Lee v Lee [2002] FJHC 37; Hbc0654j.1998s (7 March 2002)

IN THE HIGH COURT OF FIJI
(AT SUVA)

CIVIL ACTION NO. HBC 654 OF 1998S

Between:

DARRELL E. LEE
Plaintiff

and

JOE LEE
Defendant

Plaintiff in Person
P. Knight for the Defendant

JUDGMENT

This Action was begun by writ and Statement of Claim issued on 18 December 1998.

The Plaintiff is an attorney with law offices at Vancouver, Washington State, USA. He also has a number of other business interests. The Defendant is a businessman.

The Statement of Claim was followed by an amended Statement of Claim filed in March 1999. An amended Defence to the amended Statement of Claim was filed in August 1999. The progress of the proceedings was not helped by the Plaintiff’s unfamiliarity with litigation procedures in Fiji, by the parties residency in the USA and by the appearance and then withdrawal of solicitors. There were several interlocutory applications and many affidavits, both in support and in opposition were filed. Finally, however, a pre-trial conference was held between Counsel. Some limited facts were agreed together with a bundle of documents. Two issues were framed for determination. They are:

(a) Is the agreement signed by the Plaintiff and the Defendant and dated 24/25 December 1990 binding on both parties and enforceable by either party?; and
(b) If the answer to (a) is in the affirmative how is the Plaintiff to acquire his 40% shareholding in EMSL?

On 4, 5 & 6 April 2001 the Plaintiff testified. At the conclusion of the hearing on 6 April I saw Counsel for both parties in Chambers. I expressed certain public policy concerns to which I will return. The proceedings were adjourned for continuation on 30 and 31 July. On 30 July Mr. Q.B. Bale who had hitherto been representing the Plaintiff withdrew. On 30 and 31 July and 1 August I heard the Defendant and his sole witness an accountant. At the conclusion of the evidence and following discussion with the Plaintiff and Mr. Knight it was agreed that written submissions would be filed. Mr. Knight filed submissions on behalf of the Defendant on 10 September while the Plaintiff filed on 17 October. On 4 December I heard final argument from the Plaintiff and Mr. Knight.

The ghost at this particular banquet was that of Harold Wosepka, a businessman who died on 13 December 1990.

In October 1982 Wosepka, a US citizen, purchased Pacific Hotels and Developments Ltd a Fiji company which owned the land and buildings which then substantially comprised what may now be called Pacific Harbour and which some time later became Estate Management Services Ltd (EMSL). A copy of the agreement, disclosing a purchase price of F$600,000 is Exhibit 4.

According to an obituary published in what appears to be a newspaper called the Vancouver Metro/Northwest dated 14 December 1990 (Document 31 in the bundle of agreed documents) Wosepka was in 1983 convicted of 18 counts of misapplying federal funds, 5 counts of mail fraud, 4 counts of wire fraud and one count of supplying a false statement to obtain US$1.96 million from the US Small Business Administration. He was sentenced to 10 years imprisonment. According to the obituary at the time of his death the US Government’s position was that Wosepka still owed the Small Business Administration $2.5 million in restitution ordered in 1983. He was however free on bail pending an appeal against a reconviction following retrial after his first conviction had been set aside on appeal.

In his evidence the Plaintiff told me that he first became involved with Wosepka and the Pacific Harbour properties in late 1984 or early 1985. At that time Wosepka was the owner and manager of these properties which included an hotel, a golf course and some villas. According to the Plaintiff, Wosepka told him that he was in serious trouble having been convicted of a serious criminal offence. He needed a lawyer to help him with the Fiji operation. Thereafter the Plaintiff began working for Wosepka on a percentage basis. No contract between the Plaintiff and Wosepka was disclosed but Exhibits 1 & 2 reveal something of the nature of the business relationship between them. The Plaintiff travelled on a number of occasions to Fiji usually with Wosepka and assisted him in his attempts to find a buyer for the properties.

On several of these visits the Plaintiff also met the Defendant. During 1986 and 1987 the Plaintiff met the Defendant two or three times and again two or three times during the next 2 or 3 years. According to the Plaintiff the Defendant and Wosepka had been business associates for some time and had both been involved with business colleges.

The Defendant in his evidence confirmed this. He told me that he had owned over 50 business colleges during the years 1965 to 1993. What the Defendant did not confirm but what was not challenged either on his behalf was the Plaintiff’s evidence that he had understood from Wosepka that the Defendant’s main involvement in the Fiji operation was to have “all the agreements made in his name”. This was because, according to the Plaintiff, the Pacific Harbour Properties had been bought with the money which had been embezzled by Wosepka and which the US Government was of course keen to trace.

That the properties were indeed eventually substantially held in the Defendant’s name is not in dispute. The defendant himself told me that α of the shares were put in his name in 1984 and that later on after he lent EMSL $600,000 the remaining β were also transferred to him by way of security for the loan. While I was told a confusing story of holding companies in Vanuatu and other subsidiary companies of one kind or another the position today basically remains the same: the legal ownership of such Pacific Harbour properties as have not been sold remains in the Defendant’s name or in the name of companies owned by the Defendant (see also paragraph 3 of the Defendant’s affidavit filed on 21 April 1999). One of the principal companies sold by the defendant was Waikalou Developments Ltd. This was sold to the Plaintiff in 1994 (see document 75) and is the subject of other proceedings between the parties pending in this Court.

In 1990 and while the appeal against his reconviction was still pending Wosepka was diagnosed with cancer of the brain. By the year’s ending it was apparent that he would shortly die. According to the Plaintiff there then followed a number of meetings and discussions held to decide what should happen to the Fiji properties after Wosepka’s death. The Plaintiff told me that in November 1990 he met Wosepka, the Defendant, Vinod Singh and Wosepka’s wife and son in Hawaii. Following that meeting at which the future of the operations in Fiji was discussed the Defendant went to Australia while the Plaintiff returned to Washington.

On 11 December 1990 the Plaintiff wrote to the Defendant (Document 28). He advised the Defendant that Wosepka’s condition had deteriorated, that he had given his power of attorney to his son and that he had authorised his name to be removed “from everything in Fiji”. On 14 December (Document 30) the Defendant wrote to the Plaintiff. He claimed out that he was owed $1.2 million from the Fiji operation “which was the original agreement I had with Harold”. “In the light of the newspaper article we must move quickly. Please discuss with the family how I can work with them to recoup my losses and protect my investment”.

On 21 December 1990 the Defendant again wrote to the Plaintiff (Document 32). He explained that he had had further discussions with the Wosepka family who did not wish to have any further involvement with the Fiji project. He instructed the Plaintiff to “draft all necessary paper work to release the estate from any involvement in the Fiji operation”. While the Defendant would be “more than glad” to see Wosepka’s widow

Josephine receive something he however foresaw “a problem there because of the Court action”.

On 24 December the Plaintiff replied. He advised the Defendant that he had prepared all necessary papers to have Wosepka’s son removed as an officer and director. He had also prepared all the necessary papers for signature by Josephine Wosepka to acknowledge “that you own everything”. Importantly he enclosed “a confidential agreement to be known only by us. Sign a copy and send it back or make whatever changes are appropriate.” The papers signed by Josephine Wosepka are documents 42 and 43. The confidential agreement is document 36-38 which, after amendment by the Defendant was signed as document 39-41 which is the agreement referred to in issue (a).

No more then a mere glance at Documents 42 and 43 is required for one to be satisfied that they are fundamentally false and misleading. The third paragraph of each document reads:

“this is to make it clear that my husband Harold Wosepka does not and never did own or have any legal or equitable interest in any of the properties or corporations in the country of Fiji”.

Apart from these statements being contradicted by the oral and written evidence of both parties, Documents 42 and 43 are also inconsistent with Exhibit 4 and Documents 6 & 17.

It will be noted that Documents 42 and 43 both declare that the Fiji properties and other ancillary properties were owned by the Defendant. This assertion of ownership is in direct conflict with the second paragraph of the agreement under consideration (Document 39-41) which reads:

“the properties ..... are hereby jointly owned forty percent (40%) by Darrell E. Lee and sixty percent (60%) by Joe Lee”.

The Plaintiff’s case is that the agreement was declaratory of the beneficial ownership of the Fiji properties following Wosepka’s death and was subsequently acknowledged accepted and acted upon by the Defendant. Insofar as it required performance by the parties the Plaintiff discharged the obligations imposed upon him but the Defendant in part did not. Although the Defendant did inject a further sum of US$50,000 as required by the agreement and although the Plaintiff was, as also required by the agreement, appointed a director of the various companies, no shares were transferred to him, in other words his 40% never actually legally became his own.

The Defendant’s case is that the agreement was merely the skeletal outline of further relations between the parties. Although it is accepted that the Plaintiff became a director it is denied that the Plaintiff ever injected US$174,000 of his own funds as required by the agreement. While it is not disputed that US$174,000 was sent by the Plaintiff to EMSL the Defendant asserts that this money came from the Wosepka bail bond which was refunded after his death and that the bail bond originally came from the Defendant and was therefore not the Plaintiff’s even though it had moved from the Tacoma District Court into the Plaintiff’s trust account.

The suggestion that the bail bond came from the Defendant was of course derisively rejected by the Plaintiff. It appears this was the bail bond over which Wosepka had no “legal or equitable interest or control” and which is mentioned in Document 42. According to the Plaintiff the original $500,000 although paid by the Defendant, did not come from the Defendant until after it had been given to him by Wosepka and was actually part of the monies which had been embezzled. In support of this suggestion the Plaintiff referred to Document 33 which appears to show proceeds of a partial repayment of the original bond being expended at Wosepka’s direction.

By this stage of the narrative I hope three things will have become clear. First, both the Plaintiff and the Defendant were deeply involved in the processing of property which was directly or indirectly the proceeds of crime. Secondly, both parties were involved in the preparation and offering of false legal documents. Thirdly, this Court was only told a very small part of the whole story, much of which remains deliberately concealed.

As already mentioned, on 6 April 2001 I saw both Counsel then representing the parties and voiced my concern. Apart from public policy concerns most neatly expressed in the maxims “ex turpi causa oritur non actio” and “he who comes into equity must come with clean hands” I was also troubled by the consequence of any declaration of legal entitlement in favour of either party. Would not such a declaration have the effect of stamping the High Court of Fiji’s seal of approval upon these transactions?

But there is another way of looking at the situation. Is it not the case that the Wosepka embezzlement, never finally proved, happened many years ago? Are there not many innocent people now perfectly legally involved in the Pacific Harbour venture? Would a refusal by the Court to intervene by declaring legal entitlements not leave not only the relation between the parties but also many other interests in a sort of legal limbo?

In a postscript to his written submission the Plaintiff admitted and apologised for preparing a false document. He asserted that he had only become involved with Wosepka years after he had committed his crime. For the Court to decline to interfere now would effectively be to reward the Defendant since he would be allowed to retain his 100% shareholding in the properties despite the Plaintiff’s entitlement.

I was, frankly, disappointed not to receive some assistance from Mr. Knight, as the sole remaining counsel, on this point after Mr. Bale had withdrawn. The Defence made no submissions on these difficulties at all and my own research did not prove enlightening. I must confess that I found it a difficult problem to resolve.

In his otherwise detailed and helpful written submissions Mr. Knight set out in detail a number of other reasons why the agreement should not be upheld. I did not find any of these reasons convincing. While the agreement is undoubtedly somewhat vague and ambiguous, as are many agreements which come before the Court, it seems to me to be clear enough on the central point which is that at the moment of signing and subject only to the provision of cash contributions by the parties they were henceforth beneficially entitled to ownership of the named properties in the proportion of 40 to 60%.

The Plaintiff’s unchallenged evidence was that the agreement itself was not questioned by the Defendant until the Plaintiff discovered certain alleged breaches of the agreement in about 1995. The Plaintiff’s assertion on this point is corroboration by the preamble to document 68 and paragraph 5 of document 70 both of which were acknowledged by the Defendant in October 1994. It also receives support from paragraph 4 of Document 76, apparently written by the Defendant in April 1995. Further support comes from the 60% ownership of the properties in question claimed by the Defendant in a personal statement of assets and liabilities filed by him on 15 May 1991 (Document 50).

Mr. Knight suggested that the manner in which the Plaintiff was to acquire the 40% or had already acquired it was unclear. While I agree I am also of the opinion that this criticism not only applies to the Defendant’s 60% also but that it is now far too late to raise as a defence, contradicted as it is by the plain declaratory words of the agreement. As to the $174,000 which the Defendant claims the Plaintiff never really sent, I prefer the Plaintiff’s evidence. If indeed the Plaintiff had merely sent down $174,000 of the Defendant’s money and had thereby purported to comply with the agreement one would have expected to find some contemporaneous complaint by the Defendant in the papers. A similar answer may be given to the suggestion that subsequent funds remitted by the Plaintiff were not to EMSL but were to Waikalou Developments Limited, the company which he later acquired. If, as suggested by Mr. Knight the agreement was not supposed to be binding and if the Defendant did not accept that the Plaintiff had any stake in these companies then why was he appointed one of the three directors?

If the circumstances placed before the Court had not so plainly arisen from dishonest dealings then I should have had no hesitation in upholding the agreement and declaring it to be legally enforceable. In my view it was plainly intended to be a solemn and binding agreement between the parties and was accepted as such and acted upon as such. Whether it was intended to be followed by a transfer of shares from the Defendant to the Plaintiff or to a Plaintiff’s nominee I do not know. How the agreement could remain “strictly confidential” and yet be publicly implemented is not at all clear. Because, however, I am not prepared to give the High Court of Fiji’s approval to this agreement or the transactions which preceded it or followed it I decline to go any further towards answering the questions posed.

M.D. Scott
Judge

7 March 2002