. Kawasaki Kisen Kaisha Ltd [1961] EWCA Civ 7; (1962 2 Q.B. 26 and page 64) Upjohn L.J., put forward the following test-
"Does the breach of the stipulation given so much to the root of the contract that it makes further commercial performance of the contract impossible, or in other words is the whole contract frustrated? If yea, the innocent party may break the contract as at an end. If, nay his claim sounds in damages only."
Mr.Jamnadas submitted that the Plaintiff's breaches were of sufficient seriousness to give the Defendant a right to terminate performance of a contract under the test stated by Upjohn L.J.
He added that Diplock L.J., in the Hong Kong Fir case whilst using the same yardstick of commercial frustrations concluded his test in terms of Deprivation of benefit. His Lordship on page 66 said -
"the test------has been stated in a number of metaphors all of which I think amount to the same thing: does the occurrence of the event deprive the party who has further undertakings still to perform of substantially the whole benefit which it was the intention of the parties as expressed in the contract that he should obtain as the consideration for performing these undertakings."
Mr.Jamnadas submitted that Diplock's L.J., emphasis on depravation of benefit does not imply that this is the only ground on which the doctrine of fundamental breach will operate to confer a right to terminate performance. The Defendant quite rightfully terminated the Contract given the various breaches of the Plaintiff and particularly the nature of such breaches.
Secondly, the Plaintiff in seeking an equitable remedy to obtain relief against forfeiture by the Defendant must come within the equity's jurisdiction which is well established and the traditional view has been that the inherent jurisdiction to grant relief against forfeiture is fairly narrow in scope. This was expressed by Lord Wilberforce in Shiloh Spinners Ltd v. Harding [1993] A.C. 691 and 723 -
------"that their Lordships should reaffirm the right of Court to equity in appropriate and limited cases to relieve against forfeiture for breach of covenant or conditions."
As his Lordship went on to explain on page 723 -
------"that equity intervenes-----where the primary object of the bargain is to secure a stated result which can effectively be attained when the matter comes before the Court------."
Accordingly, before the Court should grant relief against forfeiture, the "stated result" which is the primary object of the bargain must still be available and the circumstances of the case must make it "appropriate" for the Court.
He submitted that due to the breaches by the Plaintiff of the Contract and the lack of benefit to the Defendant because of the breaches, the primary object of the Contract is not only unattainable by the Defendant but there is no benefit accruing and the Plaintiff's application should therefore be dismissed as being inappropriate.
The Law is also clear in that the potential loss of a contractual right of the Plaintiff standing alone, as is the case here, is not sufficient to raise an equity in the Plaintiff's favour, something more must be shown such as the loss of a proprietary or possessing interest.
An illustration of this limitation on the scope of the Courts inherent jurisdiction is provided by Scandinavian Trading Tanker Co. A.B v. Flota Petrolera Excuatoriana [1983] 2 A.C. 694 which concerned a time Charter party on the "Shelltime 3" form ----- Clause 8 of the Charter Agreement, required the charterers to make monthly payments of hire in advance to the shipowners and conferred on the shipowners a right to terminate the performance of the contract, in default of payment, by withdrawing of the vessel from the Charterer's service. When the Charterers failed to make payments of an instalment due and payable, the shipowners withdrew the vessel. "A without prejudice agreement" was then entered into under which the vessel resumed her service under the charter. Subsequently, the shipowners issued a Writ, seeking, inter alia, a declaration that they had been entitled to withdraw the vessel. The House of Lords held that a right to withdraw had accrued and that the Court had no jurisdiction to grant relief against forfeiture. Although withdraw of a vessel is sometimes described as a forfeiture, this is not a strictly accurate description of the position, since a time charter party transfers no interest in the vessel to the Charterers, it is merely a contract of services: to grant an injunction prohibiting withdrawal would be tantamount to an Order for specific performance which is generally refused in such contract (at page 701). The Court of Appeal [1983] Q.B. 529 and 541 had been influenced when refusing to grant relief against forfeiture in the context of a commercial contract, by the need for certainty:
"The policy which favours certainty in commercial transactions is so antipathetic to the form of equitable intervention involved by the charterers in the present case that we do not think it would be right to extend that jurisdiction to relieve time charterers from consequences of withdrawal. We consider that the mere existence of such a jurisdiction would constitute an undesirable fetter upon the exercise by the parties of their contractual rights under a commercial transaction of this kind. It is not enough to say that it will only be exercised in rare cases."
When affirming the Court of Appeal's decision the House of Lords also emphasised the practical difficulties which would be created by the mere existence of the jurisdiction.
On perusal of all the Affidavits filed for this application, it seemed to me that the breaches by the Plaintiff are so serious to the Charter Contract that forfeiture or withdrawal of the vessel was the only way in which the Defendant could protect its position from substantial losses.
The principles applicable to granting Interlocutory Injunctions have been authoritatively explained by Lord Diplock in American Cyanamid Co v Ethicon Limited [1975] UKHL 1; (1975) A.C. 396 and can be briefly summarised as follows:
(1) The Plaintiff must establish that he has a good arguable claim to the right he seeks to protect.
(2) The Court must not attempt to decide the merit of the claim on the affidavits; it is enough if the Plaintiff says that there is a serious question to be tried.
(3) If Plaintiff satisfies this test, the grant of an injunction is a matter for the exercise of the Court's discretion on the balance of convenience.
In the case of Evans Marshall Co. Ltd v Bertola S.A (1973) 1 W.L.R. 349 Sachs L.J. said at page 379:
"The standard question in relation to the grant of an injunction, "Are damages an adequate remedy", might perhaps, in the light of the authorities of recent years, be rewritten: "Is it just, in all the circumstances, that a plaintiff should be confined to his remedy in damages?"
Again in American Cyanamid page 408 Lord Diplock had this to say:
"It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, that the question of balance of convenience arises. It would be unwise to attempt even to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be attached to them. These will vary from case to case. Where other factors appear to be evenly balanced it is a counsel of prudence to take such measures as are calculated to preserve the status quo."
Furthermore, an injunction being an equitable remedy can only be granted where the applicant must have a cause of action in law entitling him to substantive relief (North Condor Railway Co. v. Great Northern Railway Co. [1883] UKLawRpKQB 111; (1883 11 QBD 30).
Again an injunction is not a cause of action (like tort or a breach of contract) but a remedy (like damages). In Pickering v. Liverpool Daily Post [1991] 1 All E.R. 622 the House of Lords reaffirmed the rule that an injunction must be ancillary to a substantive cause of action.
It is evident from the Affidavits filed for this matter, that the parties have competing claims against each other, and in my view if the Plaintiff wishes to proceed further against the Defendant, "an injunction is not a proper remedy because the very first principle of injunctive law is that you do not obtain an injunction for an actionable wrong for which damages are the proper remedy" (per Lindley L.J. in London and Blackwall Railway Co. v. Cross [1886] UKLawRpCh 7; (1886) 31 Ch.D 354 at 367).
As Lord Diplock said in American Cyanamid case at page 408:
------"Where other factors appear to be evenly balanced it is a counsel of prudence to take such measures as are calculated to preserve the status quo."
Reflecting on the submissions of both Counsels I am in agreement with Mr.Jamnadas that damages would be an adequate remedy available to the Plaintiff.
I will therefore dismiss this application by the Plaintiff, and make no order as to cost.
[S W Kepa]
JUDGE
10th August, 1995
HBC0555D.94S
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