Pacoil Fiji Ltd v Attorney-General of Fiji [1996] FJHC 107; Hbc0496j.92s (14 March 1996)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. 496 OF 1992

Between:

PACOIL FIJI LIMITED
Plaintiff

- and -

1. ATTORNEY-GENERAL OF FIJI and
MINISTER FOR JUSTICE

2. FIJI TRADE AND INVESTMENT BOARD
Defendants

Mr. G.P. Shankar for the Plaintiff
Mr. D. Singh with Mr J. Udit for the Defendants

JUDGMENT

The Plaintiff Company PACOIL FIJI LIMITED a limited liability company having its registered office in Wainibokasi, Nausori (hereafter referred to as the "Plaintiff" has sued the ATTORNEY-GENERAL OF FIJI and MINISTER FOR JUSTICE (the first defendant - D1) and FIJI TRADE AND INVESTMENT BOARD (the second defendant - FTIB - D2) claiming

(a) Declaration that the Defendants are bound to honour, follow, and continue with the promise and assurance of protection given to the Plaintiff;

(b) Declaration that reduction of Plaintiff's protection is wrong, unfair, unreasonable, and/or in breach of Defendants solemn promise and assurance;

(c) Damages;

(d) Costs

Evidence on behalf of the Plaintiff was given by WILLIAM TOGANIVALU (now deceased). Testifying on behalf of the defendants were ISOA GAVIDI (DWI) the Managing Director FTIB, LUKE ROKOVADA (DW2), Permanent Secretary for Trade, Commerce and Industry and EDWARD JAYARAJ SAMUEL (DW3) a former employee of the Plaintiff company.

After the hearing of this action written submissions were filed as ordered.

The Plaintiff's claim

The Plaintiff's claim is set out in the Statement of Claim which is, inter alia, as follows:

"4. THAT the Defendants encouraged and assured the Plaintiff full protection against competition in respect of oil blending industry and its products in Fiji and in fact the Plaintiff was encouraged to set up oil blending factory in Fiji, upon Defendants assurance that the Plaintiff would have full 100% protection from the Defendant against competition by anyone and that the Defendants would prohibit setting up of another factory, importation sale or distribution of blending oil by anyone in Fiji.

5. THAT the Plaintiff relied on such encouragement and assurances and acted to its detriment in that it -

(a) spent substantial money to complete and establish factory;

(b) entered into binding contract with overseas supplier to for purchase of raw materials and other things, supply of expertise personnel;

(c) imported machinery equipment apparatus and all other things ready;

(d) entered into binding contract for regular supply of raw and other materials from overseas and had itself bound by firm financial commitment.

6. THAT the Government of Fiji by Legal Notice No. 64 of 1989 dated 4th October, 1989 and published in the Fiji Gazette issued amendment to customs (Prohibited Imports and Exports) (Amendment) (No 2) Regulations 1989 whereby it included in schedule 4 the oil and fluid which the Plaintiff was encouraged to make prepare and supply in Fiji. This regulation was amended to grant protection to the Plaintiff, and the Plaintiff will refer to correspondence preceding the making of the amendment to the regulations and subsequent thereto. The Plaintiff relied on the said protection.

7.1. THAT by letter dated 30th September, 1987 the second Defendant advised Plaintiff as follows:-

"This is to inform you that the Government has approved protection by way of import licence on the import of lubricating oil and we have advised the Department of Trade Industry and Tourism for the gazetting of the same. Please liaise with the Department of Trade Industry and Tourism." (underlining mine for emphasis).

7.2. THAT by letter dated 9th November, 1987 the second Defendant stated as follows:-

"Re: LUBE OIL PROJECT

It was indeed a pleasure meeting you during my recent visit to your factory and we have noted the following:-

(a) Factory building completed to an amount of $1.3 million which includes land purchases also;

(b) $50,000 from personal savings spent on pre-project development exercise;

(c) delay in implementation of the project result as:-

(i) Field assistance in the project from IDU/CFTC which was supposed to have begun from July/August of this year has not commenced as yet;

(ii) Fiji Development Bank not releasing already approved funds for procurement of plant and equipment as protection approval for the project being one of the conditions for its release;

(d) On 30 September, 1987 we notified you that the Government has approved protection for your project.

Please note, we shall pursue c(i) above with the IDU/CFTC and will let you know the outcome in due course. However, if in the event IDU/CFTC's reply is in the negative, than we shall approach Centre for Industrial Development Unit (CID) in Brussel for similar assistance in your project." (underlining mine for emphasis)

Yours faithfully,

Sgd Vimal Sharma

for Director, Fiji Trade and Investment Board"

7.3. THAT again by letter dated 12th February, 1988 the second Defendant stated as follows:-

"Re: BLENDING OF LUBRICATING OIL PROJECT

Further to our discussion, I wish to inform you that the Government of Fiji had approved your above project with the following concessions/assistance:

(a) Duty free entry of plant and machinery subject to the Department of Customs & Excise vetting the list;

(b) Concessionary duty rate of 7.5% on import of base oil and other raw material subject to Department of Customs & Excise vetting the list. Regarding this, please note that recently the Government has announced duty free entry of materials for a period of 12 months from 01.12.87 to assist the manufacturing enterprises, and after 12 months it would be considered again;

(c) Income tax concession for 5 years;

(d) Export incentives subject to the fulfilment of the requirements under the 5th Schedule of the Income Tax Act;

(e) Regarding excise duty exemption for 5 years on the locally refined oil, you are advised that this is under consideration by the Government;

(f) Regarding work permits, the Government had recommended that your company should liaise directly with the Ministry of Home Affairs and Immigration;

(g) The Government has approved protection by way of import licence on the importation of lubricating oil.

Please let us know if you are finding any difficulty towards an early implementation of the project so that necessary assistance can be provided.

(underlining mine for emphasis)

Thanking faithfully,

Sgd. V Sharma

for DIRECTOR, FIJI TRADE AND INVESTMENT BOARD"

8. THAT the Plaintiff relied on the encouragements and assurances of the Defendants and has acted to its detriment, namely spent money, and is financially committed to its Bankers, contractually bound and committed with the suppliers, in the hope and expectation that the protection will continue to enable it to function without competition to produce distribute and sell its products, to be able to earn sufficient income with the assistance of protection without completion to meet its financial obligations.

9. THAT on learning of the move by the Defendants to withdraw the protection. The Plaintiff wrote to the Minister for Trade and Commerce and Minister for Finance letter dated 26th April, 1992, explaining the position and emphasising that it relied on the Defendants assurance and encouragement, and protection.

It also wrote to the first Defendant's Ministers and/or Secretaries on 22nd April, 1992, 24th June, 1992, and had several meetings, communications and discussion with first Defendant's representatives regarding its reliance on the Defendants assurance and encouragement, and the consequences which would flow in case 100% protection was not allowed to continue.

10. THAT first Defendant's servant from the Ministry of Trade and Commerce by letter dated 17th August, 1992 wrote to the Plaintiff as follows:-

Rohit Latchan

Managing Director

Pacoil Fiji Ltd

Box 2427

Government Buildings

Suva

Dear Mr Latchan

Thank you for coming to meet with us on Friday 14th of August to discuss the licensing arrangements for lubricating oils.

As we explained during the meeting, Shell Fiji Ltd had applied for a Judicial review against the Ministry under the Fair Trading Decree 1992. This also had legal and liability implications upon Pacoil given that we have entered into an agreement to protect your company, which Shell's solicitor claims is contrary to the Fair Trading Decree.

In order to stall the legal process we have issued import licences for the final quarter of 1992 to the oil companies in the normal way. In the meantime, discussions are being held between ourselves and the Attorney General's office so as to find a solution to this situation. We will keep you informed of the outcome of these discussions.

From our meeting, it is clear that Pacoil intend to continue with the lube project despite this delay in quota restrictions. As such, we recommend that you contact NATA as soon as your laboratory equipment arrives so as to arrange for it to be accredited. During the meeting we explained the need for this accreditation process. I believe that you now fully understand and agree with the necessity for Government to have a separate examination of the laboratory and for the involvement of NATA in this process.

We also discussed our concerns regarding your marketing arrangements and I hope that these discussions have clarified any confusions regarding our previous request for marketing information. I understand that you will be providing us with your marketing plan and with general details of the type of outlets and geographical placement of the outlets once these are known to you. You have also agreed that you will provide us with pricing details once you have received new quotes from Caltex. This information and that regarding your marketing arrangement will be kept in the strictest confidence. (underlining mine for emphasis)

Yours sincerely,

Sgd. Rachel Fletcher

for The Permanent Secretary for Trade and Commerce

11. THAT Fair Trading Decree 1992 (No 25 of 1992) was issued by the President of Fiji:

"...acting in accordance with the advice of the Prime Minister and the Cabinet..."

[hereinafter called "the Fair Trading Decree"].

12. THAT by letters dated 10th June, 1992, and/or 18th June, 1992 the second Defendant advised the Plaintiff that its protection was altered in that:

"The Government has further approved licence protection for a period of 3 years with effect from 1st October, 1992 for 50% of the various lube products which your Company intends to produce and market in Fiji." (underlining mine for emphasis).

13. THAT having regard to all acts facts and circumstances relating to encouragement, assurances and protection by the Defendants and the Plaintiff to Defendants knowledge relied and acted on the same to its detriment, the actions and/or decisions of the Defendants to reduce and alter the protection granted to the plaintiff and its period is wrong, unfair, unreasonable.

14. THE Defendants having given assurance and encouragement on which the Plaintiff to Defendants knowledge relied and acted to its detriment owed duty of care to the Plaintiffs:

(a) to be reasonably careful not to do any act directly or indirectly which would destroy, alter reduce or otherwise affect the encouragement, assurance, and protection promised and/or granted by the Government;

(b) that the Defendants were under duty, after having given encouragement, assurance, promise and protection and getting knowledge, that Plaintiff relied on it, to take reasonable care to safeguard the interests of the Plaintiff who was influenced encouraged and assured by Defendants protection, advice and statements;

(c) that the Defendants were bound to do what is reasonably within their power, consistently with their promise and assurance to ensure that the assurance, protection and promise they made or granted to the Plaintiff was not altered affected or otherwise reduced."

The Defendants' defence

The Defendants by their Statement of Defence state, inter alia, that Government in 1987 gave protection against competition to the Plaintiff in respect of a waste recycling operation and not for oil blending industry. Further, the Defendants did not at any time encourage nor assure the Plaintiff that they would prohibit the setting up of another venture to carry out similar operation.

They said that Legal Notice No. 64/89 did not restrict any other venture from either engaging in oil recycling industry or from benefiting from the licence protection.

They further say that no encouragement nor any assurances were given to the Plaintiff and they put the Plaintiff to strict proof of any financial or other obligations incurred or undertaken by the Plaintiff.

The Defendants state further that on 18 June 1992 Government stipulated that the Plaintiff be granted 50% licence protection for blending operation and further that when licence protection was granted in 1987 the degree and period of protection for the recycling operation were not stipulated.

The Defendants also say that the issue of reduction of protection does not arise and has never arisen, since the degree and period of protection was previously never specified and thus the Defendants had the right to decide on this.

Plaintiff's Reply

In Reply to Defence the Plaintiff says, inter alia, that the first Defendant is estopped from denying his approval for oil blending when through his agents and servants such approval was given to Plaintiff orally and in writing, and also encouraged the plaintiff to spend money to establish oil blending project and gave assurance of 100% protection. It further states, as to degree and period of protection, that in any event the acts or actions taken by the Defendants against Plaintiff are most unfair, unreasonable and not expected from Government.

The Issue

In the Minutes of the Pre-trial Conference dated 17 September 1993 it is stated that there is no agreement on facts except those agreed in the pleadings; that the Court will be asked to determine the issue of liability first and subject to the outcome of this the Court may then be asked to assess damages.

The Defendants have in their written submissions put the issue as follows:

"Whether any promise, assurance or representation was ever given to the Plaintiff by the Defendants and if given whether it renders the defendants liable for failure to impose restriction on importation and provide 100% protection to the Plaintiff".

Consideration of the Issue

I have before me lengthy and comprehensive submissions in writing from both counsel. I have found them of great assistance in considering the issues.

The Statement of Claim and the Defence referred to above give a picture of the facts surrounding this case and I shall be referring to them in my judgment.

According to the Plaintiff it was a clear cut case of the Defendants being in breach of the assurances and undertakings given by them to P to protect the Plaintiff's project. In fact the Plaintiff's case is well summarised in Mr. Shankar's written submission which is as follows:

"that the Government had made and given full protection against competition in respect of an oil blending industry. That it had taken all possible steps to ensure the efficient and proper establishment of that industry as proposed by it on the strength of the full or 100% protection Government encouragement and assurances that it had made large financial commitments, entered into various agreements to see that the project is commissioned without undue delay. Further the Plaintiff is saying that the Government later arbitrarily and unreasonably reneged or reduced the protection given in 1987 to fifty (50%) as a result of representation by the Oil Companies now in Fiji. It asserts that because of that reduction in the degree of protection, and Government's failure to implement the protection by imposing restriction on existing oil Companies to import finished product which the existing Oil Companies have been selling, the Plaintiff's project became economically not viable. The Plaintiff had suffered damages."

There are two important questions which need to be answered in determining the issues before me. The first question is, what was the protection for, namely, whether it was for "Waste recycling Operation" (WRO) or for "oil blending industry" (OBI). The Plaintiff says that it was for OBI whereas the Defendants say it was for WRO. The second question is whether it was a 100% protection or was it, as the defendants put it, that the "degree of protection" for WRO, "was never specified". In fact the defendants argue that the first proposal of the P was for WRO and then when in 1992 it submitted proposal for OBI, approval was given and protection was 50% and therefore the 1987 approval "lapsed". Mr. Singh for the defendants explains that among the letters from Government in 1987 approval for protection stated "lubricating oil blending plant" as their subject matter, but he submits that "this simply occurred due to a somewhat loose use of the term."
(underlining mine for emphasis)

The answer to the above two questions will lie in my findings of fact on the whole of the evidence adduced in this case including documentary evidence.

Plaintiff's evidence

I shall now analyze the evidence adduced and will begin with the evidence of the Plaintiff's only witness WILLIAM BROWN TOGANIVALU.

For the Plaintiff WILLIAM TOGANIVALU who was appointed Chairman of Board of Directors of the Plaintiff Company testified that initially the idea was to "produce recycling of waste - later changed to oil blending - lubricating oil". He said that "recycling and blending go hand in hand". He said "recycling is that you convert used oil into base oil. Blending is process whereby you have base oil and additions - then you have lubricant. Therefore have to import more base oil. Applied for protection given protection for importation of base oil". Negotiation took place to change to blending and as there was not sufficient waste oil available to produce 'base oil' protection was given for importation of base oil. The witness made reference to document 22(in exhibit P1) dated 18 June 1992 under caption "continuation of concessions/Assistance for the lube oil blending operation" which stated, inter alia, "that the Government has approved your proposal for blending lubricating oil instead of recycling waste lubricating oil as originally approved." (underlining mine)

He said that after protection was granted the Plaintiff started its activity; it received "assurance" and applied to F.D.B. for a loan of half a million dollars which was approved. The Plaintiff relied on the letter from FTIB and assurance and encouragement from them.

The Plaintiff then negotiated with ESSO an overseas supplier and obtained material from CALTEX which cost 400 to 500 thousand dollars. These materials are still in the Company's yard in 44 gallon drums.

The witness said the protection for blending was 100% - "understood to be that". Later only 50% protection was granted as per said letter of 18 June 1992. He said that protection was given well before Fair Trading Decree 1992 (Decree No. 25 of 1992) (exhibit P2) came into force.

Defendants' evidence

In his evidence ISOA GAVIDI DWI (the Managing Director of FTIB) said that he had been with Fiji Trade and Investment Board (FTIB) since 1992. He said that initially protection was given for "recycling: but degree of protection was not specified" and later "the emphasis shifted from recycling to blending" as P was not making much progress. The P was advised to put in another submission. Fifty per cent protection was given but the P did not take advantage of this because the P wanted 100% protection. He denied that the P relied on protection from 1986 to June 1992. In cross-examination DWI said that when protection was granted in 1987 no time limit was set but the general policy is 6 months but it was not stated in this case. He said that P did rely on concession but protection was withdrawn "prematurely" before 1993 but then in re-examination says that it was not "formally revoked". He does not know whether P imported raw material but machinery it did.

This witness in my view was not able to throw much light on a lot of matters; and to a lot of questions in both examination in chief and cross-examination his answers were 'no', or "I don't know".

The main witness for the defendants was LUKE ROKOVADA (DW2) the Permanent Secretary for Trade and Commerce. He became Deputy Secretary for Trade and Commerce on 31 February 1989 and Permanent Secretary on 2 January 1992.

The witness said that various concessions were given initially for "recycling" and that was in 1986. The letter of 12 March 1992 (letter 41) was written because it was "clear that the whole nature of project shifted from recyclying to blending"; that in their view he said detracted from original project and concession and conditions. He said that although the letter of protection dated 30.9.87 (letter 51) is there, it is the Legal Notice of 1989 which is "the instrument of the protection" and under that import licences are issued and P was granted a licence but it was not exclusive to P.

He agreed in cross-examination that the letter of 30.9.87 (letter No. 38) and Gazette of 1989 do not specify period of protection. He said that letter No. 22 dated 12.6.92 (re: "continuation of concessions/assistance from the lube oil blending operation") is significant. When asked if he can produce a letter which proves that P applied for "fresh concession" the witness said that "discussion was had with Plaintiff we kept Plaintiff informed". When asked "have not replied to Plaintiff. How can you say Plaintiff informed", there was no answer. In answer to the question that "Plaintiff made no submissions to require concession" (letter 22 dated 18 June 1992 referred to hereabove) and letter 32 ("To whom it may concern" memorandum) stating, inter alia, that there was an agreement between Caltex (Asia) Limited and Pacoil Limited that they "have entered into a five-year agreement for the supply of components, blending technology and trademarks for use in manufacturing and marketing in Fiji by Pacoil a range of Caltex branded lubricants", he answered "correct".

The DW2 agreed that in letter No. 25 (dated 12.5.92) there was "no emphasis on time when project to be completed and ready for production". The approval was given in 1987 and gazetted two years later. The said letter of 12 May 1992 from Director FTIB to National Bank of Fiji stated, inter alia, that the approval is still current.

On Mr. Shankar's insistence DW2 produced a faxed copy letter dated 1.4.92 from Director FTIB (Isoa Gavidi) to Permanent Secretary Trade & Commerce which stated, inter alia, that:

".... to date the company "has invested in excess of $1 million on the project and is now ready to go into commercial production. The Company has gone to these lengths towards implementation on the assumption that Government will continue to provide protection after it commenced commercial production. It would indeed be a serious erosion of confidence on the part of the local investor if the Government now decided to remove protection which was a statutory undertaking the Government had given to the Company. The removal of protection will not only make the Company's operation unviable, but will also create uneasiness in other entrepreneurs wishing to set up business in Fiji."

In cross-examination DW2 further said that the granting of 50% (letter No. 22) "protection for a period of three years with effect from 1 October 1992 ..... of the various lube products which your company intends to produce and market in Fiji", had nothing to do with the passing of Fair Trading Decree. When asked "from 1987 till today still same - no restrictions" he answered "could be correct".

In re-examination DW2 said that he did not go to see if the Company went into production.

I shall now outline the substance of ALBERT JAYARAJ SAMUEL'S (DW3's) evidence. He was a former employee of P as production, marketing and technical services manager who specialised in, inter alia, fuel and lubricants in the petroleum industry.

He commenced work with P on 1 November 1991. His work involved the setting up of "the lubricating blending plant. Co-ordinate technical matter with Oil company CALTEX International set up the laboratory, training of personnel and assist Pacoil in all technical services to the customers". He left P on 30 April 1993.

He said that prior to his starting, the plant was not ready to produce for there was no laboratory for "laboratory goes hand in glove with plant". The production did not take place at the end of 1992 as negotiation with ESSO was not completed. Then negotiation took place with CALTEX.

The witness said that Caltex assisted P a lot in many ways. Raw material did come in October - November 1992; the laboratory was "completely ready in October 1992". On 19.4.93 the trial run and "commissioning" did not take place because a number of factors prevented it as stated by the witness. Marketing was to be done by a subsidiary Company.

Findings

Upon a careful consideration of all the evidence that has been adduced and documentary evidence produced I have come to findings of fact as hereunder.

I do not propose to reiterate what I have stated hereabove in regard to P's claim, the Ds' defence and evidence of various witnesses but will make reference to them in my judgment.

I will start from the time the project for oil blending (hereafter referred as the "project") was put before the D2 (and that includes the Government); part of the dispute is, as the Ds contend, that "protection" was given for "recycling" at first and not "for oil blending industry".

Both parties adduced evidence in this regard. For the Plaintiff, RATU WILLIAM TOGANIVALU has clearly stated that protection was given for "blending", as "recycling" goes hand in hand with "blending". After 100% protection, as he understood it to be, the P commenced "its activity"; it obtained approval for half a million dollars from the Fiji Development Bank for the project.

In fact I find that Ratu William's evidence has not been challenged in material particulars. The Defendants' witness also admitted that the protection given by the Government was for oil blending in the circumstances outlined hereabove. Even the Report under the caption "Fiji Establishment of used Lubricating Oil Refining Plant" indicates that there was scarcity of waste oil available for recycling and it recommended oil blending.

I find as fact that the project was for 'blending'(OBI). The letter No. 51 dated 30 September 1987 from FTIB confirms that Government had approved protection "by way of import licence on the import of lubricating oil". This fact is also evidenced by a "To Whom it may Concern" document dated 29 October 1987 (letter No. 50) and signed by Minister Isimele Bose, Ministry of Economic Development Planning and Tourism, stating that the Plaintiff "is proposing to establish a lubricating Oil Blending Plant in Fiji" and that "Fiji Government has approved the project together with protection" (underlining mine for emphasis). The contents of this document corroborates Ratu William's evidence in this regard.

The bundle of documents (exhibit P1) which contains 51 letters and documents, sets out the correspondence between the parties. They have been referred to throughout the hearing of this case.

Mr. Shankar has highlighted some of these documents in support of his arguments in regard to P's claims. Some of the letters to which reference has been made reveal as follows and I find them as fact:

(a) letter of 12 February 1988 specifies concessions for "blending"

(b) letter of 19 August 1988 indicates that the Minister is pleased with progress

(c) Legal notice no. 64 of 1989 adds a new item 16 to Schedule 4 to the Customs (Prohibited Import and Export) Regulations 1986.

(d) Letter dated 25 April 1992 from P shows displeasure when verbally informed that there will be no import licence protection given to the local blending plant project.

(e) Letter of 18 June 1992 from Director FTIB to P approves licence for a period of 3 years from 1 October 1992 for 50% of the various lube products "which your Company intends to produce and market in Fiji". It is to be noted that this is contrary to what is stated, as no "degree" or "duration" of protection is mentioned in said letter of 30 September 1987". (underlining mine for emphasis)

The letter of 17 August 1992 from the Ministry addressed to P shows that Ds were in some difficulty with Shell Fiji Ltd who applied for Judicial Review under the Fair Trading Decree 1992. The letter states that "this also had legal and liability implications upon Pacoil given that we have entered into an agreement to protect your company, which Shell's solicitor claims is contrary to the Fair Trading Decree". It goes on to further state that "in order to stall the legal process we have issued import licences for the final quarter of 1992 to the oil companies in the normal way." (underlining mine for emphasis)

I am not at all convinced with Luke Rokovada's (PW2's) evidence on essential matters on which he attempted to give his explanation. I prefer to rely on documentary evidence (exhibit P1) which speak for themselves. This witness was not the author of many of those letters and documents and he was merely trying to explain the meaning behind some of them.

I agree with Mr. Shankar in his submission that this same said protection which was given in 1987 was reduced to 50%. This naturally was not acceptable to the Plaintiff, and as it says, the project would not with the reduced protection be economically viable. The Ds argue that this was not a "reduction" or "withdrawal" of protection but licence given under the Legal Notice No. 64 of 1989. They also argued that there was no intention of 100% in any of the letters previously. On the evidence before me I reject these arguments of the defendants altogether; it is quite clear from the evidence before me that it was meant to be a hundred percent protection and it was so understood by Ratu William, the Plaintiff and also the D's witness Ratu Isoa Gavidi.

I find that there is overwhelming evidence that on the strength of the approval and protection granted by the defendants the Plaintiff went ahead and spent considerable sums of money in erecting a factory building, purchasing and installing plant and equipment and also purchasing raw materials (which are to this date stored in the factory building) (vide D2's letters of 8.9.87 and 30.9.83). The Defendant's letter No. 50 dated 9 November 1987 states, inter alia, that "factory building completed to an amount of $1.3 million which includes land purchases also" and "$50,000 from personal savings spent on pre-project development exercise".

Why would Plaintiff incur all this expenditure unless it was assured of protection, and in this case 100% protection was needed. In the circumstances of this case, in the absence in writing of any lesser degree of protection being accorded, it would be the right assumption on the part of the Plaintiff that it was 100%. Had the defendants meant the protection to be less than 100% they would have said so in so many words as they did when they granted 50% protection (vide said letter of 18.6.92). The D2's said letter of 1.4.92 referred to hereabove leaves no doubt that the 100% protection was granted when it stated that "it would indeed be a serious erosion of confidence on the part of the local investor if the Government now decided to remove protection which was a statutory undertaking the Government had given to the Company."

I further find as fact that it is not only the expenditure referred to hereabove that the P incurred, but the plant was ready for commissioning as evident from DW3's (Samuel's) evidence. No doubt there was some delay in commissioning as Ratu William explains as it was not viable through lack of full protection and as DW3 explains but time was extended. Time was not made of the essence of the project but P kept Ds informed of the reason for the delay in production.

As submitted by Mr. Shankar it is clear from evidence, particularly that of DW2, that the fatal blow came when Shell Company Fiji Limited applied for Judicial Review; and to get out of a tight situation the D2 reduced the P's protection to 50% for 3 years. Mr. Shankar submits that there was no need for this reduction to 50% because the Fair Trading Decree does not and could not affect the acts and things already done.

In a nutshell, to sum up, I find that after having given a hundred per cent protection to the project the defendants are in breach of their undertaking (as stated by Isoa Gavidi, the director FTIB) given to P by reducing the protection to 50% and which the Plaintiff found to be not viable for the project.

LAW

Mr. Shankar has raised a number of legal principles to which Mr. Singh has replied and I shall now consider some of these in so far as they assist in determining the issue before me.

(i) Estoppel

The Court has been referred to, inter alia, the following passage from the judgment of COOK J in MEATES v AG 1983 NZLR 308 at 379 on the subject of "promises and assurances", as there was Government's undertaking in this case and which I find apt here:

"I think that there can be occasions when a reasonable person, on receiving such a request, promise or assurance from someone acting within the particular sphere of his authority, is entitled to assume that the speaker has taken and will take reasonable care to safeguard the interests of the person he has sought to influence, if that person acts as suggested. And if the speaker in authority has indicated that certain assistance or other benefits will follow, he will be bound to do what is reasonably within his power, consistently with his other responsibilities, to bring about that result. This is not an absolute duty or a guarantee, which belongs to the realm of contract. It depends simply on what a reasonable man would regard as his duty to his neighbour."

In SHING v ASHCROFT (1987) NZLR 145 at 158 COOK P stated:

"Although falling short of a contract, a promise, undertaking or assurance may in the particular circumstances be or form part of material resulting in a finding that the person making it was under an ongoing duty of reasonable care, or had assumed such a duty, to the other party."

I agree with Mr. Shankar that the principle of estoppel applies against the defendants. The defendants were well aware of the actions taken by the Plaintiff pursuant to the protection granted it. There was continuous correspondence between the parties and extension of time was granted for the completion of the project.

Then in the face of all these developments the said letter containing the 50% protection is slammed on the Plaintiff's face much to its detriment and surprise. In such a situation the defendants certainly did not have any right of waiver to withdraw or revoke as they did the concession or protection which I find they gave in full.

On estoppel it is stated thus in ADMINISTRATIVE LAW by H W R WADE 6th Ed. pages 261 and 262 and which I find apt on the facts of this case:

"The basic principle of estoppel is that a person who by some statement or representation of fact causes another to act to his detriment in reliance on the truth of it is not allowed to deny it later, even though it is wrong, Justice here prevails over truth. Estoppel is often described as a rule of evidence, but more correctly it is a principle of law."

I find the following passage on what estoppel is from the judgment of DENNING MR in MOORGATE MERCANTILE CO. LTD v TWITCHING (1976) Q.B. 255 at pp.241-242 also applicable to this case:

"Estoppel is not a rule of evidence. It is not a cause of action. It is a principle of justice and of equity. It comes to this: when a man, by his words or conduct, has led another to believe in a particular state of affairs, he will not be allowed to go back on it when it would be unjust or inequitable for him to do so. Dixon J [in Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641 at p 674] put it in these words:

The principle upon which estoppel in pais is founded is that the law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations."

The parties are estopped from retracting what is contained in the letters and documents passing between them. The representation by the defendants is of existing facts, that is, upon completion of project the necessary concession and production would be given force.

As is borne out by the facts, in the early stages approval was granted to set up a recycling plant; but on 29 October 1987 the Minister by letter No. 50 said that the Plaintiff is "...proposing to establish a lubricating Oil Blending Plant in Fiji .... The Fiji Government has approved the Project together with protection". (underlining mine for emphasis). What other meaning can one ascribe to this than that the protection was for blending. This is supported by many letters such as those of 9.11.87, 12.2.88, 19.5.88 and 24.1.89. Ratu William was not contradicted in regard to the degree of protection namely 100%. Ratu Osea Gavidi has stated to this effect in his said memorandum quoted hereabove. I find on the evidence that there was no resubmission by the P in 1992 to change the project from recycling to blending and no evidence was adduced to say that was so. In fact DW2 could not produce any documentary evidence in this regard when taxed in cross-examination on this aspect.

It is pertinent to note that the Ds had by letter dated 12 May 1992 i.e. one month prior to withdrawing their letter of 9 June 1992 and substituting it by that of 18 June 1992, wrote to National Bank (who where one of the financiers of P) as follows, and there, there was no suggestion that the protection was for 50% or that there was a resubmission by P for blending:

"I refer to your letter of 4th May, 1992, on the above mentioned subject and wish to advise that the approval granted to the Company to blend lubricating oil is still current. All concessions/assistance contained in the approval including protection by licensing on imports of lubricating oil is valid and would be available to the Company once it commences commercial operation.

As a matter of interest the Company has already imported and installed the necessary machinery and is poised to commence blending of lube oil by the middle of this year."

It is therefore clear from the evidence that D2, without supporting evidence, introduced the point that there was a re-submission for oil blending; it is also clear that it was D2 who arbitrarily imposed 50% protection. The P had through Ratu William asserted that under identical Legal Notice cement factory and match factory were granted 100% protection and this has not been refuted by D2 except to say that "something may have been written down".

(ii) Duty of Care

The learned counsel for the Plaintiff is also relying on breach of duty of care which he says the Ds owe to the Plaintiff.

Both counsel have dealt with this point of law and I have considered the arguments put forward by them.

Mr. Singh submits that there was no such duty of care.

I find that there was a duty of care on the part of the defendants and in considering this aspect of the matter I propose to deal with two cases, namely, McNAUGHTON PAPERS GROUP v HICKS ANDERSON [1990] EWCA Civ 11; (1991) 1 AER 134 C.A. and WILLIAMS v ATTORNEY-GENERAL [1990] NZCA 20; (1990) 1 NZLR 646 C.A.

In McNAUGHTON, NEILL L.J traced the development of the law since the landmark decision of House of Lords in HEDLEY BYRNE & CO. LTD v HELLERS & PARTNERS LTD [1963] UKHL 4; (1963) 2 AER 575 as to the circumstances in which a duty of care exists giving rise to liability in negligence where the loss suffered by the Plaintiff is a purely economic loss.

At page 141 NEILL L.J. said:

"In the last ten years, however, there has been a change of direction. In a series of decisions of the Privy Council and of the House of Lords it has been emphasised that no single general principle is able to provide a practical test which can be applied to every situation to determine whether a duty of care is owed and, if so, what is its scope. This series of cases was recently referred to by Lord Bridge in his speech in Caparo Industries plc v Dickman [1990] UKHL 2; [1990] 1 All ER 568 at 573-574[1990] UKHL 2; , [1990] 2 AC 605 at 617-618. Lord Bridge continued:

'What emerges is that, in addition to the foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and party to whom it is owed a relationship characterised by the law as one of "proximity" or "neighbourhood" and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope on the one party for the benefit of the other. But it is implicit in the passages referred to that the concepts of proximity and fairness embodied in these additional ingredients are not susceptible of any such precise definition as would be necessary to give them utility as practical tests, but amount in effect to little more than convenient labels to attach to the features of different specific situations which, on a detailed examination of all the circumstances, the law recognises pragmatically as giving rise to a duty of care of a given scope. Whilst recognising, of course, the importance of the underlying general principles common to the whole field of negligence, I think the law has now moved in the direction of attaching greater significance to the more traditional categorisation of distinct and recognisable situations as guides to the existence, the scope and the limits of the varied duties of care which the law imposes.'

Moreover a similar restatement of the present state of the law was given by Lord Goff in Davis v Radcliffe [1990] 2 All ER 536 at 540 [1990] 1 WLR 821 at 826, where he said:

'It is now clear that foreseeability of loss or damage provides of itself no sufficient criterion of liability, even when qualified by a recognition that liability for such loss or damage may be excluded on grounds of policy. On the contrary, as appears in particular from the speech of Lord Keith in Governors of the Peabody Donation Fund v Sir Lindsay Parksin & Co Ltd [1984] 3 All ER 529 at 534. [1985] AC 210 at 240-241, it is also necessary to establish what has long been given the label of "proximity", an expression which refers to such a relation between the parties as renders it just and reasonable that liability in negligence may be imposed on the defendant for loss or damage suffered by the plaintiff by reason of the act or omission of the defendant of which complaint is made. Furthermore, it has also been reasserted that it is not desirable, at least in the present stage of development of the law, to attempt to state in broad general propositions the circumstances in which such proximity may or may not be held to exist.'

NEILL L.J in McNAUGHTON (supra) at p 142 goes on to state that "in the absence of some general principle, to examine each individual case in the light of the concepts of foreseeability, proximity and fairness". As to how these general concepts are to be applied are in the words of LORD BRIDGE in CAPARO INDUSTRIES plc v DICKMAN [1990] UKHL 2; (1990) 1 AER 568 at 575 as follows:

"to determine the essential characteristics of a situation giving rise, independently of any contractual or fiduciary relationship, to a duty of care owed by one party to another to ensure that the accuracy of any statement which the one party makes and on which the other party may foreseeably rely to his economic detriment."

The following passage from the speech of LORD OLIVER in CAPARO (supra) at 638 sums up the guidance which can be obtained from the HEDLEY BYRNE case (supra) on the aspect of duty of care:

"What can be deduced from the Hedley Bryne case, therefore, is that the necessary relationship between the maker of a statement or giver of advice (the adviser) and the recipient who acts in reliance on it (the advisee) may typically be held to exist where (1) the advice is required for a purpose, whether particularly specified or generally described, which is made known, either actually or inferentially, to the adviser at the time when the advice is given (2) the adviser knows, either actually or inferentially, that his advice will be communicated to the advisee, either specifically or as a member of an ascertainable class, in order that it should be used by the advisee for that purpose, (3) it is known, either actually or inferentially, that the advice so communicated is likely to be acted on by the advisee for that purpose without independent inquiry and (4) it is so acted on by the advisee to his detriment. That is not, of course, to suggest that these conditions are either conclusive or exclusive, but merely that the actual decision in the case does not warrant any broader propositions."

As NEILL L.J stated in McNAUGHTON (supra) at 143, LORD BRIDGE in his speech in CAPARO (supra) at 576 sums up the recent authorities in England on this branch of the law. where he said:

"The salient feature of all these cases is that the defendant giving advice or information was fully aware of the nature of the transaction which the plaintiff had in contemplation, knew that the advice or information would be communicated to him directly or indirectly and knew that it was very likely that the plaintiff would rely on that advice or information in deciding whether or not to engage in the transaction in contemplation. In these circumstances the defendant could clearly be expected, subject always to the effect of any disclaimer of responsibility, specifically to anticipate that the plaintiff would rely on the advice or information given by the defendant for the very purpose for which he did in the event rely on it. So also the plaintiff, subject again to the effect of any disclaimer, would in that situation reasonably suppose that he was entitled to rely on the advice or information communicated to him for the very purpose for which he required it."

NEILL L.J at 143 says that "in England a restrictive approach is now adopted to any extension of the scope of the duty of care beyond the person directly intended by the maker of the statement to act on it".

In WILLIAMS (supra) a New Zealand Court of Appeal case the same principles as in McNaughton were applied. There CASEY J said at p.688:

"However, in addition to the element of foreseeability of harm, there must also be a sufficient relationship of proximity or "neighbourhood" between the Department and Mr. Williams before it can have a duty of care towards him. There are strong pointers to such a relationship ..."

In the context of the present case, I now turn to the facts of this case in considering how the duty of care arises.

As far back as 9 November 1987 the D1 had in its letter of that date followed by letters of 12.2.88 and 25.5.88, as Mr. Shankar submits, encouraged the P in this project when it said, inter alia:

"Please note, we shall pursue c(i) above with the IDU/CFTC and will let you know the outcome in due course. However, if in the event IDU/CFTU's reply is in the negative, then we shall approach Centre for Industrial Development Unit (CID) in Brussel of similar assistance in your project."

There are other correspondence which show that there was encouragement and assurance not only in Exhibit P1 and also the evidence of Ratu William, but most important of all is the coming into being of the factory building which is the culmination of the Ds' assurances and protection granted. Ample proof of this protection is the Legal Notice No. 64 of 1989 being Customs (Prohibited Import and Exports) (amendment)(No. 2) Regulations, 1989 which took two years to gazette and which allowed for protection.

As already indicated I have found that protection was given by the Defendants to the Plaintiff for "blending" and on the "assurances" given it went ahead and incurred considerable expenditure in building a factory and importing raw materials etc. Applying the principles stated hereabove there is no dispute that the Plaintiff relied upon the protection and that there was that degree of 'proximity' and "foreseeability" of damage likely to be caused and the concept of "fairness" to establish a duty of care on the part of the Defendants towards the Plaintiff.

On 'foreseeability' and 'proximity' in negligence, in PAGE v SMITH (1995)(Feb. 1995) 2 LL.L.R(H.L) p.96 at p.97 LORD KEITH OF KINKEL has said:

"Liability for negligence depends upon proof both that it was reasonably foreseeable that injury would result from the act or omission called in question and that a relationship of proximity existed between plaintiff and defendant."

In MARC RICH & CO AG and OTHERS v BISHOP ROCK MARINE CO. LTD and OTHERS (The NICHOLAS H) (House of Lords) (The Times 7.7.95 p. 34) the question was whether a duty of care arose. There LORD STEYN quoting from LORD JUSTICE SAVILLE in DORSET YACHT CO. LTD v HOME OFFICE [1970] UKHL 2; (1970) AC 1004 at P.1077 said:

"that Lord Justice Saville had correctly stated (at p.1077) the law as it now stood: that the three so-called requirements for a duty of care were not to be treated as wholly separate and distinct requirements but rather as convenient and helpful approaches to the pragmatic question whether a duty should be imposed in any given case. Whether the law did impose a duty in any particular circumstances depended on these circumstances."

Applying the above principles, I find that in the circumstances of this case the Plaintiff has established the existence of a duty of care owed to it by the Defendants in preventing the damage suffered by the Plaintiff as a result of the reduction in the percentage of protection and I conclude with the following extract which is apt and which I have borne in mind from the judgment of NEILL L.J IN McNAUGHTON at p.146 which I would gratefully adopt:

"Indeed it may be noted:(a) that Lord Keith ([1990] 2 All ER 908 at 917, [1990] 3 WLR 414 at 425) referred again to the judgment of Brennan J in Sutherland Shire Council v Heyman [1985] HCA 41; (1985) 60 ALR 1 at 48, where Brennan J emphasised that the question is always whether the defendant was under a duty to avoid or prevent the kind of damage which the plaintiff in fact suffered, and (b) that Lord Oliver underlined the same point where, having referred to the Sutherland Shire Council case and to the Caparo Industries case, he continued ([1990] 2 All ER 908 at 933-934 [1990] 3 WLR 414 at 445):

The essential question which has to be asked in every case, given that damage which is the essential ingredient of the action has occurred, is whether the relationship between the plaintiff and the defendant is such, or to use the favoured expression, whether it is of sufficient "proximity", that it imposes on the latter a duty to take care to avoid or prevent that loss which has in fact been sustained."

Also, I am further fortified in the view that I hold that there was a duty of care by a decision in the Isle of Man in the case of BANDARI and BANDARI v DEPARTMENT OF LOCAL GOVERNMENT AND THE ENVIRONMENT (1993-95) (The Manx Law Reports 47 (I quote from the COMMONWEALTH LAW BULLETIN July 1995 p.874-876). That case deals with 'duty of care' and Government department being negligent in giving professional advice. For ease of reference and for completeness, I quote the relevant sections from the Bulletin in extenso which are as follows:

"Negligence - duty of care - Government department negligent if gives misleading professional advice to member of public in knowledge that will be relied upon, and member of public does so and suffers loss - damages - injury to reputation - loss of reputation and financial anxiety permissible heads of damage in award for economic loss caused by negligence.

The plaintiffs brought an action against the defendant claiming damages for loss and damage caused by negligent advice or mis-statement from the defendant, its servants or agents."

The facts of the case are as hereunder:

"The first plaintiff, with his wife, the second plaintiff, ran a horticultural business producing much of the Island's supply of fresh raspberries. The cooling and packaging of the fruit was carried out in the plaintiffs' kitchen. The first plaintiff obtained a contract to supply fresh raspberries to the local Marks & Spencer, and arranged for a visit from an environmental health inspector from the Department of Local Government to ensure that his business did not infringe Government regulations. The inspector gave him a copy of the Department's Guide to the Food Hygiene Regulations 1978, on the first page of which, in para 2.08, was printed a definition of "food business" which expressly excluded "agricultural activities such as horticulture, fruit growing ...etc." The Guide did not mention reg 3 of the Regulations, under which "food business" included such parts of an agricultural trade or business as were "provided by Part V," nor did it mention reg 45 in Part V, which included as part of a food business "premises in which is carried on the business of packing and storing ... fruit ..."

The health inspector pointed out para 2.08 to the first plaintiff and indicated that, although commercial juice extraction could not take place in the plaintiffs' kitchen, cooling and packaging of the fruit there was acceptable.

Five months later, in July when the fruit picking season was under way, the health inspector visited the premises again and told the plaintiffs that, although the premises gave no cause for complaint, some minor procedures needed to be changed. During the inspection, the first plaintiff told the inspector that his operation had been approved by Marks & Spencer. The inspector informed Marks & Spencer's head office that the kitchen was being used for packaging and, as soon as they had confirmed that fact with the first plaintiff, Marks & Spencer cancelled the contract."

The plaintiffs instituted proceedings "claiming damages, submitting that the defendant was liable for the financial loss, loss of reputation and financial anxiety stemming from the loss of the Marks & Spencer contract since, had the plaintiffs been advised at the time of the first inspection that the kitchen could not be used, they would have started to erect the new packing shed immediately and would have had it in use before the picking season started".

The defendant submitted that, even if the inspector had given inaccurate advice, which was denied, the absence of evidence from Marks & Spencer meant that there was no proven link between the advice given in February and the loss of the contract in July.

The Common Law Division giving judgment for the plaintiffs, held:

"1. The inspector had owed a duty of care to the plaintiffs to provide accurate advice, since he ought to have known that the plaintiffs would rely on it, yet he had misstated the legal position and the Department's own guide was itself misleading in its omission of the exceptions to the exclusion of fruit growing as a food business. It was also the case that the plaintiffs had suffered loss as a result of relying on the negligent advice since, had the first plaintiff been advised that the kitchen could not be used, he would have proceeded more rapidly with the building of the separate packing shed: furthermore, there was sufficient evidence that the inspector's contacting Marks & Spencer had led to the cancellation of the contract. The defendant was therefore liable in damages to the plaintiffs.

2. The plaintiffs were entitled to damages for the pecuniary loss suffered over the remainder of the growing season during which they had lost the Marks & Spencer contract and the first part of the following season, when the first plaintiff was still attempting to mitigate the damage by negotiating resumption of the contract, and were also entitled to a modest sum for loss of reputation and financial anxiety. They were not, however, entitled to damages for any loss suffered after the first plaintiff's failure to take up the new contract which Marks & Spencer had offered." (underlining mine for emphasis)
   

I gratefully adopt the reasoning in BANDARI to the case before me.

To conclude, on the facts, I find that the actions of the Government and its servants and agents failed in their duty of care to the Plaintiff and were negligent in their approach to the matter of protection before them.

Summary and Conclusions

In view of the above findings and on the authorities, I conclude that the Plaintiff has substantially made out its claim. The said letter of 30 September 1987 (letter 51 in exhibit P1) informed the Plaintiff that the "Government has approved protection by way of import licence on the import of lubricating oil and we have advised the Department of Trade Industry and Tourism for the gazetting of the same". This gazetting took two years and in the meantime the Plaintiff incurred all the expenditure referred to hereabove in reliance upon the protection and which expenditure the defendants have acknowledged. In regard to the expenditure the said letter of 9 November 1987 (letter No. 50 exhibit P1) is relevant.

Although I have generally found in favour of the Plaintiff, it cannot be said that the Plaintiffs are entirely blameless when the defendants eventually resorted to the grant of import licence to the extent of 50%. Initially, after the grant of protection there was delay of two years on the part of the Government in gazetting it. When it was finally gazetted, the Fair Trading Decree 1992 came into being. That led to Judicial Review (referred to above) and the defendants were forced into a situation to find a solution to the impasse that has been created. They were between the devil and the deep sea. At that stage the Plaintiff had some difficulties in not being able to commission the plant and to go into production including the question of marketing. In other words there were numerous matters to be ironed out before commissioning. That being the situation, despite the fact that the defendants were committed to protection given to Plaintiff, in my view, it was not possible to completely stop import by refusing import licences to oil companies who were hitherto importing. So the next best thing in their wisdom was to grant 50% protection for 3 years to the Plaintiff. The question that looms large is as to what happens to the protection in these circumstances bearing in mind all the aforesaid expenditure in reliance upon 100% protection.

In view of what I have stated in this regard the defendants are liable in damages up to the time the 50% protection was granted, namely, 18 June 1992.

The plaintiff is seeking declaratory relief as well as damages and costs.

Declaratory relief is a discretionary remedy and "the relevant considerations for the exercise of the discretion not being a matter which may be narrowly confined or precisely determined". (FORSTER v JODODE AUSTRALIA PTY LTD (1972) 127 Ch.R. 421 at 437.

In all the circumstances of this case, as far as relief sought in (a) namely, declaration that the Defendants are bound to however follow and continue with the promise and assurance of protection given to the plaintiff, is concerned, I refuse to grant the declaration sought as the Plaintiff does not appear to be in a position to get back on the rails after such a long lapse of time and without major disruptions to the status quo bearing in mind the coming into force of the Fair Trading Decree.

The Plaintiff can properly be compensated for in damages.

As for declaration (b), subject to what I have stated as to the limit to liability, it is true and I have held, in the words of the Plaintiff, that the "reduction of Plaintiff's protection is wrong, unfair, unreasonable, and/or in breach of Defendants solemn promise and assurance". I therefore grant the declaration sought in (b).

As for prayer (c), which is for damages, I find that the defendants are liable to pay same subject to the limit as to liability up to 18 June 1992 referred to hereabove.

In the outcome, declaration (a) is refused, declaration (b) is granted and prayer (c) for damages is granted with the limitation referred to hereabove.

Accordingly there will therefore be judgment for the Plaintiff against the defendants with damages to be assessed with costs which is to be taxed if not agreed.

D. Pathik
Judge

At Suva
14 March 1996

HBC0496J.92S