Herbert Construction Company (Fiji) Ltd v Malolo Development Company (Fiji) Ltd [2008] FJHC 302; HBC336.2007 (12 September 2008)

IN THE HIGH COURT OF FIJI
AT LAUTOKA

CIVIL ACTION NO. HBC 336 OF 2007

BETWEEN

HERBERT CONSTRUCTION COMPANY (FIJI) LTD
1st plaintiff

AND

HERBERT CONSTRUCTION LIMITED
2nd plaintiff

AND

MALOLO DEVELOPMENT COMPANY (FIJI) LTD
Defendant

Appearances: Koyas for the plaintiffs
Munro Leys for the defendant

Hearing & Submissions: 23 June, 27 August 2008
Decision: 12 September 2008

DECISION

[1] Before me is a summons for stay of proceedings or alternatively dismissal of the action and discharge of interim injunction filed by the defendant. The grounds relied on for stay are that:

(a) the construction contract pleaded by the plaintiffs was subject to an agreement to refer and submit any and all disputes arising out of or in connection with the said agreement, in respect of which matters this action is brought, for determination and adjudication by the courts of New Zealand;

(b) in terms of, among other things, the convenience and expense, availability of witnesses, the places where the parties (and their alter egos) respectively reside and hitherto have in fact carried on a substantial part of their business, the law governing the transaction and the most appropriate and most "natural forum" with which the action has the most real and substantial connection is New Zealand;

(c) there is pending in the High Court of New Zealand an action between the plaintiffs and persons related to both the plaintiffs and the defendant concerning the same subject matter and raising similar and related issues.

Should the proceedings be stayed or dismissed

[2] In the course of the hearing learned counsel for the defendant handed me a document titled ‘Defendant’s Time Line and List of Affidavits and Court Documents Filed’. The document contains a helpful synopsis of relevant events leading up to the institution of proceedings in New Zealand and in Fiji. For the purposes of this decision it suffices to state that the parties in both the New Zealand and Fiji proceedings and the issues involved are interconnected. The New Zealand action concerns inter-alia allegations of shareholder oppression arising from a shareholders dispute. The action in Fiji, whilst grounded on allegations of breach of a construction contract (the construction contract), involves issues of performance of the construction contract which are raised in the dispute between shareholders in proceedings in the High Court in New Zealand filed in June 2007. The Fiji action was filed in November 2007.

[3] The defendant contends that it is vital that one court, the High Court of New Zealand (Napier Registry), decide all issues, including credibility and relief, if any is to be awarded to the parties in both proceedings. Since the filing and hearing of this application the defendant’s in the New Zealand proceedings have taken steps to obtain leave to file amended statement of claim and for orders pursuant to section 174 of the Companies Act New Zealand (the New Zealand application). The New Zealand application also seeks an order to join the plaintiffs herein as third parties. Pursuant to section 174 of the Companies Act an order is sought for permission to sell the undertaking in Malolo Development Company (Fiji) Limited, the defendant herein, upon terms that the proceeds of any sale, after deduction of commission and associated expenses be held by a stakeholder to be appointed by the court and that payment of the proceeds await any further direction of the court.

[4] The central question to be determined is whether the High Court of New Zealand is clearly or distinctly the more appropriate forum for the determination of the issues raised in these proceedings. In deciding this the court will look first to see what factors there are which point in the direction of another forum. The relevant principles for consideration enunciated in Spiliada Maritime Corp v Cansulex Ltd: The Spiliada[1] still apply today. The principles which emerge from the judgment of Lord Goff have been summarized by counsel for the defendant as follows:

(a) the fundamental principle applicable to a stay of proceedings on the ground that some other forum was the appropriate forum is that the court would choose the forum in which the case could be tried more suitably for the interests of all the parties and for the ends of justice

(b) the burden is on the defendant to show that the court should exercise its discretion to grant a stay. The defendant must show that not merely that (Fiji in this case) was not the natural or appropriate forum for the action but there was another available forum which is clearly more appropriate. In that respect the court would look for the forum with which the action had the most real and substantial connection for example, in terms of convenience and expense, availability of witnesses, the law governing the relevant transaction, and the places where the parties resided or carried on their business.

The interests of justice

[5] The parties in both the New Zealand and Fiji proceedings are interrelated. The issues which arise in the Fiji proceedings are clearly interconnected with the issues which arise in the New Zealand proceedings particularly in light of the New Zealand application. I concur with the defendant that it is neither practical nor desirable that there are two proceedings in different countries where evidence is bound to be led in both covering allegations of shareholder oppression in New Zealand while at the same time alleging in Fiji that the conduct giving rise to the New Zealand proceedings also amounts to a repudiation of the construction contract. It is apparent from the voluminous affidavit material filed in these proceedings that the issues concerning alleged shareholder oppression and breach of contract are extremely contentious. The plaintiffs maintain that Fiji is the proper forum and not New Zealand given that the most real and substantial connection is Fiji in that:

(a) the resort is to be built on Malolo Island, Fiji

(b) the resort is to be built by the first plaintiff. The first plaintiff is a Fiji construction company based in Momi. The first plaintiff is owned by Elizabeth Herbert (51 percent), Malcolm Herbert (24 percent) and Anthony Herbert (23 percent). The Herbert family are fourth generation Fijian.

(c) the defendant is a Fiji company.

Of significance is that the construction contract was concluded in New Zealand where all the major parties reside and where Mr. Malcolm Herbert first commenced proceedings in June 2007. That the resort was to be built on Malolo Island in Fiji is not determinative.

[6] In my view there is an indistinguishable connection between Mr. Malcolm Herbert’s interests advanced in the New Zealand proceedings and the plaintiffs in these proceedings. The evidence before me establishes that Mr. Herbert purported at all times to be acting with the full authority of the plaintiffs in this action. I agree with the defendant that the nexus between the Herbert family’s New Zealand interests concerning funding, alleged default, walkout, the alleged failure to participate in the planning states of the construction contract and engage in its variation are all relevant to whether there is a repudiation of the contract by the plaintiffs in these proceedings and whether those actions were similarly as a result of shareholder oppression leading to relief under the Companies Act. The plaintiffs in the New Zealand proceedings having elected to commence proceedings in New Zealand in relation to the shareholders dispute cannot now complain that in order for the New Zealand court to proceed with the winding up of Rachmaninov Limited it should have the power to direct the sale of the Malolo leases. Essentially the basis of the mareva injunction application in Fiji was premised on the actions of the defendants in the New Zealand proceedings. Ultimately findings will have to be made in respect of the construction contract, the competing allegations of breach of its terms and why the construction contract did not proceed beyond 6 November 2006. The interests of justice will not be served if two courts, versed with evidence similar in both reached different conclusions on credibility.

Convenience and expense

[7] In my view justice can be done in New Zealand at substantially less inconvenience and expense to both parties. All of the defendant’s deponents with the exception of Messrs Rankin, Cohen and Benton work and reside in New Zealand. For the plaintiffs the following deponents, Elizabeth Herbert, Malcolm Herbert, Stephen Reaney, Daniel Kerr, Grant Graham and Tony Dawson work and reside in New Zealand. Mr. Herbert’s brother Anthony Herbert resides in Fiji. The relevant documentary evidence, which appears to be very substantial is deposited in New Zealand. The parties are represented by New Zealand lawyers. Suffice it to say that the expense of duplicate proceedings covering identical issues is unnecessary and should be avoided.

The submission to New Zealand law

[8] A critical connecting factor is the law governing the relevant contract and transactions between the parties. The parties to the construction contract agreed to submit to New Zealand law. The contract expressly provides that it shall be governed by New Zealand law. The construction contract refers to a number of provisions expressly inserted indicating that New Zealand law was to apply. That New Zealand law must apply is not seriously disputed by the plaintiffs who submitted that the applicable law clauses should be distinguished from a jurisdiction clause and that the court in Fiji can apply New Zealand law. I agree. However I do not agree that the legal issues are as straightforward or distinct from the issues in the New Zealand proceedings, as counsel submitted. In my view both parties stand to benefit by the court in New Zealand dealing with the dispute both in respect of the construction contract and the shareholders dispute which are inextricably linked and considering the relief available to the parties under the Construction Contracts Act 2002, the Contractual Remedies Act 1979 and the Companies Act. The High Court of New Zealand is seized of matters raised in the Fiji proceedings and in my view it is appropriate and just that the proceedings in Fiji be stayed. The Fiji proceedings should not be used to defeat or limit the extent of the relief which the parties are entitled to pursue in the pending New Zealand proceedings filed first in time.

Discharge of the Mareva Injunction

[9] The grounds relied on for discharge of the ex-parte injunction granted in the plaintiffs’ favour on 5 November 2007 are that:

(a) the plaintiffs failed to supply all relevant documents to the court on an ex-parte application

(b) the plaintiffs provided insufficient evidence that the leases which are the subject of the order could or may be dissipated in order to defeat the plaintiffs’ claim

(c) the plaintiffs have not established an arguable case

(d) the balance of convenience does not favour the granting of an injunction.

[10] Any risk of dissipation of assets in order to defeat the plaintiffs’ claim has evaporated in light of the New Zealand application. The defendant says that sale of the Malolo leases is now inevitable. That is an issue which the New Zealand court will have to determine. In my view the risk of contempt in New Zealand adequately protects the plaintiffs’ interests in regard to the Malolo leases. The placing of instructions with Bayleys in Fiji has been sufficiently explained in Mr. Kelt’s affidavit sworn on 25 July 2008 in support of the pending New Zealand application, which is annexed in the affidavit of Sharon Veu–Morris dated 30 July filed herein.

[11] I have also upheld the defendant’s submission that the omission in failing to disclose that the parties in the construction agreement agreed to submit to New Zealand law was material non-disclosure. The omission of relevant documents expressly providing that New Zealand law was to apply was also material. These documents point to the jurisdiction of the New Zealand court. This was a relevant consideration in my assuming jurisdiction having been put on notice of the New Zealand proceedings. I concur with defence counsel that clause 1.4 of the construction contract (Law Currency and language NZS 3910:203) providing for NZ law to apply, disclosed after I had granted the plaintiffs’ ex-parte application, established an important regime of enforcement and dispute resolution in New Zealand and not Fiji. Had this been drawn to my attention I would have declined jurisdiction. The plaintiffs should also have disclosed the fact that up until the eve of the Fiji proceedings Mr. Herbert was a Director of Rachmaninov Ltd and Rach Trustee Ltd and the fact that Rachmaninov Ltd owned shares in Rach Trustee Ltd. This impacted on the ability of the defendant to dispose of the leases without breaching the substantial compliance provisions of the Companies Act 1993. Mr. Herbert’s consent to the proposed sale or short of that, court approval was required. This was not disclosed.

Conclusion

[12] In the exercise of my discretion I have stayed all proceedings in this action having arrived at the conclusion that the plaintiffs’ complaints giving rise to these proceedings and the conduct at issue are interconnected with the proceedings in New Zealand. The High Court of New Zealand is clearly the more appropriate forum for the trial of the action. Aside the fact that the leases are in Fiji, New Zealand is the ‘natural forum’ with which the action has the most real and substantial connection. In balancing the factors I am required to take into account I have concluded that justice can be done in New Zealand at substantially less inconvenience and expense. The parties will not be prejudiced. At this stage a stay order is appropriate until I am informed of the outcome of the New Zealand application. I have also discharged the mareva injunction for reasons contained in paragraphs [10] and [11].

Orders

(a) all proceedings in this action are stayed

(b) the mareva injunction is dissolved

(c) the plaintiffs are to pay the defendant’s costs of the application to be taxed if not agreed

(d) this action is to be re-listed on the cause list in due course with 3 days notice to the parties after determination of the New Zealand application.

Gwen Phillips
Judge

At Lautoka
12 September 2008

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^[1] [1986] UKHL 10; [1987] AC 460; [1986] 3 All ER 843