Natural Waters of Viti Ltd v CEO of the Fiji Islands Revenue and Customs Authority and Controller of Customs [2008] FJHC 138; HBJ1.2008 (8 February 2008)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

Judicial Review No. HBJ 1 of 2008

IN THE MATTER of an application
for Leave to apply for Judicial Review by
NATURAL WATERS OF VITI LIMITED
Under Order 53 of the High Court Rules 1988

AND

IN THE MATTER of three Decisions of the
CHIEF EXECUTIVE OFFICER OF THE FIJI ISLANDS
REVENUE AND CUSTOMS AUTHORITY
AND/OR THE GENERAL MANAGER OF FIJI ISLANDS
CUSTOMS SERVICE purportedly made on or about
20 December 2007 and 4 and 11 January 2008 respectively.

BETWEEN:

NATURAL WATERS OF VITI LIMITED,
A company incorporated under the laws of Fiji
with its registered office at 4 Nuqa Place, Lautoka
Applicant

AND:

THE CHIEF EXECUTIVE OFFICER OF THE FIJI ISLANDS
REVENUE AND CUSTOMS AUTHORITY
AND CONTROLLER OF CUSTOMS
5^th Floor Dominion House, Victoria Parade, Suva.
First Respondent

THE GENERAL MANAGER FIJI ISLANDS
CUSTOMS SERVICE, Rodwell Road, Suva
Second Respondent

THE MINISTER OF FINANCE OF FIJI
Ro Lalabalavu House, Victoria Parade, Suva
First Interested Party

THE ATTORNEY-GENERAL OF FIJI sued on behalf of
The Minister of Finance of Fiji,
Level 7 Suvavou House, Victoria Parade, Suva
Second Interested Party

Mr R. Naidu and Mr N. Barnes for the Applicant
Mr M.J. Scott and Mr B. Solanki for the First and Second Respondents
Mr C. Pryde, Solicitor General for the Interested Parties (excused)

Dates of Hearing: 4/7 February 2008
Date of Judgment: 8 February 2008

JUDGMENT

1. Background

On 21 January 2008 the following orders were granted on an application made by Natural Waters of Viti Ltd (‘Natural Waters of Viti), the Applicant:

1. Leave granted to the Applicant pursuant to Order 53 Rule 3(3) of the High Court Rules 1988 to apply for judicial review of the decisions of the First Respondent and/or the Second Respondent set out in the Applicant’s Application of 17 January 2008.
   
2. Leave to operate as a temporary stay of the said decisions up to and including 31 January 2008.
   
3. The Applicant to be permitted by the Respondents to export Viti Fiji Water accompanied by commercial invoices on the basis of $4-5/per case as previously, conditional upon the Applicant’s pay into Court a sum being the difference between $4-5/per case and $10/per case, in respect of each shipment up to and including 31 January 2008.
   
4. The Application to be set down for hearing in the High Court in Suva on 31 January 2008.
   
5. Costs in the cause.
   

1.1 On that day, a further order was made as follows:

(b) To comply with Order 3 of the Judgment, the Applicant will provide a bank bond through Westpac Banking Corporation to a limit of not more than USD5 million and would not seek to, or export more than the differential required to comply with that order.

1.2 Additionally, order 4 was amended to read:

(c) The matter be listed for mention on 31 January 2008 at 9.30am in Suva.

1.3 The substantive matter relates to three (3) decisions said to have been made by the Respondents the Chief Executive Officer of the Fiji Islands Revenue and Customs Authority and Comptroller of Customs (‘Comptroller of Customs’) and the General Manager of Fiji Islands Customs Service (‘GM Customs Service’). The decisions are set out by Natural Waters of Viti in the following terms as being:

1. Of 20 December 2007, purportedly under section 25(2) of the Exchange Control Act (Cap. 211) requiring Natural Waters of Viti to deliver declarations of costs of goods in the format accompanying the CEO Revenue’s letter to Natural Waters of Viti dated 20 December 2007 (‘Breakdown by Product Format’) – First Decision
   
2. Of 4 January 2007 (conveyed orally despite requests for confirmation in writing). Purportedly in terms of section 25(1) of the Act, that no shipments of Natural Waters of Viti’s Fiji Water bottled water product (Viti’s Fiji Water) would be permitted to leave Fiji unless the commercial invoices to which they related were priced at $US24 per case – Second Decision
   
3. Of 11 January 2008 requiring compliance with Internal Circular No. 1 of 2008 (‘Circular’) which in turn requires Natural Waters of Viti to deliver declarations of costs of goods in the Breakdown by Product Format (purportedly under regulation 108 of the Customs Act) and insisting on an export value of $US24 pursuant to Part 3 Schedule 1 of the Customs Tariff Act – Third Decision
   

2. Further Interlocutory Orders

By Summons of 31 January 2008 Natural Waters of Viti sought further interlocutory orders:

(a) The leave granted by the Court on 21 January 2008 to continue to operate as a temporary stay of the decisions of the First Respondent and/or the Second Respondent set out in the Applicant’s Application for Leave to Issue Judicial Review Proceedings dated 17 January 2008, pending final determination of this action by the Court;

(b) The Applicant to be permitted by the Respondents, until the final determination of the action by the Court, to export its Fiji Water product, accompanied by commercial invoices on the basis of $4-5/case as previously, without further requirement for payments into Court PROVIDED THAT the banker’s undertaking delivered to the court in a sum not exceeding five million dollars in United States currency continue in force until such final determination by the Court;

(c) Costs of this application be in the cause.

2.1 Together with the Summons were filed Affidavits setting out the grounds upon which National Waters of Viti rely. These Affidavits were sworn, respectively, by Carol Watkins, Natural Waters of Viti Finance Director, and Loraine Alpana Bhan, Legal Librarian of the Lawyers for Natural Waters of Viti. The latter annexed the Reserve Bank of Fiji (RBF)’s Exchange Control Brochure 2005 and pages from the Fiji Islands Trade and Investment Bureau (FRIB) website. The former set out an index of contents indicating that the Affidavit addressed, in relation to Natural Waters of Viti:

(a) general commercial background;
(b) what has occurred since the 21 January 2008 Court orders;
(c) Natural Waters of Viti’s position as of 31 January 2008;
(d) Shipments scheduled to occur;
(e) Natural Waters of Viti’s continued ability to provide ‘security’ in terms of Order 3 of the court’s orders of 21 January 2008;
(f) Confirmation of Natural Waters of Viti’s Value Added Tax (VAT) refund status.

2.2 Whether the information in the Exchange Control Brochure 2005 was contemporary arose during the course of the hearing and on 4 February 2008 Counsel for the Comptroller of Customs and GM Customs Service handed up two documents, one being RBF ‘Exchange Control Restrictions effective from 6 December 2006’, the other dating from 2007. On 31 January 2008 the Respondents filed an Affidavit of Jitoko Cakacaka Tikolevu, CEO, Fiji Islands Revenue & Customs Authority, ‘in answer to the third Affidavit of Carol Watkins’.

2.3 Handed up on 1 February 2008 for Natural Waters of Viti was a fourth Affidavit of Carol Watkins, ‘answering Affidavit of Mr J. Tikolevu’.

2.4 Additionally before the Court were Counsels’ written submissions. In this regard it is noted that the Solicitor-General appeared for the First and Second Interested Parties, the Minister of Finance of Fiji (Minister of Finance) and Attorney-General of Fiji (Attorney-General), however was excused, advice to the Court being that the Minister of Finance and Attorney-General were content to rely upon submissions made for the GM Customs Service and Comptroller of Customs.

2.5 On 31 January 2008 an order was made addressing the issue of commercial matters (with liberty to apply) and setting a timetable for the substantive hearing. The first order provides:

1. No party is to disclose to third parties (excluding Counsel and witnesses of either party) including by way of public statement any commercial matters of the Applicant appearing in Affidavits in this proceeding.
   

2.6 On 1 February 2008, to cover shipping of Fiji Water up to the hearing of the application for further interlocutory orders, the orders of 21 January 2008 were continued to 5 February 2008 enabling further shipments of Fiji Water to be exported up to the level of the $5ml bond.

2.7 The matter commenced as a hearing in Chambers however with the parties’ consent it was determined on 4 February 2008 that it should be heard in open court, any issue going to commercial matters to be dealt with as it arose. In the event, on 4 February two matters were the subject of an order, namely as to Natural Waters of Viti’s anticipated shipping in $terms and the $amount of its credit line, these ‘not to be reported on or the subject of media comment’.

3. Positions of the Parties

In short compass, the positions of the parties in relation to the continued shipment of Fiji Waters pending hearing of the substantive application were as follows.

3.1 (a) The Applicant - Fiji Waters of Viti

Natural Waters of Viti set out its position in the earlier referred to Summons:

(a) the leave granted by the Court on 21 January 2008 to continue to operate as a temporary stay of the decisions of the First Respondent and/or the Second Respondent set out in the Applicant’s Application for Leave to Issue Judicial Review Proceedings dated 17 January 2008, pending final determination of this action by the Court;

(b) The Applicant to be permitted by the Respondents, until the final determination of the action by the Court, to export its Fiji Water product, accompanied by commercial invoices on the basis of $4-5/case as previously, without further requirement for payments into Court PROVIDED THAT the banker’s undertaking delivered to the court in a sum not exceeding five million dollars in United States currency continue in force until such final determination by the Court;

3.2 Submissions in support of this outcome were that:

1. Natural Waters of Viti was content that the $US5,000,000 bond was held by the Court however submitted it was not equitable to continue to condition exports on a pro rata payment-in basis;
2. The ‘conditional injunction’ essentially required Natural Waters of Viti to ‘secure its perfectly credible and sound undertaking as to damages’ (affirming its view that ‘the prospect of damages seems low’;
3. There were no reasons in law for Natural Waters of Viti to secure its undertaking as to damages in this way;
4. A bond conditioning exports for 10 days (as in the original order) is quite different from a position where such a condition may exist for up to two months or more to the substantive hearing, possibly 31 March 2008;
5. This was the more so as the Comptroller of Customs had ‘effectively extended this period’:
   
   1. by ‘not being ready to argue the case in its entirety on 31 January (because he wishes to put up "after the fact" expert evidence to support his demand for an export value’ of $US24,.00 per case)’; and
   2. by not checking through diligent work a matching of Natural Water of Viti’s export documentation with US Customs documentation;
   3. doing the latter would bring about a situation where the Comptroller of Customs ‘could resolve the whole case’.
      

3.3 Natural Waters of Viti summed up:

In the circumstances, it is unfair to penalise NWVL in the interim by continuing with the orders as set out. This would require NWVL to pay into Court (based on current shipping projections to 17 March alone) in excess of USD10 million to enable it to continue to ship product. The realistic assessment must be that, at some point in this period, these requirements will become too commercially onerous and shipments will stop. The irony, if such were to occur, is that Comptroller’s alleged concern to safeguard foreign exchange will result in none being earned at all: para 3 Written Submissions 4 February 2008

3.4 (b) The Respondents and Interested Parties - Comptroller of Customs, GM Customs Service, Minister of Finance and Attorney-General

The Comptroller of Customs and GM Customs Services, with which submissions the Minister of Finance and Attorney-General concurred saw three alternatives open:

1. Continuation of the present Order until hearing, of the $US4-5/per case being supplemented by a bond being the difference between that figure and $US10/per case for each shipment of Fiji Water;
   
2. A new Order requiring Natural Waters of Viti to invoice all outgoing shipments with a ‘Without Prejudice’ value of $US10/case;
   
3. A new Order allowing Natural Waters of Viti to export Fiji Water at the figure (to date $US4-5/case) it sets upon each case.
   

3.5 The submission summed up:

Alternative (ii) is the favorite of the Respondent, [obviating] the need for security, and is considerably more than ‘superficially attractive’ as the Applicant asserts, as will be shown. The attempted refutation of this notion ... [by] the Applicant’s submission[1] is exceptionally fragile ...

Alternative (i) is in the Respondent’s view the second preferred option. The ability of the Applicant to provide security seems to be established, but subject to an important reservation as to the evidence of Carol Watkins to be cited presently.

To follow alternative (iii) ... is ... to suspend the operation of a vital provision enacted in the public interest and not in the interest of NWVL, of which the comptroller is guardian ...

The harm to the foreign reserves which following of the third alternative will cause is very firmly established ..., notwithstanding the vigorous and consistent complaint of the Applicant that no harm [will arise from alternative (iii)]: Submission 7 February 2008, p. 4

3.6 Submissions were presented vigorously on a number of issues. The parties contested whether one or other was responsible for delay in the hearing of the substantive application. They contested the financial position of Natural Waters of Viti and the information conveyed in the Affidavits from Ms Watkins for Natural Waters of Viti. Ms Watkins’ reply to Mr Tikolevu dealt with a number of matters, indicating agreement with some matters in his Affidavit and contesting or correcting others as to Natural Waters of Viti’s interests. They contested whether or not Natural Waters of Viti was in a position to lodge a further bond with the Court or not, so as to continue effectively the orders of 21 January 2008. They contested matters going to foreign reserves, the GNP and documentation from the Reserve Bank and associated matters. There was a contest as to the question of Customs and documentation – both as to the follow up with US authorities by the Comptroller of Customs vis-à-vis documentation provided by Natural Waters of Viti, and as to tax and customs implications if Natural Waters of Viti were to ship consignments with invoices representing, ‘without prejudice’, the case value or price of $US10 rather than the value or price which has been stated for the past 10 years or so, namely $US4-5/per case. Each party’s position on this aspect was challenged as speculative by the other. The issue of VAT to be reimbursed to Natural Waters of Viti was also a live issue, with the Respondents’ position being that $1ml had already been reimbursed by cheque not yet received by Natural Waters of Viti and an assurance that the remainder outstanding was scheduled to be reimbursed to Natural Waters of Viti with the next month (as it was understood) or at least short period.

3.7 A shipping schedule was attached to the third Affidavit of Carol Watkins (Annexure ‘CW 23’). A revised shipping schedule was produced to the Court, indicating various shipments from 23 January 2008 through to 18 February 2008. Consistent with the Orders of 21 January 2008, a number of these shipment had sailed and as at 1 February of the $US5ml bond lodged with the Court, there was a balance of $US1,200,000 approx. In the course of the hearing a shipment or part shipment was noted as having been unable to sail in consequence of the cyclone which arrived in Fiji on or about 28 January 2008. The parties cooperated to ensure that an alternative shipment was able to sail consistent with the Orders.

3.8 The material presented and submissions made have been useful both for the purposes of this interim application and for the hearing on the substantive application. On all that has been said and provided in written material to the Court, it appears to be in the interests of both parties and in the public interest for Fiji Water to be exported.

4. Determination

I have thoroughly canvassed in my previous judgment wherein the interim Order was made the basis upon which a stay and interlocutory relief may be granted and the matters to which the Court is obliged to direct itself in making a determination as to whether or not to grant the relief sought. I have considered those principles afresh and applied them in this new application. It would be otiose to replicate those matters here, save as to say that I have taken them into full action in this determination.

4.1 Upon that basis, I have concluded it is consistent with principle as outlined in that earlier judgment to continue the stay and to allow Natural Waters of Viti to continue exporting through to the time of the final determination on the substantive application.

4.2 The question then is, however, how to enable this to occur consistent with the principles I am obliged to follow and apply in granting the necessary relief.

4.3 The basic positions of the parties are clear. Natural Waters of Viti says it is unable to lodge more bond with the Court. It says that its undertaking as to damages will suffice. The Comptroller of Customs and GM Customs Service say that ‘something’ is needed to enable section 25 of the Exchange Control Act) to be complied with – that is, the Comptroller must be able to establish for himself a ‘satisfaction’ consistent with his statutory obligation. This matter was considered by me to be important in my original judgment. In my opinion, it remains important.

4.4 Particularly taking into account the balance of convenience I am therefore obliged to find a practical solution which:

• Will enable Natural Waters of Viti to export Fiji Water for the forthcoming period;
• Will enable the Comptroller of Customs to comply with his statutory responsibility under the Exchange Control Act.;
• Will not place Natural Waters of Viti in a position which could cause complexities in the United States vis-à-vis its documentation and the implications of changing its invoiced amount by doubling it;
• Will obviate the need for Natural Waters of Viti to deplete its funds by having funds held by the Court which could be detrimental to its financial liquidity;
• Will enable the Comptroller of Customs and GM Customs Service to fulfill their responsibilities as public office holders.
  

4.5 I accept that both parties’ positions on the tax and customs aspect vis-à-vis the US were speculative. At the same time, I do take into account that a sudden rise in the invoiced value or price per case of Fiji Water may cause administrative difficulties at US Customs and may have tax or customs, etc implications which unnecessarily interfere with the smooth export of Fiji Water.

4.6 I also accept that allowing the shipping of Fiji Water at the aforeaccustomed value or price of $US4-5/case does not enable the Comptroller of Customs in all the circumstances to be satisfied as he is statutorily required to be. Hence, the preferred position of Natural Waters of Viti, nor the preferred position of the Comptroller of Customs and GM Customs Service is appropriate.

4.7 As to the delay (which as noted was said by the parties to have arisen by reason of the other’s conduct or at least was not their doing or entirely their doing), even if the Comptroller of Customs and GM Customs Service were responsible for the delay in hearing the substantive application, this does not obviate the need for compliance by the Comptroller of Customs with section 25 of the Exchange Control Act.

4.8 Natural Waters of Viti’s position is that it is unable to lodge further bond monies with the Court, citing amongst other matters that holding substantial assets does not mean that monies are available to lie in Court so that they are unable to be utilised in an ongoing manner as required from a commercial point of view. Natural Waters of Viti does hold substantial assets including a 99 year lease over land situate in Fiji and vehicles being Mann trucks, and other assets (including stock).

4.9 The practical solution, taking into account the commercial realities facing Natural Waters of Viti and the statutory and public interest lying in the responsibilities of the Comptroller of Customs and GM Customs Service is as follows.

4.10 The stay should continue, as stated, until the final determination of the substantive matter. Export of Fiji Waters should continue in accordance with the shipping schedule (taking into account that this schedule may change in consequence of ships arriving or not arriving, or arriving at different dates from those set out on the schedule, or being able to take larger or smaller consignments). To satisfy the Comptroller of Customs and GM Customs Service concerns as to their statutory responsibility:

• The current bond of $US5mil. is to remain with the Court.
• Natural Waters of Viti is to lodge with the Registrar of Land Titles a charge over the leased land held by Natural Waters of Viti under a 99 year lease being Title CL no. 12700 Nasoro (Part of)(Formerly RR69)Lot 1 SO3401, being an area of some 0768 hectares.
• That charge is to be made in favour of the Comptroller of Customs.
• With each shipment of Fiji Water or batch of shipments, Natural Waters of Viti should lodge with the Court a schedule indicating the invoiced value of the consignment at $US4-5/case and the difference between that value and the figure of $10/per case.
• The schedule will operate as a ‘control’ against the charge so that the charge is determined and accepted by the parties as never exceeding the total of the difference between the $US4-5/case and $10/per case value, consistent with each shipload or consignment exported from Fiji.
  

4.11 Should there by any delay necessitated by administrative requirements in lodging the charge with the Registrar of Land Titles, then Natural Waters of Viti will lodge with the Court a bond in the amount of $1ml being the amount reimbursed as VAT, that bond to be lodged when the $1ml is received by Natural Waters of Viti.

Orders

1. The stay granted on 21 January 2008 and continued on 1 February 2008 is to continue until the final determination of the substantive action.
2. The bond lodged by the Applicant with the High Court in the amount of $US5ml to remain with the Court.
3. The Applicant to:
   
   1. lodge with the Registrar of Land Titles a charge over the leased land held by it under a 99 year lease being Title CL No. 12700 Nasora (Part of)(Formerly RR69)Lot 1 SO3401, being an area of some 0768 hectares;
   2. commence on 8 February 2008 or as soon thereafter as practicable and in any event before close of business 12 February 2008 the requisite steps for lodging the charge;
   100. make the charge in favour of the Court;
   4. lodge a copy of the charge with the Court;
   5. lodge with the Court, with each shipment of Fiji Water or batch of shipments, a schedule indicating the invoiced value of the consignment at $US4-5/case and the difference between that value and the figure of $10/per case.
      
4. The schedule held by the Court, including each schedule lodged by the Applicant, will operate as a ‘control’ against the charge lodged with the Registrar of Land Titles so that the charge is determined and accepted by the parties as never exceeding the total of the difference between the $US4-5/case and $10/per case value, consistent with each shipload or consignment exported from Fiji.
   
5. The charge to remain until the final determination of the substantive application.
   
6. In the event that the lodging of the charge cannot be effected to enable the next scheduled shipment of Fiji Water to be exported at the invoice value of $10/case, the Applicant to lodge with the Court the amount of $US1ml being the $1ml VAT reimbursed by the Respondents.
   
7. The Applicant be permitted to export Fiji Water at the value/price of $US4-5/case in accordance with these orders until the determination of the substantive application.
   
8. Liberty to apply.
   
9. Costs in the cause.
   

Jocelynne A. Scutt
Judge
8 February 2008

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^[1] Para 32, Submission of 4 February 2008.