York Properties Ltd v Fiji Development Bank [2009] FJHC 373; HBC311.2009 (13 October 2009)

IN THE HIGH COURT OF FIJI AT SUVA
CIVIL JURISDICTION

CASE NUMBER: HBC 311 OF 2009

BETWEEN:

YORK PROPERTIES LIMITED
FIRST PLAINTIFF

AND:

ASPIRITUS HOLDINGS LIMITED
SECOND PLAINTIFF

AND:

YAUKUVE HOLDINGS LIMITED
THIRD PLAINTIFF

AND:

FIJI DEVELOPMENT BANK
DEFENDANT

Appearances: Mr. Nandan for the plaintiffs.
Mr. S. Parshotam for the defendant.
Date/Place of Hearing: Tuesday, 22nd September 2009 at Suva.
Date/Place of Oral Judgment: Wednesday, 13th October, 2009 at Suva.
Judgment Of: The Hon. Acting Justice Anjala Wati.

INTERLOCUTORY JUDGMENT
(Striking Out Claim and Security for Costs)

The Application

1. The defendant has made an application for the plaintiffs claim to be struck out as it discloses no reasonable cause of action and alternatively for an order that the plaintiffs do within 14 days pay security for costs, in default of which payment, the action to be struck out. A further order is sought that all proceedings be stayed until such time security is given for payment of costs.
   
2. The application is opposed by the plaintiffs.
   

The Submissions

3. Succintly, Mr. Parshotam stated that there is no cause of action against the defendant Bank. There is failure by the plaintiffs to plead any contract, failure to establish any duty of care in tort or fiduciary duty or obligation in trust which the Bank may owe to the plaintiffs'; and failure to state whether the claim is founded under or by virtue of the terms of an agreement or whether it is founded upon a breach of an agreement. It was further submitted that the proceedings relate to the account of Yaukuve Island Resort Limited, hereinafter referred to as the "resort". The resort maintains an account with the Bank. None of the plaintiffs have any connection with the Bank on resorts account except that the third defendant is a shareholder of the resort. The Bank, however does not hold any guarantee from any of the Plaintiffs nor does the Bank hold any security from any of the Plaintiffs. The plaintiffs do not have any standing to institute the proceedings against the Bank.
   
4. On the aspect of security for costs, Mr. Parshotam submitted that the plaintiffs are limited liability companies. The first and the second plaintiffs are incorporated outside Fiji Islands and have their respective registered offices out of the jurisdiction. The first and the second plaintiffs have no assets in Fiji and further derive no income in Fiji, apart from money which they say is owed to them by the resort. A search from Registrar of Companies in Fiji indicates that the first and second plaintiffs are not even registered in Fiji as foreign companies. A further search in the Registrar of Titles in Fiji does not indicate that the first and the second plaintiffs have any land or lease registered in its names. The institution of the action has put the Bank to costs. In the event the plaintiffs are unsuccessful in their claim and costs is awarded against it, the Bank will not be able to recover the costs as it is not resident in Fiji and does not have any assets within Fiji to which the Bank could attach its costs.
   
5. Mr. Nandan submitted that the plaintiff's writ of summons contains a concise nature of the relief or remedy and so it does not offend the rule of filing the writ of summons pursuant to order 6 Rule 2 (1) (a) of the High Court Rules 1988. In respect of security for the costs application, Mr. Nandan submitted that the third plaintiff is locally incorporated and it guarantees payment of any costs if ordered against any one of the plaintiffs.
   

The Law and the Determination

6. The writ of summons bears an indorsement of claim which reads as follows:-
   

"WHEREFORE THE PLAINITFFS CLAIM:

(1) The Defendant whether by its employees, servants or agents be restrained from howsoever exercising any power of sale or any of its powers including but not limited to selling, foreclosure, advertising for sale or appointment of a Receiver/Manager or in anyway whatsoever under the Mortgage dated 11th December 2004, the Debenture dated 11th December 2004 and the Bill of Sale dated 11th December 2004 over Yakuve Island Resort on Yaukuvelevu, Ono, Kadavy, NLTB Reference No. 4/5/408 in the Fiji Islands or any part thereof.

(2) A Declaration be made that the Plaintiffs retains title to all goods used in the construction of the Yakuve Island Resort on Yaukuvelevu Island, Ono, Kadavu, NLTB Reference No. 4/5/408 in the Fiji Islands whether fixtures built during the said construction be removable or otherwise.

(3) Costs on an indemnity basis;

(4) ..."

7. The plaintiff's have only outlined in their statement of claim a concise nature of the relief or remedy sought against the defendant. This was done because there was urgency in the matter and a full statement of claim could not be filed. Indorsing the writ with the relief or remedy is allowed under Order 6 Rule 2(1) (a) of the High Court of the Rules, 1988.
   
8. The reliefs sought are an injunction against the defendant from exercising its powers of sale under the security documents and a declaration that the title to all the goods used in the construction of the resort vests in the plaintiffs.
   
9. The plaintiff's claim is pursuant to the Deeds of Loans entered by the plaintiff's and the resort on 1st day of August, 2003 and the 1st day of December, 2004 respectively. Pursuant to the deeds, the plaintiffs claim an interest in the goods of the resort over which the defendant has a secured mortgagee. Although there is no connection between the plaintiff's and the defendant Bank, the plaintiffs have sufficient interest and rights over the goods which the Bank wants to sell under its powers of sale. The plaintiff's want the court to declare who has the title to the goods and whether the mortgagee can sell those goods.
   
10. The relief sought and the proceedings involve the determination of a question that is not abstract or hypothetical. There is a real question involved and an answer to that question will produce some real consequences for the parties. The defendant is the real contradictor to this case and has a true interest in opposing the same, as the declaration may affect its rights.
    
11. I do not wish to comment on the success of the claim because the parties have not argued on this aspect and more so I do not find it prudent to make such a comment at this stage but the retention of titles clauses in the deed of loans and the mortgagees rights does indicate that there will be substantial controversy between the parties because of adverse legal interest of sufficient immediacy and reality.
    
12. I do not hesitate to say at this stage that the relief in itself is the cause of action.
    
13. Let us examine the legislative provisions pursuant to which the plaintiff's could sue for declarations.
    
14. Order 15 Rule 18 of the High Court Rules 1988 states that "no action or other proceedings shall be open to objection on the grounds that a merely declaratory judgment or order is sought thereby, and the court may make binding declarations of right whether or not any consequential relief is or could be claimed".
    
15. The case of Dyson v. Attorney General [1910] UKLawRpKQB 203; [1911] 1 KB 410 clearly discusses the subject of declarations. In that case the order 25 Rule 5 of the English Rules gave right to sue for declaration. Our order 15 rule 18 has used the same wordings of order 25 Rule 5 of the English Rules.
    
16. Dyson said that order 25 rule 5 was available where no consequential relief could be granted, it is impliedly ruled that it is permissible to sue for a declaration in the absence of a cause of action. That was confirmed in Guaranty Trust Co. of New York v. Hannay and Co [1915] 2 KB 536 and has been acknowledged in countless cases since then.
    
17. Our order 15 rule 18 talks about declarations of rights as in order 25 rule 5 of the English Rules in a context where the right to sue for declaration was the right. As Gibbs ACJ said in Sankey v. Whitlam [1978] HCA 43; (1978) 142 CLR 1 at 23:
    

"The word 'right'...is used in a sense that is wide and loose."

18. Young CJ In Eq Musumeci v Attorney –General NSW [2003] NSW CA 77 at [76] took that statement further, by concluding that the declaration now encompasses "rights, privileges, powers and immunities whether justiciable at law or not."
    
19. Another judge, Justice Gibson said in the case of Palfreyman v Southern Metropolitan Master Planning Authority (1936) 15 LGRA 28 that the rule created a new cause of action, which "consists in part in a subjective conclusion in the exercise of a judicial discretion that the case is one for granting a remedy by way of declaration."
    
20. Accordingly to Hutley JA in the case of Johnco Nominees Pty Ltd v Albury-Wodonga (NSW) Corp [1977] 1 NSWLR 43 at 65 the word "right" is used in a sense broad enough to go beyond any legal bonds between the parties, but it is still confined to the "sphere of legal relations".
    
21. The General Law requires the applicant to have a personal stake in the issue, but that stake can be a "special interest", which is something less than a "right". See the case of Australian Conservation Foundation Inc v Commonwealth (1980) 146 CLR 493. The courts use the term "interests" in that context, although in such a wide sense it seems that one has an interest if the court thinks there is an 'equity' worth protecting: Bateman's Bay Local Aboriginal Land Council v Abroginal Community benefit Fund Pty Ltd [1998] HCA 49; (1998) 194 CLR 247 at 257 per Gaudron, Gummow and Kirby JJ.
    
22. It is useful to quote Lockhart's J's summary in Aussie Airlines Pty Ltd v Australian Airlines Ltd [1996] FCA 813; (1996) 139 ALR 663 at 670-671:-
    

" For a party to have sufficient standing to seek and obtain the grant of declaratory relief it must satisfy a number of tests which have been formulated by the courts, some in the alternative and some cumulative. I shall formulate them in summary form as follows:-

(a) The proceedings must involve the determination of a question that is not abstract or hypothetical. There must be a real question involved, and the declaratory relief must be directed to the termination of legal controversies [in re Judiciary and Navigation Acts [1921] HCA 20; (1912) 29 CLR 257. The answer to the question must produce some real consequences for the parties.

(b) The applicant for declaratory relief will not have sufficient status if relief is "claimed in relation to the circumstances that [have] not occurred and might never happen"., [University of New South Wales v. Moorhouse (1975) 133 CLR 1 at 10 per Gibbs J] or if the court's declaration will produce no foreseeable consequences for the parties [Gardner v Diary Industry Authority (NSW) (1977) 18 ALR 55 at 69 and 71 per Mason and Aickin JJ respectively].

(c) The party seeking the declaratory relief must have a real interest to raise it [Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 at 448 per Lord Dunedin; and Forster v Jododex Australia Pty Limited [1972] HCA 61; (1972) 127 CLR 421 at 437 per Gibbs J. Note that since Aussie Airlines, the requirement for a proper contradictor was seen simply as a requirement for all "necessary" parties: Merit Protection Commissioner Nonnenmacher (1996) 86 FCR 1112.]

(d) There must be a proper contradictor [Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 at 448 per Lord Dunedin and Ainsworth v Criminal Justice Commission 91992) [1992] HCA 10; 175 CLR 564 at 596 per Brennan J].

These are the rules that should in general be satisfied before the Court's discretion is exercised in favour of granting declaratory relief."

23. I reiterate that the plaintiff has satisfied the test to seek the relief sought in the writ of summons. Whether or not the relief should be granted is another matter to be decided which would be determined after a full scale hearing and on the merits of it, but to say that they do not have a cause of action against the Bank is unacceptable.
    
24. Further, the plaintiff has yet not filed its statement of claim. Once that is filed, the basis of the reliefs sought would be apparent. Although an application for striking out can be made at any stage of the proceedings, it should not be made before the service of the statement of claim. This principle is well outlined in the cases of Wright v. Prescot U.D.C (1916) 115 L.T. 772; cf. Electrical Co. V. Att.-Gen. for Ontario [1919] A. C. 687
    
25. I cannot say that the plaintiff's case is obviously unsustainable. Whether the plaintiff should retain the title to the goods which were bought using the plaintiff's money and whether the interest in the goods should rank prior to the secured creditors rights is a point of law which is of importance and requires serious discussion. There are not so many local cases on this aspect as a result of which the court has to be careful in examining the arguments by the parties before coming to a conclusion. This therefore cannot be said to be a case clear beyond doubt for striking out.
    
26. The application for striking out shall be dismissed.
    
27. On the issue of security for costs, it is not disputed that the first and the second plaintiffs are corporate entities outside the jurisdiction of Fiji. The third plaintiff is a corporate body resident within the jurisdiction of Fiji.
    
28. The third plaintiff has agreed that it is responsible for payment of any costs that the court shall make. However the defendant's counsel has stated that the first two plaintiffs who are relying on the third plaintiff have disclosed their financial status but the third plaintiff who is relied on, has failed to disclose its financial worth. It is then argued that one can only speculate that the third defendant is financially worthless that is why the information on their financial status is missing from the affidavit in support of the application for injunction against the defendant.
    
29. The plaintiff's counsel has said nothing in respect of why the third plaintiff's financial statement was missing from the affidavit. However the plaintiff's solicitor states that the third defendant is the holding company of the resort which was valued at F$19 million in the year 2006 and its value would increase to F$28 million upon completion.
    
30. Although the third plaintiff is a holding company of the resort, it is improper to rely on the assets of the resort which is not a party to the proceedings. Even if I am wrong in making this statement, than can the third plaintiff point out to the resorts asset which is free of encumbrance and available for security for costs? There is nothing in the affidavit, and if there is, none has been pointed out to me for the court to rely on such assets.
    
31. There is also nothing in the affidavit that the resort will make its assets available for security of costs, and surely the counsel for the plaintiff cannot give that undertaking as he is not acting for the resort.
    
32. Why could not the third plaintiff disclose its assets? Was it an overlook or deliberate?
    
33. The counsel for the plaintiff has also not said anything of the nature, that if costs are ordered the plaintiff's will not be able to proceed with the case or proceedings stultified.
    
34. The third defendant is a holding company of the resort. It has not annexed any of its financial statements to indicate its financial worth. The value of the resort includes the value of the assets. The assets are not separate and apart from the dispute. The issue with these assets of the resorts are, whether they would be available as security for costs.
    
35. The whole basis of the claim is that the assets of the resort belong to the plaintiff's whilst on the other hand there is a secured debenture over the assets of the resort in favour of the defendant. If the courts do find the case in favour of the mortgagee, then the assets will not be available for costs as they would be sold.
    
36. I understand the plaintiff's contention that the defendant's debt is far less than the value of the resort. Undisputedly, yes, but if the mortgagee is successful then the entire resort would be up for sale and the assets will not be available for payment of the costs of defending the action.
    
37. I must reiterate that the third plaintiff has not shown that it has assets within the jurisdiction of this court apart from the assets over which the defendant has security. One cannot work on the value of the resort as it includes the value of the land and the resort's building in place although incomplete. If the assets are removed, some of which may have to be dismantled to be removed, then the value of the items on its own will obviously have value less than the value of the resort in its current state.
    
38. In any event the resort's balance sheets as I have interpreted it, shows it liabilities to exceed the value of its assets.
    
39. Moreover, the 1st plaintiff is the shareholder of the third plaintiff. The second plaintiff is also a shareholder of the third plaintiff and the third plaintiff is the holding company of the resort. This relationship is stipulated in the Deed of Loan agreement between the plaintiffs and the resort. The affidavits do not disclose as to the percentage of the shareholding each plaintiff has with the third defendant. However it is clear from the Deed of Loan that the third plaintiff is not an independent entity. Consequently the third plaintiff has to point out assets of its own available within Fiji to be safely able to say that those are going to be available for costs.
    
40. I am of the judgment that the first two plaintiff's who are incorporated outside the jurisdiction of Fiji can point to no assets within the jurisdiction which are clearly its own and are not the subject of dispute. They depend on the third plaintiff's assets which are also not free and available in the event of the verdict adverse to it. In the event it is just to order security for costs in favour of a mortgagee whose rights are hardly interfered with by the courts but yet to be determined in this case against the plaintiff's rights under the Deed of Loan.
    
41. What should be the amount of the security? The defendant has submitted that the costs until the trial would be exceeding $60,000 but security for costs is sought at $67, 950.00 including disbursements of $400.00 and Value Added Tax at $7,550.
    
42. The defendant is asking for 2/3 of the costs to be deposited in court.
    
43. The plaintiff's counsel has not disputed the quantum of costs. In absence of any dispute of the defendant's bill of costs I am prepared to accept the proforma bill of costs.
    
44. However, I would have preferred that a quantum be provided at the end of each head or transaction, as when ordering security for costs, the conventional approach is to fix the sum at about two thirds of the estimated party and party costs up to the stage of the proceedings for which security is ordered, but there is no hard and fast rule.
    
45. With the bill of costs at hand I cannot speculate what costs would be involved at each stage.
    
46. Be that as it may, this case involves complicated questions of law and will involve a lot of research and arguments. If the matters raised in the affidavit are carried into the final hearing, it will be a lengthy and expensive litigation. One may also not reach that final stage.
    
47. In the immediate future, I have to decide on the application for injunction, which if fails or is granted conditionally may result in an appeal to the appellate court as the plaintiffs have invested substantial sum of money in the resort. I do not only see the defendant put to a situation of only filing affidavits in response to the injunctions applications but also filing its statement of defence in the recent. Appeal by the defendant is also anticipated from the interlocutory judgment on the injunction application, as the mortgagee may not wish to have its rights interfered with for so long until the trial. Appeal will involve costs as well.
    
48. It is therefore not fair to the defendant to make an award up to only the injunction stage. Costs up till the immediate proceedings after determination of the injunction application shall suffice which shall include the filing of the statement of the defence and the anticipated appeal by both parties after the determination of the injunction application.
    
49. If a trial stage nears or the amount of the security is exhausted or becomes inadequate then the defendant is always at liberty to make an application for further sums to be paid in court.
    
50. I am therefore of the judgment that security for costs shall be ordered. On quantum, I order the 1st and 2nd plaintiff to deposit a sum of $20,000 in court within 28 days; a sum of $10,000 each by the two non-resident plaintiff's.
    
51. The application for injunction would be heard after the sum is paid in court. This is on the understanding that the defendant will extend its undertaking not to act on the securities until the hearing and determination of the injunction application. If the undertaking is not extended, then the application for injunction will have to be heard immediately irrespective of whether the monies are deposited in court otherwise the substratum of the interlocutory application would be destroyed.
    
52. In summary, in the form of final orders:-
    
    1. The application for striking out the claim is dismissed.
       
    2. The application for security for costs is allowed.
       
    100. The 1st and the 2nd plaintiffs are to pay a sum of $10,000 each within 21 days from today which sums shall be deposited in the High Court.
         
    4. Defendant is at liberty to make further applications for security for costs if the amount becomes inadequate at any stage of the proceedings.
       
    5. The issue of costs of this application shall be made after hearing the parties.
       
    6. Further conduct of the litigation will be determined after discussion and consultation with counsels.
       
    7. Orders Accordingly.
       

ANJALA WATI
Acting Judge

13.10.09
___________________________________________________________________________
To:

1. Mr. S. Parshotam for the Plaintiff.
2. Mr. Nandan for the Defendant.
3. File.