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High Court of Fiji |
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 &
MINISTER FOR JUSTICE
2. FIJI TRADE AND INVESTMENT BOARD
Defendants
JUDGMENT
(ASSESSMENT OF DAMAGES)
Counsel for the Plaintiff : Mr. G. P. Shankar
Counsel for the Defendants: Mr. Daniel Singh
(i)
INDEX
Pages
Introduction and background to case 2-5
The Plaintiff's claims 6-10
(i) Introduction and background to project
(ii) The total amount claimed
(iii) Exhibits tendered
(iv) Summary of heads of damages and amounts claimed
The Defendants' submissions 10-17
(a) The principles
(b) Date of assessment of damages
(c) Interest on damages
(d) Economic loss
(e) Mitigation of loss
(f) Cost of factory
(g) NBF loan
(h) FDB loan
(i) Caltex Singapore
(j) Advances from Associate Companies
(k) Management time
(l) Costs
(m) Conclusion
Determination of the issues 17-70
A. The General Principles
(i) Measure of damages for tort 20-23
(ii) Remoteness of damage 23-27
(iii) Mitigation of loss 27-28
(iv) Interest on damages 29-31
(ii)
B. Consideration of heads of claim 31-63
and determination of damages
(a) Factory building 32-38
(b) National Bank of Fiji Loan (NBF) 38-41
(c) Fiji Development Bank Loan (FDB) 41-43
(d) Amount payable to Caltex Singapore 43-44
(e) Advances from associate companies 44-47
(f) Management time 47-49
(g) (a) General damages - Loss of
business opportunity, loss of
profit/economic loss
(i) The principles 49-54
(ii) Loss of profit compensable 54-60
(iii) Quantum of economic loss 60-62
(b) Rental of factory building 62-63
(h) Legal and other costs. 63-66
(i) Legal costs
(ii) Other costs
C. Conclusion, summary of amount
of awards and order 67-70
JUDGMENT
(Assessment of Damages)
Introduction and background to case
This is the plaintiff's application for assessment of damages further to judgment herein delivered by me in its favour on 14 March 1996. An appeal to Court of Appeal by the defendants against the said judgment was on 29 November 1996 dismissed but the plaintiff succeeded in its cross-appeal which the Court 'allowed to the extent specified, namely damages up to 30 April 1993, and damages are to be assessed accordingly'.
On a further Appeal on 15 May 1997 the Full Court of Appeal had on 9 April 1997 confirmed refusal by Hon. Mr. Justice Tikaram P of a stay of assessment of damages by the High Court.
The last of the submissions on the assessment of damages as ordered was filed in the Registry of the High Court on 25 November 1998. This was a rather complicated, voluminous and time-consuming matter on which to write a judgment.
Before I deal with the evidence before me on the assessment, in order to give a clear picture of what is involved, I set out very briefly what my findings were in so far as they are relevant to the assessment as contained in my said judgment and in the judgment of the Court of Appeal.
The plaintiff's claims are set out in its Statement of Claim and are stated in detail in my said judgment at pages 2 to 8. I therefore do not wish to reiterate them here suffice it to say that this action was instituted against the defendants because of the withdrawal by them of protection which they had granted the plaintiff for the establishment of a 'lube oil blending factory' in Fiji. I had found inter alia on the defendants' own witness's evidence and on other evidence that the protection given by Government was for oil 'blending' and not 'recycling' despite arguments to the contrary by the defendants. Even the Report under the caption "Fiji Establishment of Used Lubricating Oil Refining Plant" indicated that there was a scarcity of waste oil available for recycling and it recommended oil blending.
In the judgment I stated inter alia as follows:
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 Isimeli 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.
Some of the letters to which reference was made by Mr. Shankar (counsel for the plaintiff) reveal as follows (as contained on p18 of the said judgment):
(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 Plaintiff 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)
I had rejected the defendants' arguments in regard to the protection and found that "it is quite clear from the evidence before me that it was meant to be a hundred per cent protection and it was so understood by Ratu William, the Plaintiff and also the Defendants' witness Ratu Isoa Gavidi".
On the strength of the approval and protection the plaintiff proceeded to have the factory building (which was already in existence with certain additions and alterations done later) ready for the project, purchase and install plant and equipment and also purchase raw material which the plaintiff says are to this day stored in the factory building.
The plant was ready for 'commissioning' but there was delay because it was not viable through lack of full protection when the second defendant (D2) reduced the protection to 50% for 3 years.
I found that the plaintiff had substantially made out its claim for the 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 (gazetted on 4 October 1989) and in the meantime the plaintiff incurred expenditure in reliance upon the protection.
On the said Legal Notice of 4.10.89 the Appeal Court (at p5) said:
Because of subsequent events in Fiji, a Legal Notice implementing this protection was not gazetted until 4.10.89; it consisted of an amendment to the 4th Schedule of the Customs (Prohibited Imports and Exports) Regulations 1986 by adding an item comprising specified lubricants and oils. That schedule prohibited the importation of goods except in accordance with the terms of licence granted by the Permanent Secretary for Economic Development Planning and Tourism. A perusal of the listed items indicates that they are aimed at the protection of local industry. This Schedule does not automatically afford total protection, the degree being in the discretion of the Secretary, depending on the level of competing imports he or she may see fit to allow into Fiji from time to time.
Ratu William could not point to a specific undertaking for total protection, stating only that he understood this would be the case when they started production because this is what had happened with some other industries where the degree of protection was not specified, and he mentioned cement and match factories. After the Legal Notice was gazetted in 1989, steps were taken to complete an oil-blending factory which Ratu William says was finished at the end of 1992, and after some further delays was ready to go into production.
I concluded that the defendants are liable in damages to the plaintiff upto 18 June 1992 but the Appeal Court extended it to 30 April 1993.
The Plaintiff's claims
(i) Introduction and background to project
A detailed examination of the evidence on the specific items of claim of the Plaintiff has to be carried out in assessing damages. But before I direct my attention to particular items for compensation I outline very briefly what its claims are and the amounts claimed based on what it has stated in its Statement of Claim (Exhibit P1 pages 1-4). Its legal submissions which are contained in its written submissions of 3 November 1997 (59 pages), 13 July 1998 (35 pages) and its Reply to Defendants' submission of 24 November 1998 (35 pages) will be dealt with by me hereafter when I deal with each item of claim separately in the light of arguments put forward by Mr. D. Singh the learned counsel for the defendants as hereafter appearing.
Before presenting its arguments in support of its various claims in assessing damages, Mr. G.P. Shankar gave an account of the background to the commencement of the project and its progress upto the time when the factory was ready to be commissioned but did not commence production because of the reduction of the protection to 50% for 3 years.
This background to the project will not be out of place if I reproduced it here (from p2 of exhibit P1); there appears to be no dispute as to its contents. It is as follows:
PFL was the brain child of the late Mr K R Latchan and was a project that was developed in the early 1980s.
The scheme involved the blending of imported base oil and local used oils with additives to produce lubricating oil as a finished product. Initial research was carried out with AMPOL Limited of Sydney. This involved a visit to Sydney to inspect facilities there and visits to Fiji to determine the feasibility of establishing the project in Fiji. Assistance was sought from the Commonwealth Centre of Industrial Development in Brussels and a study that was carried out recommended the establishment of a small scale industry.
Technical assistance to establish the project was sought from ESSO of Singapore following Government's development of a relationship with ESSO through FINAPECO. PFL took the project to a stage where the plant was installed and ready for commissioning. This in itself involved several visits to Fiji by ESSO, project design, purchase of plant, installation of plant by Sambawang Engineering of Singapore, recruitment of personnel, training including product familiarisation at Singapore and the whole range of activities involved in bringing the project to a point where it was ready for commercial production.
Due to PFL's own frustrations with Government on protection ESSO withdrew from the project. PFL then entered into an arrangement with CALTEX of Singapore.
With CALTEX'S assistance, PFL formulated a marketing plan that involved the import and distribution of finished products pending actual production from the plant. Base oil and additives were later imported to commence commercial production.
Progress on the project ceased due to an injunction by the Oil Companies, Government's withdrawal of 100% protection and PFL's view that this project was no longer viable.
(ii) The amount claimed
The Plaintiff claims the total sum of $23,664,298.00 (twenty-three million six hundred and sixty-four thousand two hundred ninety-eight dollars). How this amount is made up is as stated hereafter.
(iii)Exhibits tendered
In support of its claims the Plaintiff has tendered to Court two volumes of Statement of Claim (spiral binding) being Exhibits P1 & P2 comprising of supporting documents with facts and figures.
Other exhibits tendered were:
(a) letter dated 22 February 1992 from NBF to Plaintiff in the matter of Application for Facility of $600,000 - Exhibit P3 (A-G)
(b) Accountants Neil Underhill's (for defendants) and Gardiner Whiteside's (for plaintiff) 'Review of Statement of Claim' dated 5 November 1997 - Exhibit P4
(c) Photocopy Crown Lease No. 5385 - on which the factory building is erected - Exhibit P5
(d) Details regarding 'Associate Company Advances' - Schedule of Payment - K R Latchans Limited - Exhibit P6 (by consent)
(iv) Summary of heads of damages and amounts claimed (as stated in the Statement of Claim):
(a) Costs incurred to 1987 on factory building
inclusive of purchase of land (see FTIB
letter of 3 November 1987 and page 19 of
Judgment) plus interest to 31st July
1997 at 13.5% p.a. 4,435,446
(b) National Bank of Fiji Loan and Overdraft
facilities for purchase of stock,
laboratory equipment and other costs
incurred to prepare the plant for
commercial production
Balance as at 31 May 1997 (interest
continues to be incurred at the rate of
approximately $18000 per month) 1,478,914
(c) Fiji Development Bank loan used fund
purchase of plant and equipment plus
interest charges thereon
Balance as at 30 June 1996 (interest on
the account has been frozen) 857,903
(d) Amount outstanding to Caltex Singapore
Pte Limited
US$94824 F$134,425
S$42000 F$42,502 176,927
(e) Advances by K R Latchans Limited as
an associate Company to the
establishment costs of PFL
Interest @ 13.5% p.a. (1992-1997) 365,103
(f) Management time incurred over a 10 year
period in attendance to project
details 10 years @ $150,000 p.a. 1,500,000
(g) Legal costs and other expenses 350,000
9,164,293
(h) General damages: Loss of Business Opportunity (as stated in the Statement of Claim)
The business opportunity that the lube oil blending project represented for PFL was summarised in feasibility studies that were carried out in respect of the project on behalf of the company.
Income and expenditure determined in these studies formed the basis of the Company's submissions to lending organisations for funding.
These studies and submissions determined that an average profit of approximately $1,450,000 p.a. could be earned in the first 5 years based on 100% protection being granted to this project
by Government.
The loss of business opportunity to PFL is irreplaceable and can not be quantified as a business once established would represent a source of income to time indefinite. As a measure of some means of compensation however, the business opportunity lost to PFL has been quantified at 10 years average profits foregone by the Company; 10 years @ an average
of $1,450,000 per annum. $14,500,000
The Defendants' submissions
(a) The Principles
The defendants accept the principle that for assessment of damages in tort the Plaintiff is entitled to be put, in a financial sense, in the position as if the tort had not been committed.
Mr. D. Singh for the defendants submits that it is for the plaintiff to prove that the defendants' actions had caused it the loss of a chance that was "substantial" and not merely "speculative" for an entitlement to damages for that loss.
He referred the Court to BEOCO LTD v ALFA LAVAL CO LTD & ANOR. [1993] EWCA Civ 22; (1994) 4 All ER 464 where the Court of Appeal held that:-
"The principles for assessing the measure of damages for hypothetical loss in tort were equally applicable where the claim arose out of a breach of contract". (emphasis added)
He said that in BEOCO (supra) the defendant was not liable for hypothetical damages for loss of profit on lost production. Similarly, he said that in the instant case the 'loss of chance' or 'commercial opportunity' for damages were 'too remote'. Referring to CANADIAN NATIONAL RAILWAY CO v NORSK PACIFIC STEAMSHIP CO (1992) 91 D.L.R. (4th) 289, Supreme Court of Canada he said, that there it was held that 'liability for economic loss will not be imposed in tort cases if there is no connection or proximity between the defendants' negligent conduct and the plaintiff's loss, or a reasonable foreseeability that the plaintiff would suffer harm as a result of the acts or omissions of the defendant'.
Mr. Singh argues that in this case it was not reasonably foreseeable that the defendants' conduct could cause the plaintiff to suffer a loss above and beyond the actual financial loss sustained. He says that 'it is matter of policy that the plaintiff should be denied a right to recover from the defendants'. In this case he says that 'what was lost was an opportunity, rather than a sum of money'.
Mr. Singh says that the 'Government did not force the Plaintiff to change the planned operations from a recycling process to a blending process, the Plaintiffs did this themselves'. He argues that: 'it is very clear that the Government agreed to provide 100% protection in return for the country saving on imported lube oils. Once this saving disappeared as a result of the change to the Company's plans, the Government was no longer obligated to the 100% protection. It was the Plaintiff Company which changed plans, not the Government'.
(b) Date of assessment of damages
Mr. Singh submitted that damages should only be awarded upto 30 April 1993 for at page 25 of the Judgment the Court of Appeal held:
"Accordingly, adopting Pathik J's approach, we would substitute 30th April, 1993 as the end of the period up to which the appellants should be liable for damages and damages are to be assessed accordingly".
(c) Interest on damages
The claim for interest is opposed by Mr. Singh for the reason that it was not pleaded and that the pleadings have closed; also Order 18 r.14 of The High Court Rules 1988 requires a claim for interest to be specifically pleaded. (WARD v CHIEF CONSTABLE FOR AVON AND SOMERSET [(1985) 129, SJ, 537] USHA KIRAN v THE ATTORNEY-GENERAL OF FIJI (Civ. App. 25/85 FCA - delivered 23.3.90), ALUSIO DAINO v ATTORNEY-GENERAL C.A.No. 515/96, TACIRUA TRANSPORT COMPANY LIMITED v VIREN CHAND, FCA Civ. App. NO. 33/94 (Judgment 2.3.95), THE ATTORNEY-GENERAL v WAISALE NAICEGULEVU, (FCA 22/89).
Mr. Singh submits that the Law Reform (Miscellaneous Provisions)(Death and Interest) Act Cap 27 does not apply to this case as the Act 'applies only to Death, Personal Injuries and Estate related actions'.
(d) Economic Loss
On the question of recovery for 'economic loss' Mr. Singh has referred the Court to D'AMATO & ANOR v BADGER & ANOR (1996) 3 LRC 396.
In this case he says that economic loss should not be allowed on the grounds that:
(e) Mitigation of Loss
On this aspect Mr. Singh submits that there is no justifiable reason why the plaintiff did not mitigate its loss. He said that the fact that the property was 'tied down and bound by encumbrances and charges is not a sufficient exercise not to mitigate loss'. He suggested that the Plaintiff should have sold the property when it became clear that the 'State could not and would not backup the project'. Instead the plaintiff sat on the loss and let it accumulate.
(f) Cost of factory
Mr. Singh argues that the Plaintiff is relying on FTIB's letter in regard to the value of the building which is $1,300,000.00. He said that FTIB simply relied on Plaintiff's directors' statements in this regard although this information was 'deliberately misleading and false'. Even the Plaintiff's witness MR. WHITESIDE gave evidence that the building in fact cost in the vicinity of $424,873. The Directors had re-valued the building to $955,127.00 to increase the value in the company's accounts. The building was funded by loans from FNPF. As at 30 June 1996 the interest owing to FNPF was $1,088,125.00.
The Plaintiff claims $3,135,446.00 in interest which it says is a return on the building. This Mr. Singh submits is "fundamentally incorrect". The return on fixed assets comes from the profits which that fixed asset generates. This return is claimed in the claim for Loss of Profits/Opportunity. It is fundamentally incorrect to claim this twice, by including an interest claim on the building.
He further submits that the building/factory was originally built as a bus depot and continues to be used as such. The Plaintiff derives an economic benefit from this and no allowance has been made for this fact. He said that the Plaintiff has misled the Court when in its submissions (pages 23 & 28) it stated that the "Plaintiff was induced to acquire land and building to carry out factory operations". The evidence reveals that the 'complete building' was in existence since 1982, that is, well before the venture to blend oil was even dreamt of.
(g) NBF Loan
On the aspect of 'NBF Loan' Mr. Singh submits that the loan was used primarily to purchase plant and equipment for a 'blending' operation, associated initial inventory, together with "other costs" of $226,486 (which said sum has never been substantiated). He said that the claim also includes interest of $676,495.00. He submits that the 'interest component is included in the claim for loss of profits, as a return on fixed assets'.
(h) FDB Loan
On 'Fiji Development Loan' ("FDB Loan") claim of $869,903.00, Mr. Singh submits that the loan was used to pay for the balance of Blending Plant and equipment purchased from Singapore. Interest of $361,277.00 is also claimed.
He argues that bearing in mind the 'thin capitalisation of the Plaintiff company (the sum of $100,000.00) the interest component should not be included for the 'return on fixed assets is already included in the Loss of Profits claim'.
(i) Caltex Singapore
Mr. Singh submits that this claim of Caltex Singapore of $176,927.00 is for inventory and laboratory equipment purchased from Caltex Singapore for the Blending Operation. He argues that this has not been offset by returning the purchases to Caltex.
(j) Advances From Associate Companies
The learned counsel submits that the claim for 'advances from associate companies' amounting to $365,103.00 should be disallowed as it has not been offset by advances to associate companies.
(k) Management Time
The Plaintiff has claimed for 'management time' being based on the time spent by 4 Directors and the accountant Mr. Whiteside (who admitted to Court that he is not a director).
Each Director and the accountant is alleged to have spent an equal time in contributing to the project. This Mr. Singh submits is difficult to accept and that there is nothing in the Company's (Plaintiff's) financial statements to show that this amount has been accrued as cost.
Mr. Singh further submits that the "compensation to the Directors should not be allowed as this was their share of risk. In addition, it was the Directors, and not the Government, who changed the planned operations from a recycling plant to a blending plant".
(l) Costs
On the claim for costs on indemnity basis, Mr. Singh submits that this should not be allowed as it was not pleaded.
(m) Conclusion
On the Plaintiff's claim for 'special damages', Mr. Singh says that this claim totals $9,164,293 (Ex.PI-page3) which is made up of inventory, plant and equipment of $2,469,491, Management Time & Legal and other costs of $2,336,895 and interest of $4,357,907.
He submits that the said sum of $2,469,491 was funded with only $100,000 in Shareholders' Funds, therefore the 'thin capitalisation' of the Company must be considered. In addition, he says, 'the interest component of $4,357,907 has been claimed as a return on the fixed assets, that were purchased'. He reiterates that 'this is fundamentally incorrect, it is also claimed in the Loss of Profits claim'.
Counsel concludes by stating that in summary the Plaintiff is entitled to damages for the following items (pages 48-49 of defendants' submission):-
DETERMINATION OF THE ISSUES
In this hearing, evidence for the plaintiff was given by GARDINER HENRY WHITESIDE (PW1) ("Mr. Whiteside") chartered accountant and ROHIT RAM LATCHAN (PW2) ("Mr. Latchan") company director; and for the defendants evidence was given by NEIL PETER UNDERHILL (DWI) ("Mr. Underhill") a chartered accountant and KERRY FOSTER STEWART (DW2) ("Mr. Stewart") a valuer.
In dealing with the claims of the plaintiff, I propose to consider the various heads of claim referred to hereabove in the same order. Although I have already outlined the defendants' arguments, I would deal with the plaintiff's submissions under each of the said claims.
In a case of this nature in assessing damages certain principles of law are involved. What damages the plaintiff will be entitled to will depend on the law applicable on the facts and circumstances of this case.
It is for the plaintiff to prove its case. It must satisfy the Court both as to the fact of damage and its quantum. The loss here has been substantial and assessment may be difficult because of uncertainty in view of the nature of the damage but that would be no reason for awarding no damages or merely nominal damages (McGregor on Damages 16th Ed. 1997 p.236).
It is clear from the judgments herein that the plaintiff is entitled to damages arising, as it has been established and found as a fact by the court, out of the Government's withdrawal of the full protection granted the plaintiff and substituting it with a 50% protection for three years. The plaintiff no doubt will be entitled to damages flowing from such breach upto the period determined by Court of Appeal, namely, 30 April 1993.
By way of introduction in the way I propose to deal with the assessment of damages under the various heads, I think it important that I state the legal principles involved in such assessment bearing in mind the facts and circumstances of this case. I find that the principles which are as follows have been summed up very well by McGregor (supra) at 236 and 360 and I adopt them here for my purposes:
"As Vaughan Williams L.J. put it in Chaplin v. Hicks, (1911) 2 K.B. 788 C.A. the leading case on the issue of certainty: "The fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages." Indeed if absolute certainty were required as to the precise amount of loss that the plaintiff had suffered, no damages would be recovered at all in the great number of cases. This is particularly true since so much of damages claimed are in respect of prospective, and therefore necessarily contingent, loss. Of course, as Devlin J, said in Biggin v. Permanite:[1951] 1 K.B. 422 at 438. "Where precise evidence is obtainable, the court naturally expects to have it [but] where it is not, the court must do the best it can." Generally, therefore, although it remains true to say that "difficulty of proof does not dispense with the necessity of proof", (Aerial Advertising Co. v. Batchelors Peas [1938] 2 All E.R. 788 at 796, per Atkinson J.), the standard demanded can seldom be that of certainty. Even if it is said that the damage must be proved with reasonable certainty, the word "reasonable" is really the controlling one, and the standard of proof only demands evidence from which the existence of damage can be reasonably inferred and which provides adequate data for calculating its amount. The clearest statement of the positions is that of Bowen L.J. in Ratcliffe v. Evans [1892] UKLawRpKQB 131; [1892] 2 Q.B. 524 at 532-533, C.A.) where he said:
"In all actions accordingly on the case where the damage actually done is the gist of the action, the character of the acts themselves which produce the damage, and the circumstances under which these acts are done, must regulate the degree of certainty and particularity with which the damage done ought to be stated and proved. As much certainty and particularity must be insisted on, both in pleading and to the nature of the acts themselves by which the damage is done. To insist upon less would be to relax old and intelligible principles. To insist upon more would be the vainest pedantry."
A. THE GENERAL PRINCIPLES
(i) Measure of damages for tort
I think I ought to set out the general principles involved in determining damages under the various heads.
Mr. Shankar has given a comprehensive and lengthy account of the principles and cited a number of authorities in his written submissions which I found to be of great assistance. Likewise Mr. Singh has referred to some useful cases. I have given due consideration to their submissions. It has not been an easy task to wade through so much evidence and to read the cases, collate all the papers and accounting details with enormous figures in what to my mind is a difficult and a rare commercial case which involved assessment of damages particularly bearing in mind the magnitude of the plaintiff's claim of over $23,000,000.00.
For the breach in this case the defendants will only be liable to pay damages if their conduct has caused damage and that damage is not too remote. Here, as already stated in some of the claims which the plaintiff is making, it has proved on the balance of probabilities that the defendants' breach of duty has resulted in damage to the plaintiff.
Damages are classified in several ways, inter alia, 'real damages', 'general' and 'special'. These are the types of damages that are being claimed in this case. The plaintiff must prove actual damage and that is the gist of the action here. It will be necessary to determine what is the measure of damages. Damages in English law 'are compensatory, whether in contract or in tort'. Its function therefore is to 'put the person whose right has been invaded in the same position as if it had been respected' (THE ALBAZERO [1977] AC 774, 841). It is well settled, at least in the economic torts, that the basic question is, what has the plaintiff lost, not what can the defendant pay' (GENERAL TYRE and RUBBER CO. LTD v FIRESTONE TYRE CO. LTD [1975] 1 W.L.R. 819, 824)(quoting from SALMOND & HEUSTON on THE LAW OF TORTS, 20th Ed 1992).
Here the plaintiff, has pleaded both 'special' and 'general' damages. General damage is that kind of damage which the law "presumes to follow from the wrong complained of and which, therefore, would not be expressly set out in the plaintiff's pleadings. Special damage on the other hand, is damage of such a kind that will not be presumed by the law and it must therefore be expressly alleged in those pleadings so that the defendant may have due notice of the nature of the claim." (Salmond & Heuston ibid at 517).
On the principles regarding measure of damages for tort I refer to MASON J in L. SHADDOCK & ASSOCIATES PROPRIETARY LIMITED & ANOR. and THE COUNCIL OF THE CITY OF PARRAMATTA (1981-1982) 130 CLR 225 at 225 when he said:
"The measure of recoverable damages for negligent mis-statement is amount of money necessary to restore the plaintiff to the position he was in before the statement, subject to the loss being foreseeable".
But by contrast the measure of damages for breach of contract is different:
"where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation with respect to damages, as if the contract had been performed" (per PARKE B in ROBINSON v HARMAN [1848] EngR 135; (1848) 1 Ex 850)
Further, on this aspect enunciating the same principle I refer to the following passage from the judgment of GIBBS J and WILSON J in TODOROVIC v WALLER [1981] HCA 72; 1981 150 CLR 402 at 412:
"Certain fundamental principles are so well established that it is unnecessary to cite authority in support of them. In the first place, a plaintiff who has been injured by the negligence of the Defendant should be awarded such a sum of money as will, as nearly as possible, put him in the same position as if he had not sustained the injuries. Secondly damages for one cause of action must be recovered once and forever, and (in the absence of statutory exception) must be awarded as a lump sum; ..... the burden lies on the Plaintiff to prove the injury or loss for which he seeks damages".
And in both tort and contract the loss of damage must not be too remote.
Also in ADMIRALTY COMMISSIONERS v S.S. SUSQUEHANA 1926 AC 658 at 661 LORD DUNEDIN said:
"the common law says that damages due either for breach of contract or for tort are damages which, so far as money can compensate, will give the injured party reparation for the wrongful acts, and for all natural and direct consequences of the wrongful act."
In the case before me the Plaintiff is claiming losses arising as a direct consequence of the wrongful acts on the part of the defendants. The plaintiff has suffered 'economic loss' and in this regard LORD WILBERFORCE in a patents case in GENERAL TIRE & RUBBER CO (supra) at 824 said:
"As in the case of any other tort (leaving aside cases where exemplary damages can be given) the object of damages is to compensate for loss of injury. The general rule at any rate in relation to "economic" torts is that measure of damages is to be, so far as possible, that sum of money which will put the injured party in the same position as he would have been in if he had not sustained the wrong." (Livingstone v Rawyards Coal Co [1880] UKHL 3; (1880) 5 App. Cas. 25, per Lord Blackburn, at p.39).
He went on to say at 824:
"The measure of damages will then normally be the profit which would have been realised by the owner of patents if the sales had been made by him (United Horse-Shoe & Nail Co Ltd v. John Stewart & Co 1888 13 Appeal Cases 401)." (emphasis added)
This case is one in which the defendants owed a duty of care in relation to the granting of protection when they knew or ought to have known that the plaintiff intends to act or rely on it which in fact happened in this case (MASON J in SHADDOCK supra at 244-245). The following further statement of MASON J ibid at 253 is pertinent and these requirements were satisfied in the present case:
"But the existence of duty does not depend upon knowledge on the part of the speaker of the precise use to which the information will be put. It is enough if he knows, or ought to know, that the inquirer is requesting it for a serious purpose, that he proposes to act upon it and that he may suffer loss if it proves to be inaccurate".
(ii) Remoteness of damage
Once it is established that the loss was caused by the guilty party's breach of contract, the innocent party must also show that the loss was not a too remote consequence of the breach. Hence one of the matters to be seriously considered in any assessment of damages is the subject of 'remoteness of damage'. It is not for all the consequences which 'but for' their conduct would not have occurred. There are certain rules which determine when damages are not a too remote a consequence.
Remoteness of damages has to be distinguished from assessment of damages. The former is concerned with the heads or items of recoverable loss whereas the latter deals with the arithmetical computation of the money which will compensate for that loss.
On remoteness of damage Re POLEMIS and FURNESS, WITHY & CO (1921) 3 K.B. 560, CA and OVERSEAS TANKSHIP (U.K) LTD v MORTS DOCK & ENGINEERING CO LTD [1961] UKPC 1; 1961 1 All ER 404 (generally known as The WAGON MOUND) are the two most discussed cases. In the former case the Court of Appeal unanimously held that the charterers were liable for the loss of the ship because it was a direct, although not a foreseeable consequence of the negligent act of their employees; and in the latter case the Privy Council held that the defendants were not liable in negligence because they could not reasonably have foreseen that the plaintiff's wharf would be damaged by fire when they carelessly discharged the oil into the harbour.
It is said that:
"There is room for argument how far Polemis and Wagon Mound are in conflict..... Our concern is with the present state of English law;..... Developments since Wagon Mound make it possible to a considerable extent to expound the law of remoteness with precision..... but the principle that the damage sustained must be of the same kind as the foreseeable damage is now firmly established". (STREET ON TORTS 8th Ed by Margaret Brazier 226-228)
The following passage from the judgment of VISCOUNT SIMONDS in the WAGON MOUND (supra) at 413, in my view states the present state of the law, and is apt:
"Enough has been said to show that the authority of Polemis (43) has been severely shaken, though lip-service has from time to time been paid to it. In their Lordships' opinion, it should no longer be regarded as good law. It is not probable that many cases will for that reason have a different result, though it is hoped that the law will be thereby simplified, and that, in some cases at least, palpable injustice will be avoided. For it does not seem consonant with current ideas of justice or morality that, for an act of negligence, however slight or venial, which results in some trivial foreseeable damage, the actor should be liable for all consequences, however unforeseeable and however grave, so long as they can be said to be "direct".
What his Lordship goes on to say is important to bear in mind when considering the assessment under the various heads. It is as follows:
"It is a principle of civil liability, subject only to qualifications which have no present relevance, that a man must be considered to be responsible for the probable consequences of his act. To demand more of him is too harsh a rule, to demand less is to ignore that civilised order requires the observance of a minimum standard of behaviour. This concept, applied to the slowly developing law of negligence, has led to great variety of expressions which can, as it appears to their Lordships, be harmonised with little difficulty with the single exception of the so-called rule in Polemis (43). For, if it is asked why a man should be responsible for the natural or necessary or probable consequences of his act (or any other similar description of them), the answer is that it is not because they are natural or necessary or probable, but because, since they have this quality, it is judged, by the standard of the reasonable man, that he ought to have foreseen them. Thus it is that, over and over again, it has happened that, in different judgments in the same case and sometimes in a single judgment, liability for a consequence has been imposed on the ground that it was reasonably foreseeable, or alternatively on the ground that it was natural or necessary or probable.
His Lordship says further that:
The two grounds have been treated as a conterminous, and so they largely are. But, where they are not, the question arises to which the wrong answer was given in Polemis (43). For if some limitation must be imposed on the consequences for which the negligent actor is to be held responsible - and all are agreed that some limitation there must be - why should that test (reasonable foreseeability) be rejected which, since he is judged by what the reasonable man ought to foresee, corresponds with the common conscience of mankind, and a test (the "direct" consequence) be substituted which leads to nowhere but the never-ending and insoluble problems of causation.
VISCOUNT SIMONDS has at 415-416 concluded his judgment with certain general observations, and I am of the view that they are of great importance in any consideration of the claims of the nature before me for they state the legal position. I shall conclude this aspect of my judgment with the following passage from the judgment of Viscount Simonds:
"Their Lordships conclude this part of the case with some general observations. They have been concerned primarily to displace the proposition that unforeseeability is irrelevant if damage is "direct". In doing so, they have inevitably insisted that the essential factor in determining liability is whether the damage is of such a kind as the reasonable man should have foreseen. This accords with the general view thus stated by LORD ATKIN in M'Alister (or Donoghue v. Stevenson) (50):
"The liability for negligence, whether you style it such or treat it as in other systems as a species of 'culpa,' is no doubt based upon a general public sentiment of moral wrongdoing for which the offender must pay."
It is a departure from this sovereign principle if liability is made to depend solely on the damage being the "direct" or "natural" consequence of the precedent act. Who knows or can be assumed to know all the processes of nature? But if it would be wrong that a man should be held liable for damage unpredictable by a reasonable man because it was "direct" or "natural", equally it would be wrong that he should escape liability, however "indirect" the damage, if he foresaw or could reasonably foresee the intervening events which led to its being done; cf. Woods v. Duncan (51). Thus foreseeability becomes the effective test. In reasserting this principle, their Lordships conceive that they do not depart from, but follow and develop, the law of negligence as laid down by ALDERSON, B., in Blyth v. Birmingham Waterworks Co. (52) 1856, 11 Exch 81 (emphasis added)
(iii) Mitigation of Loss
Mr. Singh submitted that the plaintiff should have mitigated the loss by selling the factory building as well as the plant, machinery and stock after it became evident that the 100% protection will not be available.
On the facts of this case no question of mitigation of loss arises on the part of the plaintiff. If anything it is the defendants who for reasons best known to them were completely oblivious to the consequences of the breach. It is they who failed to mitigate the loss which eventually I consider they have to bear and pay for.
There is not a shred of doubt as Mr. Shankar put it (in his submissions of 24.1.98 at p.33) that:
"It is to be borne in mind that the Government's promise, assurance, encouragements and continued semblance of great interest in inquiring into the progress of the project was a very great and strong factor to induce the Plaintiff to use all its financial and other useful resources in its possession or at its disposal and those that it could raise from sources which were lending money, with a view to put up the project. The Plaintiff did not foresee the defendants would wriggle out of its promise. At least it is reasonable inference that on the face of firm and solemn promise, assurance, and undertaking the Plaintiff as a reasonable business men would act with all its might, force, and ability to expeditiously complete the project, whether it meant to beg, borrow or use its own finances, and that is what the Plaintiff did."
In these circumstances and on the special facts of this case there was nothing that the plaintiff could do to mitigate loss. As suggested by Mr. Singh it could not sell the factory building as it is already encumbered with a debenture on it in favour of the Fiji National Provident Fund and the Fund has been pursuing for payment due to it. At this very moment and for a few months now a Receiver/ Manager has already been appointed under a debenture. The plaintiff could not return the raw material as the cost to do so would have been exorbitant and I agree with Mr. Shankar that that would have increased rather than decreased the loss.
The plaintiff was required only to act reasonably which it did to mitigate its loss as held by the Court of Appeal in MARTINDALE v DUNCAN (1973) 1 W.L.R. 574 as follows:
"that there had been no breach by the plaintiff of his duty to mitigate his loss since he was required only to act reasonably in the circumstances, and in the circumstances he had acted reasonably in delaying authorisation of repairs to his damaged vehicle until both the defendant's insurers and his own insurers had approved the repairers' estimate."
The following passage from Hals. 4th Ed. Vol.12 p.441 at para 1142 is apt and fits in with the facts of this case:
"The plaintiff's act has no such effect if the wrongdoer has exposed him to peril and the plaintiff has not acted unreasonably in all the circumstances to avoid that peril or its consequences or his judgment has been overridden by terror, or his mistaken judgment in an emergency ought reasonably to have been foreseen by the wrongdoer, even if the plaintiff's decision turns out to be wrong. The plaintiff will not be debarred from re-covering if the wrongdoer has exposed another to peril and the plaintiff has acted reasonably in attempting a rescue of the endangered person or property, nor if the plaintiff is under a disability in exercising judgment, as in the case of a child, and his action should have been foreseen." (emphasis add)
(iv) Interest on damages
The learned counsel for the defendants submits that the plaintiff is not entitled to any interest particularly because it has not been pleaded and that the Law Reform (Miscellaneous Provisions) (Death and Interest) Act Cap 27 does not apply to this case.
Mr. G. P. Shankar's arguments in his claim for interest are contained in his written submissions of 3.11.97 (p13) and 13.7.98 (p26-35) and I have given due consideration to them and to the numerous authorities that he has cited. His argument inter alia is that the plaintiff is entitled to interest paid on borrowings from banks and other sources to enable it to complete the project. He states that no condition was imposed on the plaintiff that it will not borrow to finance the project.
There is no doubt and I find that the defendants expected the plaintiff to complete the oil blending project and promised, assured and undertook to give a 100% protection. Surely the defendants knew or ought to have known that for a project of this magnitude there is going to be a lot of borrowing from banks and other lending institutions and interest will have to be paid on these borrowings.
On the special facts of this case the loss suffered to which the plaintiff is entitled arises out of the breach, as a result the plaintiff has not only not been able to pay off the various loans but it has to pay or is liable to pay interest on them.
Unlike in a personal injury case, in my view this is not the type of case where one would need to specifically plead interest for it goes without saying and it is quite obvious that here interest is payable and ought to be paid by the wrongdoer on some of the claims. 'Interest' as an item is not too remote for compensation. In this regard Mr. Shankar referred the Court to a Canadian case in which interest on borrowed money was recoverable (ATLANTIC SALVAGE LTD v CITY OF HALIFAX 1978 94 DLR (3d) 513. He also referred to HUNGERFORDS & OTHERS v WALKER & OTHERS 171 CLR 123 at 144-145 where MASON CJ expressed his agreement on the principle of recoverability of cost of borrowing as follows:
"Incurred expense and opportunity cost arising from paying money away or the withholding of moneys due to the defendant's wrong are something more than the late payment of damages. They are pecuniary losses suffered by the plaintiff as a result of the defendant's wrong and therefore constitute an integral element of the loss for which he is entitled to be compensated by an award of damages. Fitzgerald J. made this very point in Sanrod v. Dainford (57) when he said:
"[W]hatever may be the position otherwise in respect of damages under the [Trade Practices] Act, I can myself perceive no difficulty in accepting that, when money is paid in consequence of misleading conduct, the loss suffered by that conduct includes not only the money paid but also the cost of borrowing that money or the loss from its investment, as the case may be: cf. Frith v. Gold Coast Mineral Springs Pty. Ltd (58); affirmed (59). Interest awarded as a component of damages in such circumstances is not for loss of the use of the money awarded as damages, but for loss of the use of the money paid over in consequence of the misleading conduct and is directly related to the misleading conduct."
Notwithstanding that these remarks were made in relation to the payment of money in consequence of misleading conduct, the underlying principle is one of wider application. The point is that the loss of the use of the money paid away is so directly related to the wrong that the loss cannot be classified simply as due to the late payment of damages: see also General Securities Ltd. v. Don Ingram Ltd. (60) (the plaintiff recovered a business loss incurred as a borrower in consequence of the lender's breach of obligation to advance the money) and Pelletier v. Pe Ben Industries Co. Ltd. (61) (damages awarded on a contract to purchase a truck in consequence of the defendant's wrongful dismissal of the plaintiff from his employment). These cases proceed on the proposition that the cost of borrowing money to avoid a loss caused by a breach of contract is recoverable and not too remote." (emphasis added)
His Lordship at 146 continued:
"There can be no objection to the recovery of the cost of borrowing as consequential loss by reference to the notion that the loss is one which arises after the plaintiff's cause of action accrues or becomes complete. Such a notion is by no means an absolute bar to recovery for loss arising after that date."
It is stated in JACKSON & POWELL's book on PROFESSIONAL NEGLIGENCE 4th Ed. 1997 at 102 that:
"The court has a discretion to award simple interest on any damages awarded to a plaintiff and will generally do so. The discretion extends to both the rate of interest awarded and the period for which it should run, commencing with the date when the cause of action arose and ending with the date of the judgment."
For these reasons the plaintiff will be entitled to interest on the various loans from the dates of advances to the date the Court of Appeal said damages ought to be awarded. I shall deal with how much interest if any is payable on the individual heads and items of claim when I come to consider them separately. I would approach each claim to interest on its own merits.
I would begin with certain introductory remarks and would at the outset state what VISCOUNT SIMONDS in WAGON MOUND (supra) said at 414-415 on tortious liability for negligence and this has to be taken into consideration when assessing damages in this case.
VISCOUNT SIMONDS said:
"It is, no doubt, proper when considering tortious liability for negligence to analyse its elements and to say that the plaintiff must prove a duty owed to him by the defendant, a breach of that duty by the defendant, and consequent damage. But there can be no liability until the damage has been done. It is not the act but the consequences on which tortious liability is founded. Just as (as it has been said) there is no such thing as negligence in the air, so there is no such thing as liability in the air."
The plaintiff has established that there was a breach on the part of the defendants as a result whereof it has suffered loss and damage.
One cannot assess damages with mathematical accuracy and the Court is only required to do its best and in the process of doing so there may be elements of forecasting, estimating or even guesswork or speculation. And as Devlin J in BIGGIN & CO LD & ANOR. v PERMANITE LD 1951 1 KB 422 at 438 said:
"It is only that where precise evidence is obtainable, the Court naturally expects to have it. Where it is not, the court must do the best it can".
I shall now deal with assessment of damages in the same order as in the plaintiff's claim as hereinbefore set out.
(a) Factory building - (claim: $4,435,446.00)
On this claim I have the evidence inter alia of witnesses Mr. Whiteside adduced on 3.11.97 (vide p8-12 of Record) and on 10.6.98 (pages 7-25 of record) and Mr. Underhill (vide evidence of 10.6.98 p.87-91).
The factory comprises of a very large industrial workshop/garage building with adjoining office situate on an industrial site close to the Township of Nausori. The land on which the building is erected is a leasehold property being Crown Lease No. 5385 and more particularly described as Lot 2 on Plan TL1879 Nakavika No.3 in the Tikina of Nakelo, in the Province of Tailevu.
According to the defendants' witness HILTON (KERRY) FOSTER STEWART ("Mr. Stewart") a registered valuer, the Lease was issued by the Director of Lands for a period of 99 years from 1.1.74 to K.R. LATCHAN. Mr. Stewart said:
This is an industrial Crown lease and we note that under Clause 6 the Lessee is to use the demised land for garaging and as a bus depot. The Lessee is not to use the land for any other purpose without the prior written consent of the Lessor.
The lease was transferred on the 22nd May 1981 to K R Latchan Buses Ltd with a change of name of that company to Pacoil Fiji Limited registered on the 2nd of September 1992. We note recorded against the Crown Lease, two mortgages to the Fiji National Provident Fund Board, a mortgage to the Fiji Development Bank and a mortgage to the National Bank of Fiji. A Caveat restricting dealings in the property was registered on the 23rd December 1996 by the Fiji Development Bank.
It is the Plaintiff's claim that the factory building cost $1,300,000.00 and the rest of the claim of $3,135,446.00 is interest on it up to 30.6.97 at 13.5% per annum.
Mr. Shankar submits that the "Plaintiff invested $1.3 million in their Factory building completed to an amount of $1.3 million and $50,000.00 from personal savings spent in pre-project development exercises".
The figure of $1.3 million which emanated from a letter from Fiji Trade and Investment Board ("FTIB") was accepted by Mr. Shankar as the Gospel truth and he expects all concerned to accept it without question and without going behind the figure to ascertain as to how it has been arrived at. Mr. Whiteside in his evidence says that "I based my figures on the basis of what FTIB had arrived at". Mr. Shankar goes to the extent of submitting (p9 of submission of 3.11.97) that "the Defendant is estopped from trying to wriggle out of that admission, or making direct or indirect attempt or effort to contradict it or otherwise attack its reliability". He submits that "no challenge has been mounted in this letter regarding the authority of Vimal Sharma, his competency and reliability" and hence the defendants are "most definitely bound by it".
I am not at all persuaded by the above argument. It is clear from the evidence before me that Mr. Shankar has accepted Mr. Sharma's (of FTIB) statement to prove that it 'cost' $1.3m to erect this 'building'. Now in assessing damages, having heard the evidence on this aspect of the claim and taking into account certain admissions as to what the building actually cost to erect, I find that the whole basis of this claim of the Plaintiff has a very weak foundation indeed.
The item of the claim is in the nature of 'special damages' and that being so it is for the Plaintiff to prove its claim of $4,435,446. This I find the plaintiff has failed to do for the above reasons.
The evidence reveals that the plaintiff Company is severely 'undercapitalised' and it relied almost wholly and very heavily on borrowings to erect the building and to participate in this project of blending. The shareholders have only contributed $100,000.00 in equity capital and this was done when the Plaintiff Company was originally established as a bus business. Mr. Underhill testifying on behalf of the defendants said that the "shareholders did not provide one cent of their own money as additional equity for this project. As a result, the equity of $100,000.00 only formed 4.97% of the total funds required for the project, the remaining 95.03% was borrowed".
It is abundantly clear from the evidence that the building was constructed from Fiji National Provident Fund ("FNPF") loan as a bus depot at a time when the "blending" project was not even in contemplation.
It is also clear from evidence that it was merely a "paper transaction" which increased the value of the building from $424,873 (cost of building) to $955,127 and then to $1,300,000 without any monetary contribution from the shareholders.
It is interesting to note that even Mr. Whiteside, the principal witness for the Plaintiff and one of the persons (not a director but claiming the sum of $300,000.00 for a period of 10 years for Management time) agreed that the building actually cost $424,873 to build.
The following extract inter alia from Appendix 2 of Mr. Underhill's Report contained in a letter dated 10.9.96 from FNPF to Mr. Whiteside is worth noting as showing that FNPF loaned $500,000 between 30.6.82 and 16.4.84 to construct the building:
1. Principal outstanding as at 30.06.96
30.06.82 Initial Loan Paid 250,000.00
(For construction of a
factory for the
transportation business)
16.04.84 Additional Loan 250,000.00
Paid (For construction of
adjoining office complex to
the building 500,000.00
Less: Principal portion
recovered 19,929.34
Principal outstanding
as at 30.06.96 480,070.66
When one considers that the actual cost of the building was $424,873 and the loan from FNPF was $500,000 (two lots of $250,000) and certain amount is still alleged to be outstanding since the time of the loan i.e. from 1982, then the Plaintiff's claim for interest on the building "costs" in the sum of $3,135,446 as at 30.6.97 cannot be correct nor reconcilable. However, there is some evidence that there were certain expenses incurred to extensions and additions to the building to house the blending factory. It is difficult to ascertain what the exact amount is in that regard. Whatever that may be it does not affect my consideration of this claim in the manner I propose to do.
The question that looms large before me is whether on the facts and circumstances outlined hereabove, the Plaintiff is entitled to make this claim of $4,435,446 or at all.
The correspondence between the Plaintiff and the FNPF shows interest as at 30.6.96 at $1,088,920.59 whereas the Plaintiff is claiming $3,135,446. The difference is not explained. In exhibit 4 which is the two accountants' (Mr. Whiteside's and Mr. Underhill's) 'Review of Statement of Claim' it is stated that Underhill was of the view "that balance of the loan was to be restricted to amount outstanding as on 30 April 1993. This is estimated at $1,082,677". The current FNPF loan as at 31.10.97 is estimated at $1,873,876.
On the evidence before me, I have no difficulty in coming to the conclusion that the building was constructed to house the Plaintiff's buses and for its transport business which the Plaintiff carried on at the time when it obtained a loan of $500,000 from FNPF for that purpose and at that time and for a long time afterwards the blending project had not got to the stage when the Plaintiff will require the use of the building for blending. I find this as a fact. When the building came to be required for blending certain modifications and additions to it were carried out to suit the Plaintiff's requirements for the project.
I am at a loss to understand how the Plaintiff can justify this claim. This claim is in my view entirely misconceived; it is too remote and cannot conceivably arise as a result of the breach on the part of the defendants. In this regard in this case I am inclined to accept the defendants' argument that the return on a 'fixed asset' of this nature comes from the profit which is generated from the 'fixed asset'. There is already a claim for my consideration, on 'future profits' for a ten year period of $14,500,000 at $1,450,000 per year which I will consider hereafter.
The claim is too remote and does not flow from the breach. For these reasons the Plaintiff's claim of $4,435,446 is rejected altogether. The building is still there and will remain there and is capable of being used for whatever purpose the plaintiff decides to use it. As conceded by the defendants the plaintiff will be entitled to damages for loss of use of the building which is dealt with by me under 'general damages' [(g)(b)] hereunder.
(b) National Bank of Fiji Loan - (claim: $1,478,914)
In considering this claim I have considered inter alia the evidence of Mr. Whiteside on 3.11.97 (vide p12-14 of Record) and on 10.6.98 (p40-44 of Record) and that of Mr. Latchan.
The claim is for $1,478,914 which includes an item of $676,495 as interest.
This claim is evidently made up as follows (taken from Mr. Underhill's Report page 7):
Initial deposit to Sembawang
(originally paid by ANZ) 117,697
Fee paid to Esso Singapore
(US$25,000 originally paid by ANZ) 36,198
Inventory purchased from Esso Singapore
(US$30,734.27 originally paid by ANZ) 45,344
Inventory purchased from Caltex Singapore 85,905
Inventory purchased from Caltex Singapore 181,186
Salary and Wages 67,680
Travel 12,315
Laboratory Equipment 16,647
Office Installation 12,961
Other Costs 226,486
Sub-total 802,419
Interest to 31/05/97 676,495
TOTAL $1,478,914
The majority of expenditure herein relates to deposit paid to Esso Singapore which supplied and installed the blending plant, fees paid to Esso Singapore plus inventory purchased from Caltex Singapore and other miscellaneous expenses.
In this claim the principal amount is $802,419 and interest to 31.5.97 is $676,495.
The items purchased with the above loan are still in the factory building. What would these items fetch if sold is anyone's guess. No attempt appears to have been made by the Plaintiff either to return these items or as much of it as was possible to the vendors or to sell them locally.
No doubt the plant, equipment and machinery etc purchased from this loan will not be of any use to the Plaintiff in view of the withdrawal of the protection.
Why NBF made the loan of this magnitude when the Plaintiff Company had a paid up Capital of only $100,000 is not my concern here. The fact is that there was this loan and the said expenditures were incurred to set up the factory and to get the factory ready for operation on reliance of the protection. The Plaintiff is therefore entitled to all expenses set out hereabove which were incurred pertaining to the setting up of the factory from the 'NBF' loan.
As per exhibit P3 dated 25.2.92 which is a letter from NBF it advised the approval of a loan of $600,000. This was further increased to $250,000 (vide ex. P3(e) being letter dated 31.12.92) making a total of $873,054.
For what period interest on the loan should be paid is something which I would now like to consider.
It was on 30 September 1987 that the Plaintiff received a letter from the second defendant confirming that Government had approved the protection. Then by letter dated 18 June 1992 the Government reduced the protection to 50% for 3 years.
In accordance with the decision of the Court of Appeal damages is to be assessed to 30 April 1993.
The loss here arises out of the breach. Interest has been paid or accrued due on the loan which was obtained for the project.
Agreement was reached between the accountants Underhill and Whiteside "on the manner in which the NBF loan and overdraft had been applied" (Exhibit P4). Mr. Underhill "also felt that amount outstanding to be restricted to balance outstanding as at 30 April 1993. This amounts to $882,911." (Exhibit P4 page 2). Mr. Underhill further felt that "amount outstanding should be offset by the landed cost of assets that had been acquired with the proceeds of these funds. These included -
. finished goods and raw material 267,091
. packing material 66,980
. lab equipment 16,647
350,718"
The interest to which the Plaintiff is entitled is at the Bank rate of 13.5% p.a. on the loan from 25.2.92 to 30 April 1993.
Mr. Underhill says that the amount outstanding to Bank as at 30 April 1993 is $882,911 which I accept. Hence the interest to be calculated is on this amount of $882,911 as from the date of the loan i.e. 25.2.92 (vide Exhibit P3) to 30.4.93 which comes to $119,192.
Therefore the amount payable under this claim is the said balance amount of $882,911 plus the said interest of $119,192 making a total of $1,002,103. Further for being kept out of this money the plaintiff is entitled to further interest on the said sum of $1,002,103 from 1.5.93 to 16.4.99 (date of this assessment judgment) at the rate of 4% per annum which amounts to $264,000. Hence the total sum payable under this claim is $1,266,103.
I order that all goods purchased from this loan be disposed and/or sold by the defendants in whatever manner they think fit to recoup the loss in paying out damages.
(c) Fiji Development Bank Loan ("FDB") - (claim: $857,903)
On this claim I have considered inter alia the evidence of Mr. Whiteside given on 3.11.97 (vide p14-20) and on 10.6.98 (vide 45 to 47 of Record).
The claim is for $857,903 as at 30 June 1997 inclusive of interest. The interest on the amount has been frozen. The amount is made up as follows (taken from Underhill's Report page 8):
Amount Claimed - balance as at 30/06/97 $ 857,903
This amount consists of the following;
Payment of Sembawang for purchase of
plant and equipment .454,920
18,373
23,333
496,626
Interest and Charges 361,277
TOTAL $ 857,903
The defendants contend that the interest component should not be included for the return on 'fixed asset' is already included in the 'loss of profits' claim. They say that the loan was to pay for the balance of blending plant and equipment purchased from Singapore.
The defendants say that the value of the claim should be reduced by the estimated salvage value of the assets for the plaintiff should have made an attempt to either return the equipment or sell them in the open market as it knew that it will not be commencing operations.
According to Mr. Whiteside (vide his evidence p45 et seq. of 10.6.98 - Ex. P1 also) FDB paid for equipment and also for stock.
According to Exhibit 4 agreement had been reached between the two accountants (Whiteside and Underhill) as to the manner in which loan funds had been disbursed towards the project. In exhibit 4 Mr. Underhill states that the balance owed to FDB is $857,903 (the amount in the claim) as at 30 June 1997 and he is of the view that the amount outstanding to FDB should be offset by the landed cost of plant and machinery installed by Sembawang Engineering which amounts to $596,000 approximately. But the balance that was agreed is $622,354 at 30 April 1993.
Mr. Whiteside said that interest on the outstanding amount of $857,903 is 'frozen' effective from 30 June 1996. Since damage is payable to 30 April 1993 the agreed amount payable to plaintiff as at that date is $622,354 (inclusive of interest).
I therefore allow the sum of $622,354 under this item of claim.
On this item being kept out of this sum I would allow interest at the rate of 4% p.a. from 1.5.93 to 16.4.99 (date of assessment of damages judgment) i.e. 5 years 11½ months which amounts to $149,352 making a total of $771,706.
As ordered under the previous item so also under this item I order that the defendants be at liberty to take an inventory of items purchased from this loan for the project and dispose and/or sell them in whatever manner considered appropriate by them in order to recoup the loss suffered by them in having to pay damages for a project which had to be abandoned.
(d) Amount payable to Caltex Singapore - (claim: $176,927)
The claim is for the sum of $176,927 being the balance amount payable to Caltex.
It is made up as follows (as per p.38 of
Ex.P1 - Statement of Claim):
"Balance payable for supply of products
(US$94,824) $134,425
Loan for purchase of laboratory
equipment (S$42,000) $42,502
$176,927
The defendants contend that the Plaintiff should have returned the products and equipment and whatever was purchased from Caltex as soon as it knew of Government's withdrawal of protection. This would have reduced the claim. Apart from this comment the defendants do not dispute the claim as Mr. Singh says at the end of his submission that the plaintiff is entitled to cost of plant, stock and laboratory equipment.
I am satisfied from the evidence and the accounts tendered that this expenditure is legitimate and pertains to the blending project and is allowable.
There is no evidence before me that there is an obligation or arrangement for payment of interest on this sum.
For these reasons this claim of $176,927 is allowed.
Since certain products and equipments were purchased from Caltex Singapore, it is ordered as in the previous items that the defendants be allowed to take inventory of items purchased and be at liberty to dispose and/or sell them in whatever manner they consider appropriate in the circumstances in order to recoup the loss by having to pay damages for items which are not likely to be used in this abandoned project.
(e) Advances from associate companies - (claim: $365,103)
On this claim I had inter alia considered the evidence of witnesses Mr. Whiteside adduced on 10.6.98 (pages 26-40 of Record), Mr. Underhill of 10.6.98 (p92 of Record) and that of Mr. Latchan.
The Plaintiff claims the sum of $365,103 being made up as follows:
Amount Claimed $ 365,103
This amount is made up of;
Advances by Associate Companies less
repayments 180,414
Interest charges 01/01/91 - 30/06/97 184,689
TOTAL $ 365,103
It is the defendants' contention that this item should be disallowed because the plaintiff would not have needed to borrow money from Associate Companies if it had not lent money to Associates. Therefore the interest charge does not apply. Secondly, it would not have needed to borrow from Associates if it had an adequate Equity capital base from which to undertake the lube oil blending project.
It is to be noted that according to Mr. Whiteside the advances were made a long time before the project commenced and therefore the defendants submit that this is not a relevant claim.
Pacoil Fiji Limited (Plaintiff) is not a subsidiary of K.R. Latchan Ltd. It is K R Latchan Buses Ltd which changed its name to Pacoil Fiji Limited. It is K R Latchan Limited (according to Mr. Whiteside - p.30 of evidence of 10.6.98) which made advance to Plaintiff. Associated companies referred to include K R Latchan Limited and Latchans Express Services Limited. He says that these companies have paid Pacoil; they were 'actual physical transactions' as opposed to being 'on paper' only.
According to Mr. Whiteside there were advances to and from the Plaintiff. It is noted from 1991 account (p.98 of Ex P1) there is an item $140,382 being 'Associated Company Advances' as liability and the asset 'Advance to Associated Companies' in the sum of $214,685. This account is stamped 'Draft for Discussion Propose Only' and is dated 26.2.97. Similar entries appear, with differing amounts, in the years 1992 to 1996 Account and as 'draft for discussion' and dated the same date.
Exhibit P6 gives 'details of expenses on the factory under caption 'Associate Company Advances' for the period 4.12.90 to 25.1.94 as well as 'Pacoil Advance to K R Latchan Ltd/Latchans Express Ltd' making a total of $5152.28 and this is shown as having been refunded.
Mr. Whiteside testified that the 'accounts indicated that it was interest free but the claim incorporates the interest element to set out the loss that the Company Associated with the company's claim because it has not used all its funds' (p.34 of Record of 10.6.98). In answer to a question from the Court he said that "initially it had no claim for interest between the companies" and "for the purpose of this claim, interest has been added". (ibid)
After carefully analyzing the evidence of Mr. Whiteside it is quite clear that on these alleged advances there was no agreement for payment of interest. As for the claim for balance principal sum of $180,414, there is neither a clear and proper evidence nor breakdown of this to enable me to decide how it is made up and whether it was expenses for the project.
The account is not clear and Mr. Whiteside's evidence (contained on pages 29-41 of evidence of 10.6.98) does not show how much was owed to the company in 1980 and thereafter when the transfer of the bus operation took place. The exact state of the accounts between the Plaintiff and associate company is not at all clear.
To be successful under this claim, which is a 'special damage', the Plaintiff has to prove it which I find it has failed to do.
For these reasons I disallow the claim relating to Advances between companies for both principal and interest totalling $365,103.
(f) Management Time (claim: $1,500,000.00)
Evidence on this claim was inter alia given by Mr. Whiteside on 3.11.97 (vide p25-27 of Record) and on 10.6.98 (page 47-54 of Record), Mr. Underhill (vide evidence of 10th and 11th June 1998 at p93-94 and p1-2 respectively of Record) and by Mr. Latchan.
The Plaintiff claims the sum of $1,500,00.00 (one and a half million dollars) at the rate of $30,000 per year for each of the four directors and $30,000 for the accountant Mr. Whiteside per year for a period of 10 years.
On this Mr. Shankar (p.23 et seq. of his submission of 13/7/98) submits that 'the Directors spend their skill, care, effort, and time to carry out and complement company's decisions to produce successful fruits as decided by the company'. He says that had there not been this breach on the part of the defendants the Director's efforts etc "would most definitely have been rewarded".
Mr. Shankar asks 'Why should the Directors be not remunerated or deprived of monetary benefit for their services which has been rendered fruitless and/or become frustrated because of the wrongdoer's fault'. He says that the Defendants have not in any way proved that the amount claimed is either excessive, exorbitant or unreasonable. Mr. Shankar submits (exhibit P2 page 72) that "Value of management time claimed is a non cash item and as such would not be reflected in the accounts".
I have already stated above what Mr. Singh's submissions are in this regard. In short he says that this claim should be disallowed.
The claim is for the Directors of the Company for themselves and for its accountant Mr. Whiteside.
I have had some anxious moments dealing with this matter. First of all, the question that immediately comes to mind is 'Is Management time' an allowable claim in this case?
There is no evidence of a cogent nature spelling out with particulars as to how the amount is made up apart from stating it in very general terms. It is a specific amount that is being claimed as special damages at the rate of $30,000 per year for each of the 5 persons for a period of 10 years as if it is a claim in the nature of 'salary'. To start off with the 10 year period is definitely questionable and about this I have something to say later in this judgment.
Despite what Mr. Shankar has said as to the reason for this item not occurring anywhere in the accounts I am strongly of the view that this claim should have been reflected in the Company's accounts if it was going to be an allowable item in the accounts and if it was expected to be claimed. It is not shown anywhere that this is an outstanding debt due by the Company to them. There is no evidence of this at all before me. One would have thought, in the absence of any other record in this regard, that this item of claim would have been provided for by the 'loss of profit' claimed in this assessment exercise and I do agree with Mr. Underhill on this aspect. As for Mr. Whiteside who is not a director but an accountant, I would say, as Mr. Underhill speculates, he would have charged his fees for the project or taken a 'percentage'.
It is for the plaintiff to prove this item of the claim and not for the defendants and in this regard it has dismally failed not only in the amount claimed but also in justifying the period for which it is claimed.
On the facts and circumstances of this case, whilst not denying that the Directors Rohit Latchan, Dhresh Latchan, Ratu Josua Toganivalu, Mrs. B.W. Latchan and the accountant Mr. Gardiner Whiteside did work in setting up the factory and having it ready for commissioning, in the absence of any evidence or record that this was paid or to be paid, this claim in my considered view is not allowable. It should however be noted here that under NBF claim (supra) a certain amount has been allowed for 'travel'. In the absence of any resolution or agreement in this regard, this claim should actually come out of the profits which the Plaintiff would have made but for the breach. I refer to my consideration of the 'profit' aspect hereafter under the separate heading dealing with 'loss of profit or economic loss'.
On the other aspect of the claim i.e. the period of 'ten years' for which the claim is made, in view of the decision that I have reached under this head the matter needs no further consideration here but I shall deal with the justifiability of the claim for 'ten years' under the 'loss of profit claim' hereunder.
For these reasons I disallow this claim altogether.
(g) GENERAL DAMAGES
(a) Loss of business opportunity and loss of profit/economic loss - (Claim: $14,500,000.00).
(a)(i) The Principles
Evidence on general damages was given inter alia by Mr. Whiteside (on 10.6.98 vide p55-60 of Record), Mr. Underhill (on 10.6.98 vide p78-87 of Record) and Mr. Latchan.
By way of general damages the Plaintiff claims the sum of $14,500,000 (Fourteen million and five hundred thousand dollars) for loss of chance or commercial opportunity and profit which is worked out on the basis of $1,450,000 per year for a period of 10 years.
In considering this aspect of the claim I have to carefully examine the facts and circumstances of this case and then consider what if any damages flow from the breach under this item of the claim and to which the Plaintiff may be entitled to in law.
In a claim for damages as VISCOUNT JOWITT said in CARSLOGIE STEAMSHIP CO. LTD and ROYAL NORWEGIAN GOVERNMENT 1952 A.C.(H.L.) 292 at 300:
"... I think it is well to bear in mind the elementary principle that it is for the plaintiff in an action of damages to prove his case to the satisfaction of the Court. He has to show affirmatively that damages under any particular head have resulted from the wrongful act of the defendant, before he can recover those damages."
It has been established in this case that the second defendant after obtaining the Commonwealth Secretariat Report granted the 100% protection and the Plaintiff thereafter proceeded to establish the factory including, getting the building ready (bearing in mind that the building was already there) for 'blending', obtaining loan from various sources, getting and installing plant and machinery from overseas, getting various equipments, getting raw material and incurring many other expenses details whereof are in the evidence before me and in the numerous documents and papers filed herein.
The Plaintiff relied on the defendants' assurance of protection and had the factory ready for production short of 'commissioning' it when the protection was withdrawn.
The Plaintiff claims that for breach of withdrawal of 100% protection and the consequential loss incurred by it, the defendants should be responsible for all loss suffered by it. The Plaintiff says that it has lost the opportunity to make 'profit' for it was its intention to make a profit out of this project.
The Plaintiff says that the project was a lucrative one and it is entitled to be compensated for the profit it would have made had the breach not been committed.
At this juncture I would like to consider the law on the subject matter of this claim.
Here it has been found that negligence has been established and the Plaintiff has suffered loss of profit thereby. Therefore as the Court said in ENZED HOLDINGS v WYNTHED [1984] FCA 373; (1984) 57 ALR 167 at 183:
"If the court finds damage has occurred it must do its best to quantify the loss even if a degree of speculation and guess work is involved... We emphasise, however, that the principle applies only when the court finds that loss or damage has occurred."
In assessing damages on a loss or injury suffered the following passage from the judgment of DEANE J in THE COMMONWEALTH OF AUSTRALIA v AMANN AVIATION PTY LIMITED [1991] HCA 54; (1991) 174 CLR 64 at 111-112 is worth noting in this context:
"The frequent inability of curial procedures to determine with certainty what has happened in the past, let alone what would have been or what will be, necessarily gives rise to a need for a number of subsidiary rules governing the determination of the loss or injury which a plaintiff has actually sustained by reason of a wrongful act. One such subsidiary rule is that ... a plaintiff bears the onus of establishing the extent of his loss or injury on the balance of probabilities. To satisfy the requirements of that rule, a plaintiff must, if he is to recover more than a nominal amount in such an action, affirmatively establish assessable damage, that is to say, loss or injury which is capable of being measured in monetary terms.
.... In particular, it may be appropriate that damages be assessed by reference to the probabilities or the possibilities of what would have happened or will happen rather than on the basis of speculation that probabilities would have or will come to pass and that possibilities would not have or will not."
DEANE J at 119 goes on to say:
"In such a case, considerations of justice require that the plaintiff be entitled to recover the value of the lost chance itself and that the defendant be not allowed to take advantage of the effects of his own wrongful act to escape liability by pointing to the obvious, namely, that it is theoretically more probable than not that a less than 50 per cent chance of success would have resulted in failure."
In the case before me the Court has to look at the damage suffered in the light of the 100% protection against competition which was to get implementation upon completion of the project. As Mr. Shankar submitted, the project was completed and 'the defendants wrongfully resiled from that promise, undertaking and assurance and rendered the Plaintiff's project useless, and frustrated all their efforts, expenditure, interest incurred and legitimate hope and expectation'.
On the question of loss of anticipated profits a very useful summary of the principles and factors governing the situation such as the present, in my view, appears in the following passage from a foreign judgment in the case of HOLT v UNITED SECURITY LIFE INS & TRUST CO (1909) 72 Atlantic Reporter 301 at 305-306 and quoted by BRENNAN J in AMANN AVIATION (supra) at 106:
"The fundamental and cardinal principle that underlies all rules for the admeasurement of damages is that the injured party shall have compensation for that which he has directly lost by reason of the act of the other party, so far as such loss was or ought to have been in the contemplation of the parties. This includes the loss of anticipated profits where these are capable of legal ascertainment. But, where the profits are not capable of ascertainment, or are remote and speculative, and therefore not proper to be adopted as a legal measure of damage, it does not follow that the injured party is remediless.....Losses directly incurred, as well as gains prevented, may furnish a legitimate basis for compensation to the injured party. And, among such immediate losses, expenditure fairly incurred in preparation for performance or in part performance of the agreement, where such expenditures are not otherwise reimbursed, form a proper subject for consideration where the party injured, while relying upon his contract, makes such expenditures in anticipation of the advantage that will come to him from completed performance....where one party repudiates, and thus prevents the other from gaining the contemplated profit, it is not, we think, to be presumed in favour of the wrongdoer (in the absence of evidence) that complete performance of the agreement would not have resulted in at least reimbursing the injured party for his outlay fairly made in part performance of it. Ordinarily, the performance of agreements results in advantage to both parties over and above that with which they part in the course of its performance; otherwise there would soon be an end of contracting. And it seems to us, upon general principles of justice that, if he who, by repudiation, has prevented performance, asserts that the other party would not even have regained his outlay, the wrongdoer ought at least to be put upon his proof." (emphasis added)
At 108 (ibid) BRENNAN J states that 'reliance damages' are recoverable as in the case before me, that is, when the Plaintiff acted on the defendants' promise, assurance and undertaking to grant and implement 100% protection against competition. His Lordship said:
"The recovery of reliance damages has been sanctioned by Courts in United States (Corbin on Contracts Vol 5, 1964 paragraph 1031 note 17, and American Law Institute, Restatement of the Law of Contract 2nd ed (1981) paragraph 349) in CANADA (Bowlay Logging Ltd v. Domtar Ltd (1978) 87 DLR (3rd) 325 affirmed but on other grounds (1982) 13 DLR (4th) 93 at 99 Regina v. Canamerican Auto Lease & Rental Ltd (1987) 37 DLR (4th) 591 at 608-609) and in NEW ZEALAND (Ware v. Johnson [1983] NZHC 155; 1984 2 NZLR 518 at 545-546; Herbison v. Papakura Video Ltd (No 2) [1987] NZHC 366; 1987 2 NZLR 720) and in England Cullinane v. British 'Rema' Manufacturing Co Ltd (1972) 1 QB 60. Anglia Television Ltd v Reed 1972 1 QB 60; C & P, Haulage v. Middleton [1983] EWCA Civ 5; (1983) 3 All ER 94 and C.C.C. Films Ltd v Impact Quadrant Films Ltd (1985) Q.B. 16 at 38 are consistent with the principles stated, except that, in the first two of those cases, the courts spoke of the plaintiff's inability to prove what his profits would have been rather than the value of his net contractual benefits."
(ii) Loss of profit compensable
There are a number of cases which point to the fact that the "chance or opportunity to make profit" is compensable.
The judgments of the High Court of Australia in AMANN AVIATION (supra) AND POSEIDON LIMITED and ADELAIDE PETROLEUM N.L. AND OTHERS [1994] HCA 4; 1992-1994 179 CLR 332 deal with the subject of loss of commercial opportunity and the approach to be taken in assessing such loss.
The case of AMANN AVIATION (supra) although it was a case of breach of contract the principles pertaining to loss of the nature I am dealing with can be applied in tort. BRENNAN J in his judgment at 99 (ibid) states:
"The general principle on which compensatory damages are assessed was stated by Taylor and Owen JJ. in Butler v. Egg and Egg Pulp Marketing Board (82):
"That principle is that the injured party should receive compensation in a sum which, so far as money can do so, will put him in the same position as he would have been if the contract had been performed or the tort had not been committed."
If a contract be profitable and is rescinded for breach, the profits lost and the costs actually and reasonably incurred in performance are proper subjects of compensation. If a contract be a loss contract, the costs actually and reasonably incurred in performance are the subject of compensation, but only to the extent that those losses would have been recovered had the contract been performed." (emphasis added)
In the instant case the Court is looking at what will happen in the future. In this regard the following point made by LORD DIPLOCK in MALLETT v McMONAGLE (1970) AC 166 at 176 is worth noting:
"The role of the court in making an assessment of damages which depends upon its view as to what will be and what would have been is to be contrasted with its ordinary function in civil actions of determining what was. In determining what did happen in the past a court decides on the balance of probabilities. Anything that is more probable than not it treats as certain. But in assessing damages which depend upon its view as to what will happen in the future or would have happened in the future if something had not happened in the past, the court must make an estimate as to what are the chances that a particular thing will or would have happened and reflect those chances, whether they are more or less than even, in the amount of damages which it awards." (emphasis added)
The claim under this head is the amount of profit which the Plaintiff claims it may have made over a period of 10 years with 100% protection based on the estimate prepared by Mr. Whiteside on a 'relatively simple projection'. There were no 'what if' sensitivities prepared to support this projection.
It was the plaintiff's belief that with the 100% protection the plaintiff could make an average of $1,450,000 profit per year which comes to $14,500,000 over a 10 year period.
As already found the Plaintiff was prevented by the defendants from commissioning the plant into operation and as a result inter alia the Plaintiff has been denied the commercial opportunity of earning a profit from the project.
Assessing damages under this head is no doubt fraught with difficulty but as DEANE J said in AMANN AVIATION (ibid 125) that 'the mere fact that damages cannot be assessed without difficulty and uncertainty does not, however, relieve a court from the responsibility of attempting to assess them as best it can'.
The decision in POSEIDON (supra) p.332 is quite relevant to the issue before me and what was held there sets out the position clearly to be applied to the facts and circumstances of this case. It was held:
Per Brennan J. (1) The loss of a mere opportunity to acquire a benefit is not in itself a loss, but the loss of the benefit will be such a loss if the plaintiff proves that he could and would have taken the opportunity and that the benefit would then have been yielded.
(2) Unless it can be predicated of an hypothesis in favour of causation of a loss that it is more probable than competing hypotheses denying causation, it cannot be said that the plaintiff has satisfied the court that the conduct of the defendant caused the loss. Where a loss is alleged to be a lost opportunity to acquire a benefit, a plaintiff who bears the onus of proving that a loss was caused by the conduct of the defendant discharges that onus by establishing a chain of causation that continues up to the point where there is a substantial prospect of acquiring the benefit sought by the plaintiff. Up to that point, the plaintiff must establish both the historical facts and any necessary hypothesis on the balance of probabilities. Although the issue of a loss caused by the defendant's conduct must be established on the balance of probabilities, hypotheses and possibilities the fulfilment of which cannot be proved must be evaluated to determine the amount or value of the loss suffered. Proof on the balance of probabilities has no part to play in the evaluation of such hypotheses or possibilities: evaluation is a matter of informed estimation."
The House of Lords case of KOUFOS v C. CZARNIKOW LTD (1969) 1 A.C. 350 dealt with the question of measure of damages in contract but there is also a discussion in it of the test applicable in tort. LORD UPJOHN in KOUFOS (supra) at 422 said:
"The test in tort, as now developed in the authorities, is that the tortfeasor is liable for any damage which he can reasonably foresee may happen as a result of the breach however unlikely it may be, unless it can be brushed aside as far- fetched." See the Wagon Mound case [No. 1 [1961] UKPC 1; (1961) 1 All ER 404, No. 2 [1966] UKPC 1; [1966] 2 All E.R. 709].
His Lordship goes on to say at 422:
"Once an examination of the facts establishes a breach of duty on the part of the tort-feasor, the acts and omissions of the innocent party are irrelevant until the question of contributory negligence comes to be considered. A tortfeasor may and frequently is a complete stranger to the innocent party, but, he is, however fleetingly in many cases, his neighbour for the purposes of the law and bound to act with due regard to his neighbour's rights whomever he may be. If he fails in such duty the law has rightly laid down a more stringent test for the assessment of damages."
It was held by BLACKBURNE J in OBAGI v STANBOROUGH (DEVELOPMENTS) LTD AND OTHERS (1993, 15 December, The Times Law Reports 646) that:
"A plaintiff could recover damages in respect of a loss of profit which he might, but for the breach of contract by the defendant, have made, without proving, on a balance of probabilities, that he would have made it. But his chance of making it had to be a substantial one, more than a mere speculative possibility." (emphasis added)
As I have already stated, in tort damages are awarded with the object of placing the plaintiff in the position in which he would have been had the tort not been committed. This is similar to 'reliance loss'. This reliance I find has deprived it of the opportunity of making a profit. On this aspect HUNTER J in the Supreme Court of New South Wales in TRADE PRACTICES COMMISSION v COLLINGS CONSTRUCTION CO P/L & 5 ORS (50234/94 - Dec. 1996) stated thus and I adopt it here:
"Because the object of damages in tort is to place the plaintiff in the position in which he would have been but for the commission of the tort, it is necessary to determine what the plaintiff would have done had he not relied on the representation. If that reliance has deprived him of the opportunity of entering into a different contract for the purchase of goods on which he would have made a profit then he may recover that profit on the footing that it is part of the loss which he has suffered in consequence of altering his position under the inducement of the representation. This may well be so if the plaintiff can establish that he could and would have entered into the different contract and that it would have yielded the benefit claimed: cf. Esso Petroleum Co. Ltd. v. Mardon (28); Doyle v. Olby (Ironmongers) Ltd. (29). The lost benefit is referable to opportunities foregone by reason of reliance on the misrepresentation. In this respect the measure of damages in tort begins to resemble the expectation element in the measure of damages in contract save that it is for the plaintiff to establish that he could and would have entered into the different contract. (emphasis added)
The conclusion that I have arrived at here is that the Plaintiff having relied upon the protection which was granted, not only satisfies the concept of causation but that on the authorities that I have made reference to hereabove allow the Plaintiff to recover the economic or financial loss including loss of profit.
This loss is not too remote, for the defendants either knew or ought to have known the loss that the Plaintiff will suffer as a result of their actions (WADSWORTH v LYDALL 1981 1 WLR C.A. 598 - although this was a breach of contract case). In coming to this conclusion I have given due consideration to the submissions made by Mr. Singh on this aspect but I reject bulk of his arguments in this regard.
The claim is for a period of 10 years. The only reason the plaintiff gives for picking this period is as it states 'as a measure of some means of compensation ... the business opportunity lost to PFL has been quantified at 10 years average profits foregone by the Company' (see under Summary of Damages claimed hereabove).
The defendants' witness Mr. Underhill was asked by Court as to why the 10 year period has been used. He said that it was Mr. Whiteside who did that but "for clarification we have used the same period, 10 year period looked at 100% and then looked" at others below that percentage. He told the Court that there is no fixed period in a case of this nature. Even Mr. Whiteside told the Court when asked (P56 of evidence of 10.6.98) that "there was no basis for using the 10-year period. The project if it had gone off the ground would have continued to run indefinitely; for purposes of general damages, we restricted the claim for that 10-year period". He said that this period would commence 'from the date of start of the commercial production'.
I am of the view that the 10 year period is an unjustifiably long period. A reasonable period has to be worked out in line with the facts and circumstances of this case and the principles involved. I would estimate the economic loss/loss of profit for a period of three years commencing 12 months after the year (first year) when the factory was to be switched on for production. Despite the fact that the accountants have for the reasons given by them done an exercise estimating what the profit is likely to be, I cannot under any circumstances blindly agree to a ten year period as it is unreasonable and completely out of proportion to the realities of the situation. Profit in my view for the purposes of assessing damages is something which has to be estimated bearing in mind the evidence before the Court in this regard. There could be a loss situation but there is no evidence of it but one can never tell in a business as to how a new venture particularly of this type which is the first of its kind would fare.
(iii) Quantum of economic loss
It remains for me to consider the quantum of damages under this head of claim.
The defendants' witness Mr. Underhill is aware that the plaintiff has claimed on the basis of 100% protection on a 'relatively simple projection'. In other words he says that it "assumes that the Company would obtain 100% of the Fiji Market by being granted 100% protection". He says that it should have prepared a 'what if' sensitivities to support this projection and that it is 'prudent to prepare several financial projections' looking at various levels of protection and he has therefore himself prepared cases of 100%, 50%, 40%, 30% and 25% protection and has submitted them to Court (vide p14 of his Report and annexures thereto).
I have to assess damages in this case on the facts as I have found them despite arguments to the contrary as stated by the defendants through their witness Mr. Underhill. I have said it before and I reiterate that 100% protection was given and that has to be accepted. There is no question of surmising that the 100% would be challenged or that certain contingencies might arise which would upset the protection thus depriving the Plaintiff of the benefit of it. In the light of the authorities the Plaintiff is entitled to the loss that it is likely to have suffered in the three years. i.e. the period for which I allow the loss. The defendants are saddled with the claim and they must pay.
The plaintiff's claim is for yearly profit $1,450,000. Mr. Underhill in his Report has however stated it at $1,414,256 (exclusive of tax and interest) on 100% protection as average profit per year. There is a slight difference in the two figures. The defendants have through Mr. Underhill given a breakdown of how the figure has been arrived at whereas the plaintiff has not except what "The Establishment of Used Lubricating Oil Refining Plant" had stated. I accept the latter figure of $1,414,256.
Before I leave the determination of this claim I think I ought to comment on the 'alternative' claim raised by the Plaintiff's counsel under this item. In the 'alternative' Mr. Shankar submits that if the plaintiff "had sold with full protection and occupied, this would have eventuated six months after completion in a sum of $25 million" (vide p57 of submissions of 3.11.97). Then in his submission of 13.7.98 at p2 he said "the project as a whole could have most definitely be sold at $20-$25 million dollars". His argument in this regard is that "under adversary system, what is not attacked or challenged evidence or contradicted, is deemed accepted by the opponent. It is an excellent piece of evidence for the Court to act on it".
I do not have to consider this alternative claim which is couched in such general terms without an iota of worthwhile evidence. It appears that it has just been thrown in in an half-hearted manner and hoping for the best. In any case in my view this aspect of the alternative claim does not flow from the breach to deserve any consideration whatsoever. Hence it is rejected altogether.
The main issue on this item is the assessment of damages. The plaintiff is entitled to loss of profit and it is the quantum of damages which has to be determined. The only proper method of awarding damages for the breach herein is to consider the loss of profit.
On the evidence before me and on the authorities which allow damages for economic loss doing the best I can I assess general damages for economic loss (loss of profit) at $2,757,799 nett arrived at by calculating the profit at $1,414,256 per year for 3 years which comes to $4,242,768 before tax. Tax at the rate of 35% is to be deducted from this which gives a figure of $2,757,799.00 (two million seven hundred fifty-seven thousand seven hundred ninety-nine dollars)
(g)(b) Loss of use of factory building
It is quite clear that as a result of the breach the plaintiff has not been able to use the factory building fully or profitably from the time of the withdrawal of the protection until the time damages will be allowed herein, namely, 18 June 1992 to 30 April 1993 i.e. 10½ months.
In the absence of any evidence as to how much rent the building would have fetched had it been rented out, I would assess damages in this regard under the head 'general damages drawing upon my own knowledge and experience.
Mr. Singh for the defendants accepts that the plaintiff is entitled to damages for loss of use of the building.
My own assessment is that if the plaintiff had let the building out on rent it could have earned $4000.00 per month. For the period in question viz. 10½ months it would amount to $42,000.00 (forty-two thousand dollars). I would also allow interest on this amount for having been kept out of this sum at 4% per annum from 30 April 1993 to 16 April 1999 (date of this judgment on assessment) which amounts to $8330 making a total of $50330.
I would therefore award the said sum of $50330.00 inclusive of interest by way of general damages for loss of use of the factory building.
(h) Legal and other costs (claim: $350,000.00)
(i) Legal costs
On this claim apart from Mr. Shankar's submission Mr. Whiteside gave evidence (vide his evidence of 10.6.98 at pp54-55 of Record).
The Plaintiff claims the sum of $350,000.00 (THREE HUNDRED AND FIFTY THOUSAND POUNDS) for 'legal and other costs'. What is included in the word 'other' is not clear on 'costs' contained in Mr. Shankar's written submissions of 3.11.97 and 13.7.98.
He submits that this is a proper case for award of costs on "full indemnity basis" in view of the very complex nature of legal issues involved, the defendants' unreasonable refusal to compensate the Plaintiff, the length of trial, researches and lengthy submissions, arguing before Court of Appeal, appearing before President Court of Appeal on leave to Appeal to Supreme Court and issues involved on assessment. In support of his claim on indemnity costs he has referred the Court to a number of authorities.
On the other hand Mr. Singh submits that costs on an indemnity basis should not be allowed as it was not pleaded.
The general principle is that costs follow the event - the loser will be ordered to pay the winner's costs and will be left to bear his own. Where there has been an abuse of the process and unmeritorious behaviour on the part of a losing party it has always been sanctionable by way of an indemnity costs order inter partes.
Or 62 r26(1) of The High Court Rules 1988 does provide for 'costs payable to a barrister and solicitor by his own client' "except in so far as they are of an unreasonable amount or have been unreasonably incurred".
A useful discussion of the principles involved in the award of costs on an 'indemnity basis' is to be found in the judgment of LOVEDAY J in Hurstville Municipal Council v Connor & Anor (1921) 24 NSWLR 724 at 730 et seq. There His Lordship said 'a useful starting case on a consideration of the subject of the extent of his discretions to award costs is Emi Records Ltd v Ian Cameron Wallace Ltd [1983] Ch.59, where SIR ROBERT MEGARRY V.C. sets out and discusses (at 63-64) the "main bases of taxation" of costs'. As in our own said Rules in a solicitor and own client taxation all costs should be allowed "except in so far as they are of an unreasonable amount or have been unreasonably incurred".
The matter of 'indemnity costs' was discussed by the Court of Appeal in POLICE SERVICE COMMISSION V BENIAMINO NAIVELI (Civ. App. No. 52/95S - judgment 16.8.96) where at p.6 the Court said:
"... neither considerations of hardship to the successful party nor the over optimism of an unsuccessful opponent would by themselves justify an award beyond party and party costs. But additional costs may be called for if there has been reprehensible conduct by the party liable - see the examples discussed in Thomson v. Swan Hunter and Wigham Richardson Ltd. (1954) 2 ALL E.R. 859 and Bowen-Jones v. Bowen-Jones (1986) 3 ALL E.R. 163."
The following extract from the judgment of KIRBY P in DILLON AND OTHERS V BALTIC SHIPPING CO (1991) 2 Lloyds Rep. 155 is pertinent in any consideration in the matter of costs:
"In a series of cases it has been suggested that the order of costs on a solicitor and client basis should be reserved to a case where the conduct of a party or its representatives is so unsatisfactory as to call out for a special order. Thus if it represents an abuse of process of the Court the conduct may attract such an order. See e.g. Packer v. Meagher [1984] 3 N.S.W.L.R. 486. See also Australian Guarantee Corporation Ltd. v. D. Jagr [1984] VicRp 40; [1984] V.R. 483."
Bearing in mind the above principles the question is whether there are exceptional circumstances in this case for awarding indemnity costs and whether there was something 'unmeritorious' or 'reprehensible' on the part of the defendants to warrant the order sought.
It was the defendants' right to defend this action which they did. No doubt the action involved a lot of evidence of a complex nature and they had to be shifted; also certain amount of law was involved. I agree that the preparation and presentation of the case was time-consuming but that is so for many cases. All these factors do not warrant the Court in punishing the defendants by awarding costs on an indemnity basis. At the same time the fact that the claim for indemnity costs as contended by the defendants was not pleaded does not prevent the Court from making an Order in that regard if the plaintiff is entitled to it.
In the judgment which I gave herein on 14 March 1996 I ordered that costs are "to be taxed if not agreed"; and in the Appeal on 29 November 1996 the Court of Appeal also ordered that "the respondent (the Plaintiff) will have costs to be taxed if not agreed". Then again on 15 May 1997 the Appeal Court refused leave to Appeal to Supreme Court with costs. It is clear that in this case so far there have not been any orders for costs on an indemnity basis. I will therefore be not justified in now on assessment of damages award costs on the basis sought.
In all the circumstances of this case, I do not find anything 'exceptional' 'unmeritorious' or 'reprehensible' to depart from the general rules except that I order that costs be taxed against the defendants unless agreed.
(ii) Other costs
It is only right that Mr. Whiteside the accountant should be allowed his professional costs for preparing the Plaintiff's account for the whole of the period for which he was involved in the project and after until the judgment in this assessment (i.e. 16.4.99) (unless he has already been paid partially) which costs and charges are to be worked out by Mr. Whiteside and submitted to the Plaintiff to claim from the defendants.
Should there be any difficulty in settling this account the parties will be at liberty to apply to Court.
C. Conclusion and summary of quantum of damages
To sum up, for the reasons given hereabove and applying the law to the facts the Plaintiff is entitled to damages in the amounts summarised hereunder as I find they arise out of the defendants' withdrawal of the hundred per cent protection granted by them for the project and substituting it with one of 50% for three years at the eleventh hour when the factory was ready to go into production resulting in the plaintiff not being able to commence operation at all.
As I have already stated on the facts and circumstances of this case the plaintiff has suffered damage in (a) not being able to use the factory building for the project, (b) the loss suffered in buying stock and raw material which are lying in the factory and losing their value, (c) huge amount of money lost in purchasing and installing plant and machinery and other consequential expenses, (d) payment of interest on moneys borrowed from various sources for the project and (e) legal costs and other costs involved in the prosecution of this action.
The defendants' counsel has very rightly conceded that the plaintiff is entitled to cost of plant, stock, laboratory equipment, loss of use of the factory building until 30 April 1993 and legal costs.
In the light of the concessions made by the defendants and taking into account the facts as found by me and considering matters of law the plaintiff is entitled to damages in the amounts awarded as appearing hereunder together with interest where appropriate. Some of the claims have been rejected either because they are too remote or not proved as required in law.
In summary the awards of damages which I consider appropriate under the said various heads of claim are as follows:
SPECIAL DAMAGES
$ $
(a) Factory building NIL NIL
(b) National Bank of Fiji Loan 882,911
Interest thereon from
25.2.92 to 30.4.93 at
13.5% p.a. 119,192
1,002,103
Interest thereon from
1.5.93 to 16.4.99 (i.e.
5 years 11½ months) at
4% p.a. 264,000
1,266,103 1,266,103
(c) Fiji Development Bank Loan
(agreed amount inclusive
of interest to 30.4.93) 622,354
Interest thereon from 1.5.93
to 16.4.99 (i.e. 5 years
11½ months) at 4% p.a. 149,352
771,706 771,706
(d) Caltex Singapore 176,927 176,927
2,214,736
(e) Advance by K.R. Latchans
Limited NIL NIL
GENERAL DAMAGES
(g)(a)economic loss/Loss of profit
$1,414,256 per year for
3 years 4,242,768
Less 35% tax 1,484,969
2,757,799 2,757,799
(b)Loss of use of factory
building from 18.6.92 to
30.4.93 42,000
Interest thereon from 1.5.93
to 16.4.99 at 4% p.a. 8,330
50,330 50,330
5,022,865
Less interim order for
payment of damages made
on 2.9.97 500,000
Balance payable (E.O.E.) $ 4,522,865
(h) Legal and other costs -
(i) legal costs to be taxed
(ii) accountant's fees to be calculated
Before I depart from this case I would like to remark that what has happened in this case is a stark reminder to bodies such as the Fiji Trade and Investment Board that it and the country can ill-afford to have unsuitable personnel on its establishment to run its affairs. The service of the Solicitor-General in legal matters are available, I am sure, at all times so why not use it?
There will therefore be judgment for the plaintiff against the defendants in the said balance sum of $4,522,865 (four million five hundred twenty-two thousand eight hundred sixty-five dollars) inclusive of interest with accountant's fees to be calculated and costs to be taxed if not agreed with liberty reserved to parties to apply generally.
D. Pathik
Judge
At Suva
16 April 1999
HBC0496R.92S
Cases and references cited in the judgment
Beoco Ltd v Alfa Laval Co. Ltd & Anor.(1994 4 All ER 464
Canadian National Railway Co v Norsk Pacific Steamship Co (1992 91 DLR (4th) 289
Ward v Chief Constable for Avon and Somerset (1985) 129 SJ 537
Usha Kiran v The Attorney-General of Fiji Civ. App 25/85 FCA - delivered 28.3.90
Alusio Daino v Attorney-General C.A. No. 515/96
Tacirua Transport Company Limited v Viren Chand FCA Civ. App. No. 33/94 (Judgment 2.3.95)
The Attorney-General v Waisale Naicegulevu FCA 22/89
Law Reform (Miscellaneous Provisions)(Death and Interest) Act Cap. 27
D'Amato & Anor v. Badger & Anor (1996) 3 LRC 396
McGregor on Damages 16th Ed. 1997 p.236-237, 360
Chaplin v Hicks [1911] UKLawRpKQB 104; [1911] 2 K.B. 786 C.A.
Biggin & Co. LD & Anor. v Permanite LD [1951] 1 K.B. 422 at 438, Devlin J
Aerial Advertising Co. v. Bachelors Peas [1938] 2 ALL. E.R 788 at 796 per Atkinson J.
Ratchiffe v Evans [1892] UKLawRpKQB 131; [1892] 2 Q.B. 524 at 532-533, C.A.
L. Shaddock & Associates Proprietary Ltd & Anor and The Council of the City of Parramatta (1981-1982) 130 CLR 225 at 225
Robinson v Harman [1848] EngR 135; (1848) 1 Ex 850, Parke B
Todorovic v Waller [1981] HCA 72; 1981 150 CLR 402 at 412, Gibbs J and Wilson J
Admiralty Commissioners v. S.S. Susquehana 1926 AC 658 at 661, Lord Dudedin
The Albazero [1977] AC 774, 841
General Tire & Rubber Company v Firestone Tyre & Rubber Co. Ltd [1975] 1WLR 819 at 824, Lord Wilberforce
Salmond & Heuston on the Law of Torts, 20th Ed 1992 p517
Livingstone v Rawyards Coal Co. [1880] UKHL 3; (1880) 5 App. Cas. 25, per Lord Blackburn, at p.39
Re Polemis and Furness, Withy & Co 1921 3 KB 560 C.A.
Overseas Tankship (U.K) Ltd v Morts Dock & Engineering Co. Ltd [1961] UKPC 1; 1961 1 All E.R. 404 (The WAGON MOUND), 413, 415-416 Viscount Simonds
Street on Torts - 8th Ed. by Margaret Brazier 226-228
Martindale v Duncan [1973] 1 WLR 574
Hals.Vol 12 4th Ed p441 para 1142
Atlantic Salvage Ltd v. City of Halifax 1978 94 DLR (3d) 513
Hungerfords & Others v Walker & Others [1989] HCA 8; 171 CLR 125 at 144-145
Jackson & Powell on Professional Negligence 4th Ed. 1997 at p102
Carslogie Steamship Co. LD and Royal Norwegian Government (1952) A.C. (H.L.) 292 at 300, Viscount Jowitt
Enzed Holdings v Wynthed [1984] FCA 373; (1984) 57 ALR 167 at 183
The Commonwealth of Australia v Amann Aviation Pty Limited [1991] HCA 54; (1991) 174 CLR 64 at 111-112, Deane J
Holt v United Security Life Ins. & Trust Co (1909) 72 Atlantic Reporter 301 at 305-306 quoted by Brennan J in Amann Aviation (supra)
at 106
Poseidon Limited and Adelaide Petroleum N.L. and Others [1994] HCA 4; (1992-1994) 179 CLR 332
Mallett v McMonagle (1970) AC 166 at 176, Lord Diplock
Koufos v C. Czarnikow Ltd (1969) 1 A.C. 350 at 422 Lord Upjohn
Obagi v Stanborough (Developments) Ltd and Others 1993, 15 December, The Times Law Reports p.646, Blackburne J
Trade Practices Commission v Collings Construction Co. P/L & 5 Ors (50234/94 - Dec. 1996), Hunter J
Wadsworth v Lydall 1981 1 WLR C.A. 598
The High Court Rules 1998 Or 62 r 26(1)
Hurstville Municipal Council v Connor & Anor [1991] 24 NSWLR 724 at 730 et seq., Loveday J
EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch.59, Sir Robert Megarry V-C.
Police Service Commission v Beniamino Naiveli (Civ. App. No. 52/95S FCA - Judgment 16.8.96)
Dillon & Others v Baltic Shipping Co (1991) 2 Lloyds Rep. 155, Kirby P
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