Feroz Khan Transport Ltd v Fiji Sugar Corporation [2008] FJHC 284; HBC42.2008 (20 March 2008)

IN THE HIGH COURT OF FIJI
AT LAUTOKA

CIVIL ACTION NO. HBC 42 OF 2008

BETWEEN

FEROZ KHAN TRANSPORT LTD
Plaintiff

AND

FIJI SUGAR CORPORATION
1st Defendant

AND

BHOO GAUTAM
2nd Defendant

AND

GENERAL MACHINERY HIRE LTD
3rd Defendant

Appearances: S.K. Ram and N. Khan for the Plaintiff
C.B. Young for the 1st and 2nd Defendant
V. Mishra for the 3rd Defendant

Date of Hearing: 19 March 2008
Date of Decision: 20 March 2008

RULING

[1] Before me is the plaintiff’s application for injunctive relief. I had earlier on an ex-parte application brought by the plaintiff granted an interim injunction restraining the 1st defendant from formally awarding or accepting the 3rd defendant’s tender for Specification for Contract 12/202/07. That injunction expires at 4.00 pm this afternoon. Comprehensive oral submissions were heard yesterday. The parties have also filed helpful written submissions.

Chronology of Events

(i) 13, 14 and 18 September 2007 – Expression of Interest advertised for transportation of raw sugar and molasses

(ii) 20 December 2007 – Tenders closed. Three tenders received – General Machinery Hire Ltd, Feroz Khan Transport Ltd (plaintiff herein); Arkay Enterprises Ltd.

(iii) 11 January 2008 – Tenders opened

(iv) 23 January 2008 – Recommendation conveyed to the Board of Directors

(v) 25 January 2008 – Provisional letter of acceptance issued to General Machinery Hire Ltd

(vi) 4 March 2008 – Tender Committee makes its recommendations

(vii) 6 March 2008 – Board of Directors accepts Tender Committee’s recommendation and issues letter of final acceptance to 3rd defendant

(viii) 11 March 2008 – Proceedings filed and ex-parte interim order granted in favour of plaintiff.

Consideration of Application

[2] An interim injunction provides relief that is both temporary and discretionary. Before granting such relief, the Court is required to carefully balance or weigh the needs of a plaintiff against the needs of a defendant. The starting point for the consideration as to whether the order sought should be maintained or granted are the principles expressed in American Cyanamid –v- Ethicon Limited [1975] UKHL 1; [1975] A.C. 396. At pages 406 & 407 of the judgment Lord Diplock expresses the principles as follows:

"The object of the interlocutory injunction is to protect the plaintiff against the injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty will resolve in his favour at the trial; but the plaintiff’s need for such protection must be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated under the plaintiff’s undertaking in damages if the uncertainty will resolve in the defendant’s favour at the trial. The Court must weigh one need against the other and determine where "the balance of convenience lies."

[3] On page 407 Lord Diplock said:-

"It is no part of the court’s function at this stage of the litigation to try to resolve conflicts of evidence on affidavits as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial. One of the reasons for the introduction of the practice of requiring an undertaking as to damages upon the grant of interlocutory injunction was that "it aided the court in doing that which was its great object viz. abstaining from expressing any opinion upon the merits of the case until the hearing": Wakefield v. Duke of Buccleugh (1865) 12 L.T. 628, 629. So unless the material available to the court at the hearing of the application for an interlocutory injunction fails to disclose that the plaintiff has any real prospect of succeeding in his claim for a permanent injunction at the trial, the court should go on to consider whether the balance of convenience lies in favour of granting or refusing the interlocutory relief that is sought."

[4] It is upon this basis that I consider the application before me.

[5] The fundamental requirements might be summarized as:-

(i) Is there a serious question to be tried?

(ii) Are damages an adequate remedy?

(iii) Where does the balance of convenience lie?

Serious issue to be tried

[6] For the reasons stated above, it is not for this Court in an application for an interim injunction or to dissolve an injunction, to carry out a trial of the merits of the dispute. It suffices for the Court to be satisfied that there is in fact a serious issue to be tried. Lord Diplock also held that it was not part of the courts function at this stage to decide difficult questions of law which call for detailed argument and mature considerations. This is the case at hand. Learned Counsel for the plaintiff has submitted that I adopt contract law principles yet to be applied by the courts in Fiji at this interlocutory stage. These principles are in part designed to protect the reasonable expectations of parties and impose a degree of certainty and ultimately fairness in tender processes.[1] The jurisprudence in other common law jurisdictions supports the approach that, depending upon the intentions of the parties, an invitation to tender can give rise to contractual obligations upon the submission of a bid: Blackpool and Fylde Aero Club Ltd. v. Blackpool Borough Council[2], Hughes Aircraft Systems International v. Airservices Australia[3], Transit New Zealand v Pratt Contractors Ltd[4] and Bluesky Communications Ltd v Attorney-General[5]. This is a departure from the traditional approach where an invitation for tenders was treated as an invitation to treat and not an offer. Historically the process of procuring tenders was not treated by the courts as contractual in nature. Invitations to submit tenders were treated as preliminary communications which took place before any contractual offer was made. It is only a matter of time before the developments in this area of the law, as has happened in other common law jurisdictions are applied in Fiji and this may well be the case where those principles are adopted. However in my view it would be premature at this stage, given the untested competing affidavit material and the difficult questions of law involved, to arrive at the determinations I have been asked to make without a full trial to determine the extent to which those principles may be applied, if relevant, to the facts of this case.

[7] The plaintiff’s case is essentially that a process contract, was created between it and the 1st defendant when it submitted a conforming tender in response to the 1st defendant’s call for tenders for the transportation of raw sugar and molasses from Rarawai Mill to Lautoka Mill and that in breach of that process contract the 1st defendant wrongly awarded the tender and/or contract to the 3rd defendant. The plaintiff contends that the 3rd defendant’s tender was a non- conforming tender therefore no acceptance could attach to the contract, purportedly entered into between the 1st defendant and 3rd defendant. It is also alleged that there was bias in the tender process and the awarding of the contract to the 3rd defendant. Suffice it to say at this stage that the allegations made by the plaintiff are strongly denied and contested in the affidavits filed by the defendants.

[8] In Transit New Zealand[6] Justice McGrath said:

"Whether a request for tenders gives rise to a process contract, once a conforming tender is submitted, is in all cases a question of whether all the elements of contractual formation are made out at that point. Analysis of the terms of the invitation to tender is the starting point. Where the request makes no express commitment concerning the manner in which tenders received will be addressed, that may indicate the invitation was no more than an offer to receive them. On the other hand, as Blackpool and Fylde Aero Club indicates, the rigorous and comprehensive expression of requirements to be complied with by tenderers may give rise to an implied promise by the invitor to consider a conforming tender if others are considered. The law does not, however, have a policy which inclines towards enforcement of implied promises by invitors, even if they are public bodies, and whether there has been a binding promise as to process is to be ascertained by applying general principles of contract law concerning contract creation and implied terms."

[9] In this case the 1st defendant’s tender document makes no express commitment concerning the manner in which tenders received will be addressed. At page A6, paragraph A17 of the document, titled "Acceptance of Tender", it is stated that ‘the Corporation may accept the tender that, on a view of all the circumstances appear to the Corporation to be the most advantageous. The acceptance of the tender need not necessarily be based on the lowest tender price. The Corporation is not bound to accept any tenders ....." Nevertheless having considered the competing arguments heard yesterday, I am satisfied that the plaintiff has established that there are serious issues to be tried. The legal issues include:

(i) did the plaintiff’s tender create a relationship in contract as distinct from a mere invitation to treat?

(ii) whether the 1st defendant’s request for tenders (Expression of Interest) gave rise to a process contract, between it and the plaintiff, once a conforming tender was submitted by the plaintiff?

(iii) whether the principles applicable to process contracts have application in commercial dealings between companies or is it confined, as submitted by the 1st defendant to public authorities exercising statutory powers?

(iv) if a process contract came into being on the submission of the plaintiff’s tender, did the 1st defendant act in breach of contract by accepting the 3rd defendant’s tender

(v) whether there is an express or implied term in the 1st defendant’s tender document that only tenders submitted in accordance with the tender document would be considered?

(vi) whether the express terms of the 1st defendant’s tender document entitled it to refuse to accept any tenders including that submitted by the plaintiff?

Adequacy of damages for the plaintiff

[10] Lord Diplock said in American Cyanamid[7]:

"The governing principle is that the Court should first consider whether, if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendants continuing to do what was thought to be enjoined between the time of the application and the time of the trial."

[11] The courts have held time and again that if damages are recoverable at common law, and would be an adequate remedy, and the defendant is in a financial position to pay them, no interlocutory injunction should be granted.[8]

[12] The plaintiff contends that it will suffer irreparable harm and that damages would not be an adequate remedy. The apprehended financial losses have been traversed in Mr. Khan’s affidavits. Much reliance has been placed on the investments carried out by the plaintiff company when it tendered for and was awarded the 2003 cartage contract. It says that its investment stands at FJD$2, 400, 000.00. It has no alternative use for the two sets of Smith’s 19m trailers which were specifically designed for usage at the 1st defendant’s Rarawai and Lautoka Mills for cartage of sugar and molasses. The plaintiff company has outstanding loan commitments with its financier, the Fiji Development Bank and repayment of the loan has been financed from income generated from the 2003 contract with the 1st defendant. On this issue I have preferred the submissions from the defendants. The plaintiff’s losses are capable of being quantified. If it succeeds after trial, in my view it would be adequately compensated by an award of damages for the losses it would have sustained. If successful, the plaintiff’s damages will be limited to the costs of its tendering exercise unless it is able to prove that it would have been awarded the 2008 contract, the subject matter of this dispute. A finding of ‘irreparable harm’ would of necessity involve a determination that the plaintiff was entitled to assume when it invested its monies, that it would be awarded the 2008 contract. That was clearly not the case as the 2003 contract was for a specific term and this was within the plaintiff’s knowledge. It had no right of renewal and accepted that it would have to compete with other providers of the service for the 2008 contract, which it did.

Balance of convenience

[13] The balance of convenience is the requirement on a Court to carefully weigh the rights of the parties and reach a decision that accords with fairness and justice. "It involves a decision as to whether the granting of an injunction or its refusal is the course which, after the action itself has been tried, and the issues between the parties determined, would best allow the adjustment of the rights of the parties in a way that accords with fairness and justice."[9] The importance of the adequacy of damages as a remedy available to the plaintiff assumes major importance. I have found that damages are and will be quantifiable and is an adequate remedy for the plaintiff. Far more importantly, it is clear from the documents before me, which were not disclosed by the plaintiff because it had no knowledge of these developments at the time of making the application for ex-parte interim relief, that the 1st and 3rd defendant had before the institution of these proceedings, on 6 March 2008 entered into a contract. The 2008 cartage contract was awarded to the 3rd defendant. A17 on page 6 of the tender document is relevant. It provides:

"Unless and until a formal agreement is executed in accordance with the Conditions of Contract, the Tender together with the Corporation’s written acceptance thereof shall constitute the contract between the Corporation and the successful tenderer."

[14] The prayers sought by the plaintiff have been overtaken by events which it says was not within its knowledge when the application was made. The injunctive orders sought are to prevent the 1st defendant from formally awarding/ accepting the 3rd defendant’s tender and that the 1st defendant be ordered to only consider conforming tender bids as per the Specification for Contract 12/202/07. The 1st defendant, on 6 March 2008 wrote to the 3rd defendant confirming that its tender for transportation of raw sugar and molasses from Rarawai Mill to Lautoka Bulk Terminal was accepted. Under the terms of the 1st defendant’s tender document, the 1st defendant’s written acceptance of the 3rd defendant’s tender ‘shall constitute the contract between the Corporation and the successful tenderer’. Given the existence of a contract with a third party, the 3rd defendant herein, the grant of an interim injunction would undoubtedly entail inconvenience to the 3rd defendant. In the circumstances injunctive relief would be inappropriate. Ms Khan’s argument that there could not be a valid acceptance given the alleged non-conforming bid by the 3rd defendant, must be considered together with the express terms of the Tender Specification that the 1st defendant was not bound to accept any tenders, which would of necessity include the plaintiff’s bid. The lawfulness or otherwise of the tender process and the award of the contract to the 3rd defendant are issues which can only be determined after trial.

Conclusion

[15] The plaintiff’s application for injunctive relief is declined. I have also not been convinced to make the declaratory orders sought at this interlocutory stage. The relief for discovery orders is within the Master’s jurisdiction and this file would be placed on his list to deal with those prayers in the application. Prayers (v), (vi) and (vii) of the motion dated 10 March 2008 are declined and that portion of the motion is dismissed. The plaintiff is to pay costs to the defendants assessed in the sum of $1000.00 to the 1st and 2nd defendants and $1000.00 to the 3rd defendant. The action is adjourned before the Master on 25 April 2008.

Gwen Phillips
Judge

At Lautoka
20 March 2008

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^[1] Hub Excavating Ltd. v. Orca Estates Ltd., 2007 BCSC 1512 (CanLII) paragraphs 77 & 78
^[2] [1990] 3 All E.R. 25 (C.A.)
^[3] (1997), 146 A.L.R. 1 (F.C.)
^[4] [2002] 2 NZLR 313
^[5] [2007] WSSC 58 (31 July 2007)
^[6] Supra, paragraph 77
^[7] Supra, p 408 B-C
^[8] See Vodafone NZ Ltd v Freedom Ltd [1998] 8 TCLR 546; NZ Post v Leng [1999] 3 NZLR 219
^[9] Congoleum Corp Ltd v Polyflor Products (NZ) Ltd [1979] NZCA 25; [1979] 2 NZLR 560 at 571