Matapo Ltd v Minister for Finance & National Planning [2008] FJHC 299; HBC380.2007 (19 August 2008)

IN THE HIGH COURT OF FIJI
WESTERN DIVISION AT LAUTOKA

CIVIL ACTION NO. 380 OF 2007

BETWEEN

MATAPO LIMITED
1st Plaintiff

AND

VUKSICH & BORICH (FIJI) LIMITED
2nd Plaintiff

AND

THE MINISTER FOR FINANCE & NATIONAL PLANNING
1st Defendant

AND

THE MINISTER FOR WORKS & ENERGY
2nd Defendant

AND

THE ATTORNEY GENERAL OF FIJI
3rd Defendant

Appearances: Mr. Samuel K. Ram for the plaintiffs
Mr. Green & Mr. Turaga for the defendants

RULING

[1] On 1 August 2008 the defendants filed a supplementary affidavit exhibiting what is claimed to be relevant cabinet papers and correspondence regarding the Momi Project. The plaintiff opposes the use of this affidavit on the grounds that:

(i) it is filed out of time and in breach of court orders;

(ii) the material in the affidavit is hearsay;

(iii) it offends the parole evidence rule as it brings evidence outside of the deed;

(iv) the affidavit only brings part of the transaction and nothing has been brought in relation to the whole transaction; and

(v) cabinet papers raise cabinet confidentiality.

[2] I informed counsel this morning that I propose dealing with the objections in the substantive hearing of the originating summons. What I will do is set out the principles upon which the objections will be considered. This will provide some guidance to counsel. "The modern law of contract interpretation" was enunciated by Lord Hoffman in Investors Compensation Scheme Ltd v West Bromwich Building Society[1]. His Lordship said that contracts should be given not a literal, but a purposive and sensible interpretation in which allowance is made for poor expression. He summarized the relevant principles of the modern approach by which contractual documents are nowadays construed as follows:

"The principles may be summarized as follows:

(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2) The background was famously referred to by Lord Wilberforce as the "matrix of fact," but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.

(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd v. Eagle Star Life Assurance Co. Ltd. [1997] UKHL 19; [1997] A.C. 749.

(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute tot the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera S.A. v Salen Rederierna A.B. [1985] A.C. 191, 201:

"if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense."[emphasis added]

[3] What is clear is that all contracts should be interpreted in their "matrix of fact", i.e. the circumstances surrounding their making. The interpreter needs to be placed in the shoes of the parties, knowing what they know. This can include the background of the transaction; the practices of the trade in question; the origin or genesis of the transaction; and previous dealings between the parties[2]. Relevance is also important. It is, however, only things which the parties mutually know: facts known to one but not the other cannot be relevant.[3]

[4] Sir John Donaldson, M. R. in Summit Investment Inc. v British Steel Corporation (the "Sounion")[4] stated that:

"In seeking to divine the deemed intentions of the parties – their actual intentions are happily irrelevant, since, were it otherwise, many, and perhaps most, disputes upon points of construction would be resolved by holding that the parties were not ad idem – the Court has to place itself in thought in the same factual matrix as that in which the parties were and, so positioned, is justified in assuming that both parties intended by their words ....." [emphasis added]

[5] The Supreme Court of New Zealand in a very recent case, Gibbons Holdings Ltd v Wholesale Distributors Ltd[5] held that when dealing with an issue to which the parties had turned their minds and had formed a common intention, the task of the court was to construe the contract objectively with the aim of discerning the actual intention of the parties.

[6] The plaintiffs’ oral application that the extrinsic evidence which is contained in the defendants’ supplementary affidavit be struck out will be dealt at the substantive hearing with taking into account the cases referred to above. For the avoidance of doubt I re-iterate that I will also consider the principles contained in the State’s submissions and in those of learned counsel for the plaintiffs. However it is prudent that I alert both counsel of what I consider to be the relevant principles for consideration. I also mention that at first glance some of the depositions contained in Ms Namosimalua’s affidavit are clearly objectionable. For example, how can she purport to know what was clear to cabinet ministers at the time. Her statement that "it was very clear to cabinet ministers that in all discussions between government and Matapo.......... that project costs will be reimbursed after practical completion of the hotel" – see paragraph 4, is clearly objectionable. Relevance aside this statement is inadmissible.

[7] The affidavit and its contents will not be struck out at this stage. I will however permit the late filing of the same. Costs will be reserved. What I require of counsel prior to the hearing is that they engage in a serious attempt to agree or even partly agree to a matrix of fact upon which the Deeds are to be construed. The background, aim, object, genesis and commercial purpose of the contract constitute admissible extrinsic evidence. Evidence surrounding the subjective intentions of the parties are not admissible.

Gwen Phillips
Judge

At Lautoka
19 August 2008

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^[1] [1997] UKHL 28; [1998] 1 WLR 896 at 912-913
^[2] See Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 995-996 per Lord Wilberforce referred to in the seminar paper – Interpretation of Statutes and Contracts, New Zealand Law Society June 2008.
^[3] Supra page 26
^[4] [1987] Vol. 1 Llyod’s Law Reports at page 233
^[5] [2007] NZSC 37; [2008] 1 NZLR, 277