IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

ACTION NO: HBC0359 OF 2002

BETWEEN:

JOHN BEATER ENTERPRISES PTY LIMITED
A limited liability Company having its registered office in Suva.
Plaintiff

AND:

FIJI NATIONAL PROVIDENT FUND
A body corporate established under the Fiji National Provident Fund Act Cap. 219.
1st Defendant

VITI PROPERTIES MANAGEMENT SERVICES LIMITED
a limited liability company having its registered office in Suva.
2nd Defendant

Counsel for the Plaintiff: A. Seru
Counsel for the Defendants: Miss P. Madanavosa, G.P. Lala & Associates

Date of Ruling: 18th August, 2003

RULING

On 22nd November 2002, this Court granted an injunction preventing the defendants from evicting the Plaintiff from the premises commonly referred to as the “Treetops Restaurant and Night Club” situated at and part of what is commonly known as the Cultural Centre, Pacific Harbour at Deuba.

This is the defendants’ application to dissolve the injunction.

The facts of the case can be briefly summarised as follows. Between the months of November 2001 and January 2002, the plaintiff negotiated with the 2nd defendant the leasing of the premises abovenamed. The property is owned by the 1st defendant. The 2nd defendant acts as agent for and manager of properties belonging to the defendant situated at the Cultural Centre at Deuba.

On 31 January 2002, the 2nd defendant faxed to the Plaintiff the following letter,

“Dear Sir, “Re: Application to Lease Treetop Cultural Centre and Market Place Pacific Harbour, DEUBA

1.	PERMITTED USE OF THE SPACE
The lease space shall be solely for Restaurant and Nightclub space.

2.	RENT
The rent for the premises shall be $770.00 VAT inclusive per months for the Restaurant & Nightclub and is payable no later than the first working day of the month.

3.	LEASE PERIOD
Tenant must be given 90 days notice.

4.	LEASE COMMENCEMENT DATE
The lease shall be effective from 28/12/2001.

5.	SUBLETTING
The leased space shall not be sublet at anytime during the currency of the lease without the prior permission of Fiji National Provident Fund.

6.	RENT DEPOSIT
A refundable two (2) months rent deposit or a Bank Guarantee equivalent to the sum of two months rent is payable by the 1st January 2002.

7.	ELECTRICITY AND TELEPHONE
The tenant shall pay the charges for electricity and telephone.

8.	ALTERATIONS/IMPROVEMENT
No alterations or improvements whatsoever is to be carried out without the prior approval of the Fund.

We trust that you will enjoy the tenancy with us.

Yours faithfully,

David S. Robinson
MANAGING DIRECTOR

I hereby agree with the terms and conditions letter of offer.

……………………………. ………………….
John Beater Date”
Managing Director

In the defendant’s Counsel submission, the letter was, what is commonly referred to in the trade, a “letter of intent”. Its purpose is twofold. First, it proves to the lessor that the lessee is negotiating in good faith and coupled with the payment as deposit of the first period of rental. Second, the “letter of intent” sets out all the details of the agreement so far reached so as to facilitate the preparation of the formal lease documents.

The Court however does not necessarily agree with the seemingly inevitable conclusion drawn by the defendants. The relevant question to ask is whether the defendants’ so –called “letter of intent” has gone beyond the mere invitation to treat stage where they were inviting plaintiff to negotiate. Has it entered into the phase of negotiations where they had set out definite and distinct terms of the agreement involving legal repercussions? Does this not amount to a classic offer and acceptance situation under the law contract, as opposed to invitation to treat as argued by the defendants? Is it possible that it would have only required the signature of the plaintiff on the dotted lines to make the contents a contract binding on the parties? Did not the parties intend that the plaintiff’s signature at the end of the letter was sufficient to complete the agreement? The Court has reproduced in full the letter of 31 January, 2002 to assist in ascertaining if at all, that the defendants’ intentions are clear to create a legal and binding agreement upon the plaintiff signing the “Acceptance” portion of the letter.

This Court does not find it necessary to analyse the law of contract to decide on the claim. The questions I have posed above do in fact represent the complex nature of the law in this area. It is sufficient at this stage to examine the merit or otherwise of the parties arguments in deciding whether the reliefs sought are justifiable.

DEFENDANTS’ SUBMISSION

The defendants’ main contention in this application to dissolve the injunction is that the Court had granted the order “on a decision which was wrong in law.” After referring to some English decisions, which this Court did not find any more helpful to support its arguments then its reference to the High Court Rules, Counsel then made submissions on the letter of the 2nd Defendant of 31 January 2002. In their view, the defendants say that the letter was only a letter of intent. A “letter of offer,” in other words. It is common practice according to the defendants that a prospective lessee signs a “letter of intent” in the first instance, setting out the details of the lease conditions, before a formal lease document is prepared and signed. Further the defendants argue “the lessee’s execution of the letter is seen by the lessee with whom he had been negotiating and marks the occasion of the deposit so called being the first period’s rent, so that the property may be held on behalf lessee until formal a documentation is complete.

Finally the defendants argue that given that there was no lease agreement formally entered into between the parties, the tenancy of the plaintiff insofar as it was allowed to continue by the defendants, could only be one periodic tenancy which may be terminated by written notice from either party.

PLAINTIFF SUBMISSION

The plaintiff’s position is that a complete agreement to lease the premises in question had been successfully concluded and that while it concedes it had not signed any formal lease agreement, equity requires that the Court give recognition to the intention of the parties as if a lease had been granted. There exists, according to the plaintiff, an agreement although no lease had been executed. This is evidence by the defendants allowing the plaintiff to occupy the property and opening its business. It had also paid monthly rentals in accordance with the terms of the agreement, including the two-months' rent deposit.

Furthermore, the Plaintiff submits, the conditions of the lease agreement are specified in the letter and the landlord’s agreement to the lease has already been detailed as clearly evidence from the opening paragraph of the same. There can be no other presumption than that parties had intended to create legal relations and make a contract with the Plaintiff signing the letter of 31 January 2002. Further, according to the plaintiff, there is evidence from the subsequent conducts of both parties that lend support to this view. First, the 2nd defendant’s covering NOTE enclosing the letter with the terms of Tenancy specifically states, “We attach your Tenancy Agreement.” Then the Plaintiff in its 1st of February 2002 letter to the 2nd Defendant, had specifically referred to the latter’s letter of 31 January, as “the Tenancy Agreement.” In its letter, the plaintiff sought clarification of items (sic: Clause) 3 and 4 “the Agreement.” In reply on the same date, 2nd Defendant headed its response to the Plaintiff’s enquiries with the phrase: “Tenancy Agreement”. The explanation and/or clarification carried in the 2nd Defendant’s letter of 1 February 2002, in fact gave further details of the lease conditions. Taken together, the contents of both letters of both letters of both 31 January and 1 February from the 2nd defendants, according to the Plaintiff, constituted a valid offer of a contract of lease agreement between the parties. It therefore would still have been perfectly in order for the Plaintiff to go ahead and sign the 2nd defendant’s letter of 31 January and incorporating the clarification of 1 February, and in the process create a valid legal contract binding on both defendants. 

The Plaintiff then pleads promissory estoppel citing Lord’s Denning’s enunciation of the said principle in Central London Property Trust Ltd v. High Trees House Ltd [1947] KB 130 for support. As Lord Denning succinctly summarised the principle in Evenden v. Grifford Football Club [1975] 1 QB 917, promissory estoppel is not necessary limited to cases where parties are already bound contractually one to the other, but (at p.924).

“It applies wherever a representation is made, whether of fact or law, present or future, which is intended to be binding, intended to induce a person to act upon it and he does act upon it.”

COURT’S CONSIDERATION

In considering whether to grant the interim injunction sought by the plaintiff, this Court had taken into consideration the principles to be applied as laid down in the leading authority of American Cyanamid Co. v. Ethicon Ltd (1975) ALL ER 396. In the first instance, the Court considered whether there is a serious issue to be tried. There is. The question whether there exists a valid legal agreement between the parties, without a formal tenancy instrument constitutes a serious question of both law and facts and of which quite clearly, the parties have expressed different interpretation and views upon. The Court is equally satisfied that the claim is not frivolous or vexatious, nor can it be said at this stage that the plaintiff has no real prospect of succeeding in its claim.

Having satisfied itself that there is a serious issue to be tried, that the claim is neither frivolous nor vexatious; and that evidence so far produced does not show that the plaintiff has no real prospect of succeeding in its claim at trial, there remains the only outstanding factor of the balance of convenience for this Court to address in deciding whether the parties could be compensated in damages if injunction were or were not granted. In the circumstances of this case, the question is whether the plaintiff could be adequately compensated in damages if the injunction was allowed to continue.

The 1st Defendant is a well-to-do financial institution in the country and has indicated its desire to sell the total allotment including the complex on which the premises occupied by the plaintiff and the subject of this proceedings, is located. The sale of the property would involve a considerable amount of money. The retention of the injunction may result in the 1st Defendant suffering unquantifiable damage, which will not only disrupt its business, but for which the plaintiff may not be in a financial position to pay, should the final outcome of this action favour the defendants.

On the other hand, the plaintiff has already convinced the Court in the ex-parte proceedings that there is a serious issue to be tried and decided by the Court on whether there exists an agreement between the parties. The basis for the grant of the interlocutory injunction is to preserve the status quo until the rights of the parties have been determined. It has undertaken damages.

Having fully considered the affidavit evidence and submissions of Counsel, I am persuaded that the balance of convenience favour the defendants. They not only stand to be greatly disadvantaged in the future of their business dealings but by the same token, the 1st Defendant is more than financially capable of paying damages to the plaintiff. This would be adequate remedy for the plaintiff should the action be determined in its favour.

In the end, the Court makes the following orders:

(1)	The interim injunction is hereby dissolved.

(2)	The plaintiff to file its Statement of Claim within 21 days and served on the Defendants.

(3)	The Defendants make an undertaking as to damages.

Costs in the cause.

F. Jitoko
JUDGE
At Suva
On 18th August, 2003