Kumar v Shooters Ltd [2006] FJHC 23; HBC0609.2005 (25 January 2006)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO.: HBC0609 OF 2005

BETWEEN:

DILIP KUMAR, MAHENDRA KUMAR and SAVITA BEN
PLAINTIFFS

AND:

SHOOTERS LIMITED
FIRST DEFENDANT

ELEEN ALYINA DAYAL
SECOND DEFENDANT

FRANZ GEORG KEIL and WALTON MORGAN
THIRD DEFENDANTS

Mr. S. Chandra for Plaintiffs
Mr. D. Sharma for First and Second Defendants
Mr. N. Prasad for Third Defendants

Date of Hearing: 18th January 2006
Date of Ruling: 25th January 2006

RULING ON NOTICE

This is a bizarre case where the plaintiffs and first and second defendants all suffered from a financial death wish.

The plaintiffs under a written agreement prepared by a firm of solicitors the third defendant purchased a nightclub and restaurant business together with some chattels. They paid $20,000.00 deposit to the vendor the first defendant. Later the plaintiffs paid further $20,000.00 to the defendants. The first defendant then paid $20,000.00 to the landlord as goodwill for renewal of lease. Eleven days later, while the two protagonists were embroiled in a struggle over matters which could be easily sorted out, the landlord moved in, distressed the items for rent and sold the items in the nightclub for $20,000.00 allegedly for rental owing to him in the sum of $4,620.00. Now I am told the landlord is looking for someone else to rent the place. The parties are now left with loss of $20,000, the chattels and no nightclub or restaurant. Neither of the parties tried to sort out the rental matter when distress was levied.

The plaintiffs are asking the court to freeze payment out by the third defendants of moneys deposited in third defendant’s trust account pending resolution of this matter. In support of its summons the plaintiffs have filed two affidavits and the defendants have filed two affidavits.

Mr. Chandra for the plaintiffs submitted that the Sale and Purchase Agreement was a conditional contract and that the plaintiffs had not been issued with a lease for five years or received a letter of comfort. He also said the liquor licence had not been transferred to plaintiffs’ name. He also asserted that some of the items listed in the inventory were missing or not working and that there was misrepresentation by the first and second defendants as to the level of income generated from the nightclub. He says the plaintiff has paid $20,000.00 and $20,000.00 was paid to defendant for goodwill to landlord for purposes of lease. Even though the plaintiffs have paid $40,000.00 they have no nightclub, no lease for it and all the chattels have been sold by the landlord.

Mr. Sharma on the other hand submitted that the sale was on “as is where is” basis. A large part of the contract has been fulfilled. The renewal of licence was in motion and the vendor was ready to transfer it. The lease too would have been granted as goodwill in the sum of $20,000.00 was paid to the landlord. The plaintiffs made no efforts to check on the lease with the landlord.

He strongly submitted that the vendor is now without a nightclub or the chattels and without the name Shooters. He says there is no refusal by the landlord to grant lease. He says on 8^th December 2005, keys were given to the plaintiffs, and the plaintiffs operated the business for two days and then abandoned it.

That the Sale and Purchase Agreement was a conditional contract is not in doubt. Clause 10-1 of the Contract states this:

“This agreement is conditional upon and subject to the Purchase entering into an agreement to lease with the Head Lessor of the property from which the business is currently carried on upon usual commercial terms for an initial term of five years or receiving a letter of comfort from the said Lessor to this effect.”

There is no dispute that the purchasers did not enter into a lease with the Head Lessor nor did they receive a letter of comfort. However, it is also not in dispute that a sum of $20,000.00 was by consent of the parties released from the solicitors trust account to the landlord as goodwill on 6^th December 2005. The plaintiffs also operated the nightclub for two days and concluded that the financial figures were inflated.

The issue is, had the plaintiffs by accepting the key and operating the nightclub for two days waived the above conditions regarding the lease and accepted the risk of whether or not the landlord granted plaintiffs lease. The distress for rent notice is directed at the plaintiffs so the landlord more than likely considered them as his tenants.

The transfer of nightclub licence presents difficulty. Sale of liquor is an essential part and a parcel of nightclub business. The transfer of licence to the purchaser would be considered a fundamental term of the contract. One simply could not presume that such licences would be transferred to the plaintiffs. Whether the plaintiffs took the risk of whether or not licence was transferred to them and took the keys, I cannot say without hearing the parties.

The plaintiffs make two other serious allegations against the Vendor namely that they had inflated and misrepresented income figures for the nightclub in order to induce them to enter into the contract. On the other hand the Vendor alleges that the figures were prepared by the plaintiffs’ accountants. Annexure G to the Affidavit of Mohammed Usman shows that the defendant used the $20,000.00 to clear up debts of the company and it wanted this fact not to be disclosed to anyone. What was the need for such secrecy? Would it not lead a reasonable person to conclude that the nightclub was perhaps not making a profit?

The plaintiffs also alleged that furniture, fittings and equipment were not in accordance with what was stipulated in the agreement. Some items were missing. Some were not working. A few items apparently had been changed. While some value could be put to these items and therefore damages assessed, nevertheless one must consider the action in its entirety of allegations and counter allegations. The defendants say the contract was on “as is where is” basis but that hardly explains missing items and allegedly replaced items.

The subject matter of the contract – the premises and chattels are no longer in existence. Someone has a nightclub and restaurant licence in his name but they are useless unless you have premises in a prime location to operate from. Already the plaintiff is out of pocket by $40,000.00. A stranger to the dealing has gained $20,000.00 but not issued a lease.

In the circumstances I do not consider given the contradictory assertions of parties that I should interfere with the status quo. The funds are in safe hands of the third defendants and should remain there until these proceedings have been heard and determined by the High Court.

[ Jiten Singh ]
JUDGE

At Suva
25^th January 2006