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High Court of Fiji |
IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION
ADMIRALTY ACTION NO. 4 OF 1992
Between:
FRESH FISH EXPORTERS (FIJI) LIMITED
Plaintiff
- and -
WASAWASA FISHERIES LIMITED
Defendant
Mr. R. Smith for the Plaintiff
Dr. M.S. Sahu Khan for the Defendant
JUDGMENT
This action arises out of an agreement entered into between the Plaintiff (P) and the Defendant (D). The agreement is in writing dated 25th August 1989 (hereafter referred to as the "agreement") when it was agreed that D should sell and P buy (amongst other things) the ship "Sunbird" (hereafter referred to as the "vessel") and equipment.
The Plaintiff's claim
The Plaintiff's Statement of Claim (as amended) is as follows:-
"1. By an agreement in writing dated 25 August 1989 made between the plaintiff and the defendant it was agreed (amongst other things) that the defendant should sell and the plaintiff buy the ship Sunbird and equipment (details whereof will be supplied prior to the hearing of this action).
The P joins issue with D on all the paragraphs of the D's Second Amended Statement of Defence save in so far as the same consist of admissions. On the Amended Counterclaim the P denies any further or other liability to D and denies the allegation in the Amended Counterclaim.
The P therefore claims:
(a) a declaration pronouncing the P the lawful owner of the vessel, and the equipment on it;
(b) possession of the vessel and the equipment on it and damages from Defendant for their detention;
(c) an order that D execute and deliver to P a transfer of the vessel;
(d) alternatively, that the P be relieved of the forfeiture (if any) of its rights and interests under the agreement referred to in paragraph 1 upon such terms as the court may think fit.
The defendant's claim
The D admits that there was this agreement and states in its Statement of Defence (as amended) and Counterclaim as follows:
(a) That there was that agreement but that it was "subsequently varied between the parties as a result of discussions between them".
(b) That the variation was to the following effect:
"(a) that because of cash flow difficulties facing the Plaintiff the Defendant would forego for a time that element of the formal Agreement contained in clause 3.2(b) in return for which forbearance the Plaintiff would pay a lease fee for the ship of $5,000 per month to the Defendant which lease fee the Defendant assigned to Fiji Development Bank.
(b) that the payment referred to in Paragraph 3.2(a) and 3.2(b) of the said agreement would be made and after such payment that the ship Sunbird would be transferred to the Plaintiff."
(c) That D further says that:
"....pursuant to the variation referred to above it was agreed that right, title and interest in the ship would not pass until the Plaintiff had complied with the provisions of clause 3.2(a) and 3.2(b) and the Defendant was in a position to pass title free from encumbrances. To date the Plaintiff has not complied with the provisions of clauses 3.2(a) or 3.2(b) as varied."
(d) That the D deny that they delivered the vessel to the P on or about August 1989 and say instead:
"...that in fact it had leased the ship to the Plaintiff in March, 1989 as an interim arrangement pending the finalisation of an agreement between the parties and that from March, 1989 until March, 1992 the Plaintiff operated the ship under the lease agreement referred to above and retained all the revenue earned by the ship during that time. During this period the Plaintiff did not pay any money towards the reduction of the debt owed to the Defendant but only paid the lease fee referred to above."
(e) The P is not entitled to a transfer of the vessel because it has failed to pay the sums of $235,000 and $147,342.00 as provided in clauses 3.2(a) and 3.2(b) of the agreement
(f) That it denies that the value of equipment installed in the vessel was to the value of $152,039.00
(g) That the D denies that it wrongfully took the vessel in March 1992 and says instead:
"...that it has always had the control and ownership of the ship other than that the said ship was the subject of the lease agreement referred to above which agreement was terminated on or about March, 1992 and the Defendant now continues to exercise the control and management of the ship on the basis that the Plaintiff did not meet its obligations and it is not therefore entitled to the relief claimed."
(h) That the P had acquiesced in the variation of the agreement and in any event the P is estopped from denying the said variation and both P and D had acted upon the basis of the variation.
COUNTERCLAIM
That D counterclaims as follows:
the Plaintiff and the Defendant agreed that the Defendant would lease the ship to the Plaintiff for a monthly lease fee of $5,000.00 and that the sum of $235,000.00 and $147,342.00 remains due and owing to the Defendant under the clauses 3.2(a) and 3.2(b) of the said Agreement.
Alternatively the D claims:
that in breach of clause 3.2(b) of the said agreement as varied the Plaintiff failed to pay and has still not paid to the Defendant the said sum of $147,342.00 and says that in breach of clause 3.2(a) of the said agreement the Plaintiff failed to pay to the Defendant the said sum of $235,000.00 as a result of which the Defendant lawfully rescinded the said agreement.
The D claims
(a) the sum of $382,342.00
(b) interest at 13.5% per annum
(c) alternatively, a declaration that the D is the lawful owner of the vessel
(d) such further or other relief
(e) costs of this action
The issues
There was no pre trial conference hence there was nothing before me as to "agreed facts" and "issues" for my determination. As I see it, and it will be gathered from the pleadings, that the Plaintiff's claim is that having entered into an agreement on 25th August, 1989 under which the Defendant sold the vessel to the Plaintiff, it is entitled to the transfer of ownership of the vessel; whereas the D says that there was a variation of that agreement and its claim is as stated hereabove.
It is the Defendant's contention that "although there was this agreement, the real essence of the agreement and the intention of the parties were that the ownership in the vessel was to be transferred to the Plaintiff upon the payment of all the amounts due and payable under Clauses 3(2)(a) and (b) of the agreement. Until that was done the vessel was to be rented out or leased by the Defendant to the Plaintiff on monthly payment of $5000.00. To that extent there was a clear variation of the agreement. This variation not only the Plaintiff acted upon but the conduct and circumstances of the case and dealings clearly brought out that this was so"
In any event the Defendant maintained that the Plaintiff was in breach of contract itself in not paying the amounts due as purchase price and consideration for the proposed sale and purchase as provided for under the said Clause 3(2)(a) and (b) of the agreement.
The defendant further says that when the Plaintiff Company was formed "all its operations were to be managed by the Defendant and Mr. Southwick. The vessel Sunbird was used by the Defendant for such operation. Consequently, the vessel Sunbird, in spite of the agreement of 25th August, 1989, never left the control or possession of the Defendant as such."
Background to the Case
The background to the case is sufficiently set out in the written submissions of Dr. Sahu Khan which is partly as follows:-
"The Defendant and Competitive Foods Aust Limited and other overseas partners commenced business dealings in the fishing industry in Fiji since 1988. Then it was agreed that the Plaintiff Company be formed and that eventually the majority shareholding be with the Overseas partners. In May, 1989 permission was sought from the Reserve Bank of Fiji ["RBF"] for the issue of shares to the Overseas partners. RBF was informed that the $745,000.00 in relation to the issue of shares to all the shareholders was to come from Overseas. It will be appreciated and it is common ground that under the law of Fiji where Overseas shareholders or non-residents intend to take majority or controlling shares in a local Company then they must get the approval of the RBF. This is in conformity with Exchange Control Regulations. The RBF gave its approval to the Plaintiff Company to issue the shares as specified in Exhibit "A". However, it made it a condition that the whole of the $745,000.00 (and not only the contribution of the overseas partners) had to come from offshore."
The Defendants complain that only $498,995.45 originated from offshore and another $11,363.63 was shown as deposit paid on a Fishing vessel.
Under the agreement, paragraph 3.2 to which constant reference has been made provides as follows:
"3.2 The aggregate of the amounts referred to in clause 3.1 shall be paid by the Purchaser as follows:
(a) by payment of $235,000 to the Vendor on the date of this agreement, and
(b) by payment of $147,342 to the Fiji Development Bank to discharge all mortgages, liens and other encumbrances over the Ship to that Bank and to reimburse any payments made to Fiji Development Bank on account of such mortgages since 1st February, 1989 to the date hereof on or before 60 days following the date of this agreement."
The Defendant's further contention
The defendant contends that the agreement to purchase was concluded in February/March 1989. At all material times Grahame Southwick was director of both the Plaintiff and defendant. The agreement was signed by Southwick on behalf of both the companies. Because of the Plaintiff's financial difficulties it was agreed that in the meantime the vessel was to be leased to the Plaintiff on the payment of $5000 per month and by arrangement this lease payment was to be made to the FDB on account of the mortgage payment of the defendant. Hence the provision in paragraph 3(2)(b) of the agreement to this effect.
If as the Plaintiff maintains that the $5000 payment per month was on account of the plaintiff and part payment of purchase price then the defendant argues why was there a provision for reimbursement to the defendant.
Alleged Variation of the Agreement
According to Southwick, inter alia; the
"The final legal formalities were to be completed by the Plaintiffs Sydney Solicitors and because the Joint Venture partners were anxious to begin operation immediately, it was agreed that the Defendant would make the Sunbird available on an interim basis by way of a lease and payment was to be $5000.00 per month payable to the FDB on account of the Defendant until settlement.
The legal formalities by way of a Contract was prepared but the Plaintiff found that cash flow difficulties prevented it from completing the terms of the proposed Agreement for Sale and Purchase.
It was accordingly agreed that the interim arrangement of lease would continue until the Joint Venture Company (Plaintiff) was in a position to complete the terms of the Sale and Purchase. Accordingly, the payment of $5000.00 per month as loan payments continued. To that extent there was variation of the original agreement."
The defendant says that this contention is supported by all other surrounding circumstances, documentary evidence (including letters and annual accounts) of both the Plaintiff and the Defendant.
The defendant further contends as stated on page 8 of the defendant's written submission:
"That the Plaintiff intended for purposes of its books to have the agreement (Exhibit IV) executed. Mr. Southwick who was the Director of the Plaintiff and the Defendant made it very clear that the agreement was executed on the clear basis that until the payment of $235,000 under Clause 3(2) (a) and $147,342 under Clause 3(2)(b) were made the Ownership of the vessel would not be transferred or pass. That was a collateral agreement between the parties. Mr J Cowen (the Chairman) and the Board of the Plaintiff clearly agreed to this. Mr Southwick had clearly understood this to be the arrangement. That is why he had insisted on the inclusion of the non-merger clause 6 in the agreement which stated:
"6. N0N-MERGER
None of the terms, conditions or any act, matter or thing done under or by virtue of or in connection with this agreement shall operate as a merger of any of the obligations, rights or remedies of the parties in or under this agreement and such obligations, rights and remedies shall at all times continue in full force and effect in accordance with their terms." (emphasis added)
Accordingly, it was collaterally agreed that the Ownership (and possession) of the vessel would remain with the Defendant and the Plaintiff will continue with the $5000.00 per month lease payments until the Plaintiff was in a financial position to pay the amounts referred to in clause 3(2)(a) and (b).
This must be so. The Defendant, or rather Mr Southwick, would not have been that naive to allow the Plaintiff to have ownership and possession of the vessel, to take all the earnings and benefit from the vessel, and yet not having been paid any amount except $5000.00 per month which was much less than the earnings from the vessel."
The defendant submits that the above contention is supported fully by the Financial Statements of the Plaintiff Company (exhibit I) in schedule 3/5 under the caption "Subsequent Events", similarly under schedule 3/4 paragraph 6, of the 1990 Financial Statement (exhibit 2).
The defendant argues (p.10 of the said submission):
"However, the agreement of the sale of the Sunbird was entered into on 25th August, 1989. If the intention was, as alleged by the Plaintiff, that the ownership was to pass on the execution of the agreement, then surely a similar entry would have been made pertaining to Sunbird that it is yet to be registered. That clearly supports the Defendant's assertion that it was never intended that upon the signing of the agreement the ownership was to pass to the Plaintiff only upon payments of the sums payable under Clause 3(2)(a) and (b) was that to happen. However, in the meantime the Defendant agreed that the Plaintiff keep all the income from the boat but paying the Defendant $5000 per month as rental. Consequently, for its account purposes the Plaintiff entered its book as if the transaction had been completed. Accordingly, in the Accounts of even 1990 there was a rider in the Accounts."
The defendant says with reference to Exhibits I, J, K that the ownership in the vessel did not pass to the Plaintiff. It says (p.13 of submission):
It is unimaginable for a businessman in his position to have agreed to the transfer of the Ownership of Sunbird to the Plaintiff without payment. This is particularly when bearing in mind his personal house was given as a collateral mortgage with the mortgage over Sunbird to FDB.
Accordingly, again the above letters of the Bank confirm the continual financial difficulties of the Plaintiff that it was not in a financial position to complete the payments referred to in Clause 3(2)(a) and (b) of the Agreement. In fact it is pertinent to note that the payment of $235,000 was to be paid on the date of the execution of the Agreement and the $147,342 to FDB and the refund of instalment payments made by the Defendant since 1st February, 1989 were to be made within 90 days of the execution of the agreement. Yet even after 1 year of the agreement even the FDB payments could not be cleared and even after one year the Plaintiff was in no position to do so.
The Defendant had maintained that it was clearly understood between the parties that the agreement be executed but the ownership was not to be in fact transferred until the payments under clause 3(2)(a) and (b) were made."
The defendant says (p.15 of submission) exhibits "D" (letter dated 10.1.91 from Plaintiff) and "E" (letter dated 15.1.91 from Plaintiff to Mr. Southwick) "clearly put in nutshell the true state of affairs pertaining to the dealing about the Sunbird" thus corroborating the evidence of Southwick "and the stand taken by the defendant throughout".
The defendant submits that the payment of $235,000.00 under clause 3(2)(a) of the agreement had nothing to do with the issue of shares, and if at all already issued to the Defendant Company, were done illegally. The said clause did not intend that the said sum was to be paid by issue of shares, to the contrary it was to be paid in cash on the execution of the agreement.
The defendant summed up its argument thus (p.23 of submission):
"From the evidence and documents, it is very clear that the Plaintiff miserably failed to make all the above payments. Also it was clear that until all the above payments were made the vessel "Sunbird" would merely be leased to the Plaintiff and this is precisely what was done. It is significantly clear that the $5000.00 per month payment made was the same as the Defendant was making to FDB before and this is shown in his accounts. Also the Plaintiff was to pay the FDB payment of $147,342 in 90 days but it only paid $5000.00 per month. This clearly shows that it was under the lease arrangement and the agreement was executed not to complete and record the sale as such but for other purposes as discussed above."
The Plaintiff's submissions
In response to the Defendant's submission, the Plaintiff says that it does not admit any of the contentions "whether they are contentions of "common ground" or "otherwise".
It says that the P's claim to title to the vessel is brought under a formal agreement whose authenticity, date and due execution are all admitted. The Plaintiff's damages claim is based on the wrongful re-taking by D of possession of the vessel in March 1992.
In answer to the D's contentions, the P says that the allegations "carry the same insurmountable problem for the Defendant, namely that the Defendant's knowledge of them would have raised in the Defendant the duty of action as the Plaintiff's manager."
The Plaintiff further argues (p.2 of submission):-
"Had the allegations been true, they would have been known to the Defendant. Since the Defendant was the Plaintiff's manager, that knowledge would have raised an immediate duty in the Defendant to act; at the very least to properly record the allegations and to formally and unmistakably inform the Plaintiff's board of directors of them. That would have been the standard of care required of any manager. What must the standard have been in this case, where it is the manager itself that is the claimant."
The Plaintiff says that there is a situation where the D is "simply not re-acting, or at worst deliberately refraining from action all in flagrant breach of its managerial duties as causing or allowing the P to do nothing about situations of which the D was fully aware".
The Plaintiff says that the doctrine of estoppel arises in this case and Mr. Smith refers the Court to the case of (MERCANTILE BANK v CENTRAL BANK 1938 AC 304).
The Plaintiff argues that (p.3 of submission):-
All the records of the Plaintiff prepared under the Defendant's management (some formally signed by the Defendant's managing director) show that the Sunbird was sold to, possessed by and operated by the Plaintiff. Even if the Defendant believed otherwise, having made the representations by conduct it has, it can not offer evidence to the contrary of the position it endorsed.
None of the records of the Plaintiff prepared under the Defendant's management (some formally signed by the Defendant's managing director) indicate the Sunbird to be leased to the Plaintiff. Even if the Defendant believed otherwise, having made the representations by conduct it has, it can not offer evidence to the contrary of the position it endorsed.
All of the records of the Plaintiff prepared under the Defendant's management (some formally signed by the Defendant's managing director) show that the Plaintiff paid off all except $136.92 of the FDB debt. Even if the Defendant believed otherwise, having made the representations by conduct it has, it can not offer evidence to the contrary of the position it endorsed.
All of both the Plaintiff's records and the Defendant's records show that the Defendant received the $235,000.00 for which it counterclaims. None of the records of either the Plaintiff or the Defendant (both formally signed as correct by the Defendant's managing director) show the debt that must have existed had that not been so.
The learned counsel for the Plaintiff deals with another matter and that concerns the D's allegations regarding "the real essence of the agreement" (2nd paragraph of D's submissions).
He says that Dr. Sahu Khan tries to show that in transfer the agreement between the parties was not what is recorded in the formal agreement. The "extrinsic evidence" rule is inapplicable in this case he says. Mr. Smith says that there has never been any dispute as to the nature of the transaction here, namely, that it was a sale and purchase agreement. He says that what the Defendant is now saying is "that the agreement should not be read as it is written because it does not properly record the agreement between the parties".
He refers the Court to the following passage from the judgment of LORD DENMAN in the leading case of GOSS v NUGENT 1833 5B & Ad. 58, at 64:-
"If there be a contract which has been reduced into writing, verbal evidence is not allowed to be given of what passed between the parties, either before the written instrument was made, or during the time that it was in a state of preparation, so as to add to or subtract from, or in any manner to vary or qualify the written contract."
Mr. Smith submits that it is clear beyond question that the property in the vessel passed to the P on 25 August 1989 in accordance with the terms of clause 5.1 of the Agreement. The D is estopped by the records it kept and its own acts and admissions and that everything the Plaintiff did or did not do was actually done by the D because the D was the P's Manager.
Mr. Smith further submits that there was not a mention of any variation of the Agreement (or of the non-payment of anything except $136.92 which the P admitted) until immediately before the first trial of this action was about to commence on 26 August 1993 when the then counsel for the D applied for leave to file a further amended statement of defence and counterclaim. This was more than 16 months after the action commenced.
Mr. Smith concludes with the following submission (p.11 of submission):-
The Plaintiff says that it is apparent that as the trial loomed, realising that half of Suva could aver that the Plaintiff did get possession of the vessel and that it kept it for 30 months, and realising belatedly that the mere failure by the Plaintiff to pay $136.92 ($136.92 out of a transaction in which it had paid $382,205.08) was going to have no effect on the passing of property clause in the Agreement, the Defendant concluded that it had to choose another defence - notwithstanding that its affidavits too, had already committed it to the obvious truths it had already pleaded.
What is more, it had to be an innovative defence because it -
The explanation the Defendant chose, addressed all those things - however questionably - but what it could not do was to erase the truth that had been stored away before the Defendant had found need of its imagination.
The determination of the issue
(i) Evidence adduced
The decision in this case depends upon my findings on (a) whether there was a variation of the agreement as alleged by the defendant or (b) was it a straight-out agreement to sell the vessel "Sunbird" to the plaintiff.
I have already set out hereabove at considerable length each party's case. I shall now briefly outline the evidence adduced in this case, in the light of which I will determine the issue before me.
For the Plaintiff evidence was given by JOHN GUTHERIE HOOD (W1) a chartered accountant and Manager of Price Waterhouse (Suva Office), KARIM BUKSH (W2) a financial consultant and PATRICK BOYLE (W3) an accountant. Testifying for the Defendant was GRAHAME BRUCE SOUTHWICK.
In so far as it is relevant to the issue before me, HOOD who became Manager of Price Waterhouse on 3 June 1992 and who had nothing to do with the parties prior to his joining, testified, looking at the Financial Statements of the Plaintiff for the period to 30 June 1989 signed by the directors, that P was indebted to D in the sum of $4122; and Account to 30 June 1990 shows the indebtedness as $33,300. He said that there is nothing in the accounts to show that there is any lease expense. Between 1989 and 1990 the P paid Fiji Development Bank the sum of $93,460 leaving a balance of $45000.
The second witness KARIM BUKSH (W2) testified that shareholders in P Company are Competitive Foods of Australia and Wasawasa Fisheries Ltd (D Company). The witness was approached by Cowen (a director of P Co) as consultant to look at certain aspect of P's affairs. There were disputes with Grahame Southwick (Managing Director of P). They also had some difficulties with the vessel. The vessel was taken by the Defendant or G. Southwick in February 1992. G. Southwick was Managing Director of both P & D and he signed the agreement for both the Companies.
He said that in February 1992 the vessel was in possession of P. It was taken back by D in February - March 1992 coinciding with the time when the entire staff of P Co. joined a new Company. The vessel was in an excellent condition then. In June-July 1991 it was fitted with new fishing gears; it was a "general refitting programme". The value of the vessel after refitting would be $180,000 to $200,000. He said that market for leasing at that time in March 1992 was very 'big' and could fetch $5000 to $8000 per month.
In cross-examination he said that he got involved in February-March 1992 into the affairs of P. He agreed that Southwick did say that the vessel belonged to D and that D had not been paid for it; he said that he cannot recall that he said the agreement for sale "was not to be put in place". He also said that the vessel was leased to P and that the $5000 that the P paid was in relation to lease arrangement. Mr. Buksh agreed that under clause 3.2(a) of the agreement $235,000 was to be paid by the Plaintiffs and he said that this was paid by issue of shares and although the agreement does not say that it had to be paid in that manner it can be "cash or kind".
He said that before 1992 he had nothing to do with the vessel. In March 1992 it was under the control of the D. He said he has never been in that vessel but had a look at it from outside. The witness does not know who carried out improvements on the vessel. He said that from records he can say it cost $81,000 to refit the vessel.
In re-examination he said that if the P was in debt he would find 'signs' of that in the accounts. It does not appear in the accounts of 1990 and 1991. The third witness BOYLE who was called to testify in rebuttal was not associated with the Plaintiff before March 1992 when he became a director of the P Company. He is a certified practising accountant. He is aware of the agreement but he said that "no agreement" was made to "vary that agreement". As alleged by Southwick he said that he does not recall having made a statement that the P Company was not the owner of the vessel. He said that he did not tell Andrews (another director who was not called) that the vessel was only leased and that the Agreement to purchase it will be put in abeyance. He said that he had nothing to do with the balance sheets.
For the Defendant GRAHAME BRUCE SOUTHWICK, company director, testified as to how the P company came into being; it was a joint venture with 68% overseas and 32% local content (defendant company).
Mr. Southwick's evidence on the issue was along the lines stated hereabove in the Defendant's submissions. In short, he said, inter alia, the P was to purchase "Sunbird" from D. By arrangement P was to be paid $5000 per month charter fees. In February-March 1989 when the vessel was given to P it was given to it as lessee. P commenced to pay in March 1989 but the agreement (exhibit 4) was not signed until 25 August 1989. The $5000 a month was to be paid direct to FDB on behalf of D. This $5000 was paid from March and continued to be paid after the agreement was signed.
He said that the sum of $235,000 was to be paid on the date of the agreement and $147,342 was to be paid to FDB 60 days following date of agreement but nothing was paid by the Plaintiff.
(ii) Findings
(a) Provisions of Agreement not fully complied with by Plaintiff
In the light of the evidence before me including documentary evidence I make findings of fact as hereunder.
The dealings between the parties were finalized on 25 August, 1989 with the execution of the agreement of even date (exhibit 4).
Subject to what I say hereafter in regard to payment under clause 3.2(a), it is clear from the evidence that the terms of the agreement were not fully complied with by the Plaintiff. I find that the mode of payment of the purchase price of the vessel as required under item 3.2(a) was not met, except to the extent of $5000 per month paid under item 3.2(b) to Westpac to clear the debt of the Defendant.
I therefore disagree with the Plaintiff's assertion that it had paid the amounts required under items 3.2(a) and 3.2(b) of the agreement. In my view, on the evidence and in the circumstances of this case, bearing in mind the Reserve Bank conditions of approval, payment by issue of shares to the value of $235,000 is not payment as intended under item 3.2(a). It had to be in cash and not in the form of shares. I therefore reject the opinion of BUKSH that payment could be made by issue of shares for I find that that was not what was intended nor is there anything in writing or otherwise to show that there was a variation of the agreement in that regard. Hence I find that this sum (under claim 3.2(a)) was not paid by the Plaintiff.
I find that as far as the possession of the vessel is concerned, it was given to the Plaintiff upon the execution of the agreement. There is no dispute about the fact that the Plaintiff had the use of the vessel all along until it was taken away from it in March 1992 for, according to the defendant, for non-compliance with the provisions of the agreement regarding payment of the purchase price referred to in items 3.2(a) and 3.2(b). On this aspect under item 5.1 of the agreement it is stated that "notwithstanding anything contained in this agreement, right title and interest in the Ship and Equipment will pass to the purchaser on the date of this Agreement"; but under item 5.2 of the agreement there is provision as to when the transfer of the vessel was to take place.
The "completion date" is defined in item 1.1 of the agreement to mean "the date upon which the purchaser makes the payment referred to in clause 3.2(b)". A further item 5.2 in the agreement reads that "on the completion date the Vendor will deliver to the Purchaser all duly executed bills of sale, transfers ..." etc "free from encumbrances together with any documents or other evidence of title".
In the light of the above provisions of the agreement I find that because the Plaintiff has complied with the relevant provisions of the agreement under said item 3.2(b), the defendant is required under item 1.1 and 5.2 to execute a transfer of the vessel to the Plaintiff in accordance with item 5.2, although the said sum of $235,000 has not been paid in the manner as required under the agreement. The non-payment of this sum cannot be the fault entirely of the Plaintiff for SOUTHWICK as "common officer" acquiesced in such a situation to continue without taking appropriate steps, for example by a resolution of the companies, to reduce to writing the true situation.
I therefore find that in all the circumstances of this case, subject to what I say hereafter on the alleged variation of the provisions of the agreement, that it was a straightout sale and purchase agreement between the parties (the two companies) with the terms and conditions and mode of payment as set out therein.
(b) Witnesses' Evidence on alleged variation and the law
Dr. Sahu Khan has made a lengthy submission that there was a variation of the agreement as stated by him hereabove.
I have given careful consideration to all the evidence that has been adduced in this regard and also the cases cited by Dr. Sahu Khan in support of his argument.
I am not convinced that there has been a variation as alleged after weighing all the evidence that has been adduced in this case particularly bearing in mind what each of the four witnesses has said on variation and after considering the documentary evidence produced.
This is what the witnesses have said bearing on this aspect.
Mr. Hood said that there is no entry in the Financial Statements regarding any lease to indicate that there was a variation of the agreement.
As for the witness BUKSH (W2), he came very late on the scene to be able to be of much, if any, assistance in this regard. In any case he was merely giving his views and opinions from documentary evidence.
Whereas BOYLE'S (W3's) evidence was in complete contradiction to what SOUTHWICK (the only witness for the defendant) said in regard to this matter. BOYLE does not know of any variation of the agreement.
In dealing with the aspect of variation it is SOUTHWICK'S evidence which has given me a lot of concern. He plays a double or a dual role. He is director in both the companies. He signed the agreement for both Plaintiff and Defendant. In his situation he can switch over from one company to the other. He can lodge whatever balance sheet he wishes incorporating whatever material suits him and then say that there was a variation of the terms of the agreement. According to my understanding of the balance sheets (exhibits 1, 2 and 3) of the Plaintiff, they do not reveal any variation. If there was it should have been reflected in them. A lot was read into these balance sheets by the Defendant but I do not find that the various items referred to therein during the hearing have any relevance or effect on the agreement to establish that there was a variation of the nature alleged by the defendant.
As director of both the companies SOUTHWICK was fully aware of their financial position. In fact he was the key figure in the day to day operation of the companies.
What was preventing SOUTHWICK from reducing the alleged variation to writing for after all it was such an important variation if the agreement was at all varied. It goes to the very root of the agreement. Mr. Southwick has by-passed the conditions imposed by the Reserve Bank of Fiji in relation to bringing into the country the funds involved in a joint venture with foreign partners. If the financial position of the Plaintiff company was as bad as it was made out by Southwick then he should have set in motion ways and means of varying the agreement in writing as the variation that he alleges is quite substantial which in effect changes the whole character of the agreement particularly when it concerns the mode of payment of the purchase price. On top of that payment continued for thirty months without any indication as to what was to happen to the original agreement. There ought to have been a proper resolution of the companies (P & D) to give weight to variation. In this situation it is difficult to swallow Southwick's argument on variation.
The only thing that has happened here is that the sum of $5000 per month for a period of about 30 months was paid to Westpac, which I find was for the purpose of reducing the Defendant's debt to the Bank, and this payment was to be credited towards the purchase price. I reject the defendant's argument altogether that this money was for the lease of the vessel to Plaintiff. I find that this payment was made for the purpose I have found with the full concurrence of SOUTHWICK who was at the helm of both the companies. SOUTHWICK agrees that the amount payable under 3.2(a) was to come from offshore and for which approval was given by the Reserve Bank did not eventuate in full.
I find that SOUTHWICK'S assertion regarding variation was an after-thought. He alone knew of the alleged variation because of his position whereas BOYLE as director had no knowledge of it. I prefer to accept the evidence of BOYLE in this regard to that of SOUTHWICK. As Mr. Smith has said, everything that went on in regard to the two companies was well within SOUTHWICK'S knowledge and he could manipulate matters as he wished. This was a case where knowledge of one company is imputed to another company through the medium of a common officer SOUTHWICK. I quote from the judgment of COLMAN J in CREDIT SUISSE v BOROUGH COUNCIL OF ALLERDALE 1995 LL.L.R Vol 1 p.315 at p.361 on the question of where to draw the line in this regard:
"Referring to the decision of the Court of Appeal in In re Marseilles Extension Railway Co., L.R. 7 Ch. 161, he continued:
Where is the line to be drawn, or what is the test to be applied in order to say whether or not in each case the knowledge of the common officer is the knowledge of each company employing him? It seems to me that, broadly, the Lords Justices do draw the line thus, that the knowledge which has been acquired by the officer of one company will not be imputed to the other company, unless the common officer had some duty imposed upon him to communicate that knowledge to the other company, and had some duty imposed on him by the company which is alleged to be affected by the notice to receive the notice."
In the present case SOUTHWICK as a "common officer" failed to communicate to the Plaintiff the real situation regarding the agreement and failed in his duty to take appropriate steps to rectify the agreement in an appropriate manner by reducing the alleged variation to writing rather than continuing to accept the payment of $5000 per month for so long without any indication of the fate of the provisions of the agreement particularly as to the mode of payment of the purchase price. As it was the purchase price would never have been paid and the agreement would have remained indefinitely in name only.
Why would the Plaintiff want to continue paying for 30 months the $5000 per month indefinitely without becoming the ultimate owner of the vessel which was the intention behind the agreement. The defendant extorted the payment under the guise that the vessel was leased immediately following the date of the execution of the lease. Because the financial position of the Plaintiff company was weak as stated by SOUTHWICK, I fail to understand why a lease agreement was not entered into in the first place rather than entering into the agreement for sale and purchase the subject matter of the action.
In all the circumstances of this case I find that the evidence is not strong enough to convince me that there was this alleged variation at all. Hence on a balance of probabilities it has not been established that there was a variation. Dr. Sahu Khan has stated that the defendant gave parol evidence to show what the real intention was and what was the true nature of the written transaction.
In this case there is no doubt about the "true nature of the transaction". It was a sale and purchase agreement of the vessel. Here I cannot allow evidence that the agreement did not correctly express the intention of the parties or that the defendant did not understand it. As has been said by JAMES L.J in Ex Parte MORGAN In Re SIMPSON C.A. 1875-6 2 Ch.D p.72 at 84:
"No doubt there is an equity, under some circumstances, to set aside a deed. There is equity to rectify a deed. But it must be judicially set aside or rectified, and, unless and until that is done, it is a violation of first principle to allow evidence as to the meaning and intention of parties, when there is an actual agreement in writing, the record of that meaning and intention."
JAMES L.J goes on to say:
"It is, however, quite possible that the recital in the deed may be erroneous as to the previous arrangement. It is quite possible that in fact after entering into such an agreement the parties may have found it not workable, and have superseded it by another agreement, either expressed or to be inferred from course of dealing. They may have entered into an agreement to give up the relation of principal and agent, and to become simply vendor and purchaser, as found by the verdict of the jury. But it was the duty of the Judge to have told the jury that it required the strongest evidence to support the contention that the recital was not true, and that it required like evidence to show that there was such a substituted agreement, and what that agreement was." (underlining mine for emphasis)
In this case I am not satisfied, applying the civil standard of proof, with the defendant's contention in regard to the true intention and consideration. As stated in the above-quoted passage, that it requires the "strongest evidence to support" such a contention that there was a variation of the agreement of the nature alleged as hereabove or that there was "such a substituted agreement, and what the agreement was". This requirement has not been fulfilled in this case.
In the outcome, for the above reasons I find that the defendant has wrongfully rescinded the agreement and has unlawfully detained the vessel in the absence of any provision in the agreement as to what is to happen with the vessel in default of payment of the purchase price. Since payment was made, as I have found, under item 3.2(a) of the agreement the Plaintiff became entitled to transfer of the vessel under items 1.1 and 5.2 of the agreement.
For the above reasons the Plaintiff substantially succeeds in its claim in this action.
Having found as above, I find that the defendant has failed to prove its Counterclaim. It is therefore dismissed with costs which is to be taxed unless agreed.
In the outcome there will therefore be judgment for the Plaintiff against the Defendant as follows and it is ordered as hereunder:
(a) That upon payment by the Plaintiff to the Defendant within six weeks from this judgment the sum of $235,000 which was required to be paid by the Plaintiff under item 3.2(a) of the Agreement dated 25 August 1989 the possession of the vessel "Sunbird" and its immediate transfer in the name of the Plaintiff is ordered AND if default is made in the said payment the agreement shall be deemed to have been rescinded and the Defendant shall do what it likes with the vessel.
(b) That upon payment of the said sum of $235,000 the Defendant do give credit to the Plaintiff for the sum of $5000 per month paid to Fiji Development Bank for 30 months or whatever sum has been paid in this manner towards the purchase price of the said vessel to fulfil the requirements of item 3.2(b) of the said agreement.
(c) That the Plaintiff is not entitled to damages for the alleged unlawful detention as the Plaintiff had itself failed to comply with the payment of $235,000 under item 3.2(a) of the agreement whilst it made full use of the vessel by doing business with it and not accounting to the defendant or anyone else for the proceeds from the said business.
(d) The defendants are ordered to pay the costs of this action which is to be taxed if not agreed.
D. Pathik
Judge
At Suva
25 March 1996
HBG0004J.92S
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