Vunimoli Sawmill Ltd v Samshood [2007] FJHC 126; HBC 008D.2007S (14 February 2007)

IN THE HIGH COURT OF FIJI

AT SUVA

CIVIL JURISDICTION

CIVIL ACTION NO. HBC 008D OF 2007S

BETWEEN

VUNIMOLI SAWMILL LIMITED a limited
liability company having its registered office in Labasa.
FIRST PLAINTIFF

BASHIR KHAN also known as BASHEER KHAN
father's name Puran Singh( of Labasa, Businessman.
SECOND PLAINTIFF

AND

MOHAMMED SAMSHOOD (father's name - Mohammed Sakur)
and ROZEENA SANO (father's name Hamid Abbasl both of
Labasa, trading as SAM CIVIL SERVICES.
DEFENDANTS

Counsel for the Plaintiff: Dr. S. Sahu Khan: SAHU KHAN & SAHU KHAN
Counsel for the Defendant: Sheik H. Shah.: SHEIK H. SHAH ESQ.
Date of Decision: 14 February, 2007
Time of Decision: 9. 30 a.m.

DECISION

This injunction application is to restrain the Purchasers ("the Defendants"'), trading as Sam Civil Services, from operating the Vunimoli Saw Mill in Labasa, desist from dismantling and/or removing any equipment or machines from the mill, cease logging from specified area covered under the Vendor's ("the Plaintiff") logging license (License No. 80/2006) and to allow the Plaintiff to re-enter and taking possession of the mill.

The background facts are as follows. The 1^st Plaintiff, Vunimoli Sawmill Limited, is a Company carrying on the business of logging and timber milling in Labasa. The mill is situated on a Native leasehold land known as Lot 1 on T 950 Waidamudamu (part of). The 2^nd Plaintiff owns the Company, operates the milling business and owns the logging license No. 80/2006. The defendants are owners and directors of the Company known as Sam Civil Services ("Defendant Company"), and also the third-named Defendant in this action.

On 2^nd September 2006, the Plaintiffs entered into an agreement with the Defendants for the sale and transfer of the Lease and of the sawmill, inclusive of stock and trade.

The purchaser price set out as Clause 1 of the Agreement is $900,000.00 (VAT inclusive) comprised as follows:

"a) The purchase price of Vunimoli Sawmill together with the machinery and other chattels described in the schedule B shall be $800,000.00 as a going concern with VAT if any;

(b) The purchase price of the said lease together with building as described in the schedule A shall be $100,000.00 as a going concern with VAT if any;

(c) The purchasers shall pay the said sum of $900,000.00 as a going concern with VAT if any to both vendors as follows:-

1.2 The purchasers shall upon the execution of this Agreement take all necessary steps to obtain a loan from any bank and pay off the Vendors the whole sum of $900,000.00 as a going concern with VAT if any, on the 15^th December, 2006."

The mode of payment is set out in detail at Clause 2 of the Agreement. In summary,

1. the purchasers to pay a deposit of $105,000.00 into the trust account of Messrs Shah H. Shah, Solicitors "upon grant of consent of NLTB to the transfer of the lease",

2. the sum of $35,000.00 from the deposit shall be paid across to the Vendors upon the transfer of the sawmill licence No. 80/2006 to the purchasers or upon the approval by the Conservator of Forests for the purchasers to operate the sawmill under the Vendors' current licence (80/2006),

3. the balance of the deposited sum to be paid in 2 instalments of $35,000.00 each on 31 October 2006 and 15 November 2006 respectively,

4. the Vendors are required, from the money received, to settle their FDB loan and discharge securities held over the properties, and

5. the balance of the purchase price of $795,000.00 to be paid on 15 December 2006, the date of settlement "or further 2 weeks grace period ending on 29^th day of December, 2006."

Should the Defendants fail to secure the necessary loan, then it is agreed between the parties that the purchase price be increased to $1.1m (with VAT if any) to be paid by instalments as follows:

1. $250,000.00 to be paid “to the Vendors upon settlement at Registrar of Titles office in Suva and the security of the property and the said business shall be held by the Vendor s",

2. $18,265.00 to be paid on the last day of each month for 40 months.

3. a rebate of $5000.00 is offered to the purchasers if the total purchase price is paid in full before the expiry of the 40 month period.

The default provision of the Agreement are set out under Clause 7. It states as follows:

“7.1 If the Purchasers shall make default in payment of any monies hereby agreed to be paid and if such default shall continue for the space of ninety (90) days from the due date then and in such case the Vendors without prejudice to their other remedies may at their option exercise the following remedies:-

i. enforce this contract in which case the monies paid by purchasers shall be forfeited or

ii. sue for specific performance, alternatively;

iii. claim from the purchasers a sum of $500,000.00 (plus vat) (Five Hundred Thousand Dollars) being the agreed damage;.

iv. in default of payment as agreed, the Purchasers shall pay a penalty of $1,000.00 (plus vat if any) (One Thousand Dollars) per month to the Vendors, in the event the default continues for ninety (90) days the Vendors may take possession of the property forthwith;

7.2 If the Vendors shall make default in the performance or observance of any stipulation or agreement on the Vendors part herein contained and if such default shall continue for the space of fourteen (14) days from the due date then in such case the Purchasers without prejudice to any other remedies available to them may at their option exercise the following remedies namely:-

i. may rescind this contract of sale and thereupon all monies theretofore paid or under the terms of sale applied in reduction of the purchase price shall be refunded to the Purchasers without any deduction together with interest;

ii. sue for specific performance or alternatively;

iii. claim from the Vendors a sum of $500,000.00 (plus vat) (Five Hundred Thousand Dollars) being the agreed damages."

The agreed facts subsequent to the signing of the Agreement are as follows:

1. That the deposit of $105,000.00 was paid by the Defendant to Sheik H. Shah's trust account and in turn received by the Plaintiffs,

2. That the Defendant failed to obtain a bank loan for the $795,000.00 being the balance of the purchase price by the settlement date (15 December 2006) nor by the end of the 2 weeks grace period (29 December, 2006),

3. That consent of the NLTB for the transfer of the lease from the Plaintiff to the Defendant was given on 30 August, 2006 and lapsed on 30 November, 2006; the Defendant sought and obtained a “renewal of the consent” of NLTB to the transfer on 21 December, 2006, and

4. That the Defendants have not paid the $250,000.00 pursuant to Clause 2.6 of the Agreement, nor has there been any monthly instalments payment of $18,625.00 as required under Clause 2.7.

Plaintiffs argue that the Defendants have defaulted in payment of the purchase price of $900,000.00 and alternatively tailed to pay $250,000.00 under the option available in Clause 2.6 and 2.7 of the Agreement. In any case, Plaintiffs submit that they are entitled to resile from the contract because the necessary NLTB and Conservative of Forests consent to transfer of the lease and the sawmill licences respectively, have not been properly obtained.

The Defendants on the other hand claim that the contract/Agreement is still valid since clause 7.1 allows a 90 day grace period from the breach, before the Plaintiff can take remedial actions. In their view the “extension” of the NLTB consent as well as the operation of the sawmill by the Defendants under the Plaintiff's licence, are and remained valid.

The principles governing interim relief are set out in the leading case of American Cyanamid Ltd v Ethicon Ltd [1975] UKHL 1; [1975] AC 396. The Plaintiff does not need to establish a prima facie case. He needs only to establish that a serious issue arises and produce sufficient affidavit evidence to satisfy the Court that the claim is not frivolous, vexatious and that the application discloses a reasonable prospect of success. Once this is met, the governing consideration is where the balance of convenience lies.

It is clearly obvious based on the evidence before this Court, that there are serious issues of both facts and law raised that need to be argued further. Affidavit evidence is not enough. Questions on the correct interpretation of the various provisions of the Agreement, the validity of the extension of the NLTB consent, as well as the purported re-newal of the Plaintiff's sawmill licence and its current use by the Defendants to operate the Vunimili Sawmill, are serious issues raised.

The Court in deciding whether to grant the injunction ought by the Plaintiff must determine the all important matter of where the balance of convenience lie. This is primarily measured in terms of whether the parties could be compensated in damages if interlocutory relief were or were not granted.

The Plaintiffs are seeking to avoid a contract for the sale and transfer of the lease and the sawmill on the ground of breaches of the terms of the Agreement. On the other hand, the Defendants have paid the deposit of $105,000.00 and are in physical possession of the property, in accordance, so they argue, with Clause 4.1 of the said Agreement. They are in fact operating the sawmill business as a going concern.

The Court, on the basis of the facts placed before it, is satisfied that the balance of convenience favours the Defendants. The status quo should be maintained. It is the only reasonable step forward in ensuring that the business continues unimpeded while the rights of the parties is decided in the hearing of the substantive action. However, given the fact that the Agreement demanded payments of certain amount of money by the Defendants on dates that may or may not have expired, and considering what appears to be the lack of preciseness or clarity of the terms of the Agreement on the exactness of time and place, the Court will order the payment of the sum of $200,000.00 into Court by the Defendants to be held there until further orders of this Court. The Court considers this appropriate as security or bond in addition to the undertaking in damages. This money may however be utilised upon application, to fulfil the Defendant’s obligations under the Agreement pending the Court's final decision.

The Plaintiffs application is dismissed. The matter to take its normal cause.

Order is made for the payment of $200,000.00 to be made by the Defendants into Court within 14 days.

There remains a very disturbing development that arose after the Court reserved its decision following oral arguments by Counsel on 15 January 2007. The Defendants soon after the hearing had been concluded, decided to seek the assistance of the military, purportedly to try and influence the outcome of these proceedings in their favour. It is my understanding from Counsel for the Plaintiffs, that both parties and their respective Counsel were summoned to the military camp where discussions at the behest of the military were reportedly held on this case. A letter from the military to the Court attempted to explain its effort in this regard. This was copied to all parties and Counsel.

Let me make the position very clear. It is not, I repeat not, the military or for that matter, any agency or organisation other than this Court, that will make the determination and the final decision in this case. This must hold true in all other civil matters. The independence of this Court and judiciary as a whole is premised on the clearest of understanding by everyone in the land that matters will be decided impartially in accordance with the law. Independence of the judiciary means that the Courts will not be threatened, pressured, induced or interfered with from anyone in carrying out its functions. Independence implies impartiality and freedom from or rejection of, improper influences in the conduct of the work of the Court and in reaching its judgements and conclusions. I therefore view the intrusion of the military on behalf of the Defendants, in this case with grave concern. No matter how well-intentioned the action may have been, the simple fact is that the matter is already before the Court awaiting its decision, and any attempt to interfere with it, be it directly or otherwise, is tantamount to contempt.

What however is even more serious in this instance is, what appears to be the acquiescence of Counsel for the Defendants for the matter to be referred to the military. It is the solemn duty of Counsel as an officer of the Court and to which he has duly swore its oath of office, to observe and abide by the rules and conventions that not only governed the conduct of its affairs, but at the sane time ensure the integrity of the institution is maintained and safeguarded. In this case, it is the duty of Counsel to advise the parties on what amounts to appropriate behaviour and what does not. That it appeared that he failed to do so in this case, Counsel for the Defendants is found wanting both in his duties to the Court and living the ethics of the profession.

As it turns out, this Court has already found on the merits alone, in favour of the Defendants. This however does not diminish its concern of the attempt to interfere in its independence and ultimately its impartiality.

F. Jitoko
JUDGE.

At Suva
14 February 2007