IN THE HIGH COURT OF FIJI AT SUVA
CIVIL JURISDICTION

CASE NUMBER: HBC 256 of 2009

BETWEEN:

SHALENDRA MANI PILLAY
PLAINTIFF

AND:

DRAVEEN NANDINI LAL
1ST DEFENDANT

AND:

REGINALD LAL
2ND DEFENDANT

Appearances: Mr. Mohammed A. Khan for the plaintiff.
 Ms. Renee Lal and Ms. Rakai for the defendants.
Date/Place of Judgment: Friday 19th August, 2011 at Suva
Judgment of: The Hon. Madam Justice Anjala Wati.

JUDGMENT

STRIKING OUT – Defendants' application to strike out plaintiff's claim for no cause of action and abuse of process of court.

INJUNCTION - Sought by both parties against each other – each party asserts proprietary interest in the business - accounting firm, the plaintiff by sale and the defendants by transfer – true question of ownership cannot be ascertained on affidavit evidence so it is prudent that the status quo in respect of the operation of the business be maintained until such time the question of ownership is determined by the court.

Legislations
The High Court Rules, 1988.
Case Authorities
Dyson v. Attorney General [1911] 1 KB 410.
Guaranty Trust Co. of New York v. Hannay and Co [1915] 2 KB 536.
Sankey v. Whitlam (1978) 142 CLR 1.
Eq Musumeci v. Attorney-General NSW [2003] NSW CA 77.
Palfreyman v. Southern Metropolitan Master Planning Authority (1936) 15 LGRA 28.
Johnco Nominees Pty Ltd v. Albury-Wodonga (NSW) Corp [1977] 1 NSWLR 43.
Australian Conservation Foundation Inc v Commonwealth (1980) 146 CLR 493.
Bateman's Bay Local Aboriginal Land Council v Aboriginal Community benefit Fund Pty Ltd (1998) 194 CLR 247.
Aussie Airlines Pty Ltd v. Australian Airlines Ltd (1996) 139 ALR 663.

The Application

1.	The plaintiff has filed a substantive and an interlocutory application on the 14th day of August, 2009, seeking an order to restrain the defendants from entering, operating, and interfering with the client's financial information and assets of N. Mudaliar & Company.

2.	The plaintiff's application for injunction is opposed and the defendants further filed an application seeking that the substantive action of the plaintiff be struck out on the ground that it discloses no reasonable cause of action or that it otherwise is an abuse of the process of the court or alternatively that the plaintiff and the trustee be restrained from accessing any accounts of N. Mudaliar & Co. and the 1st defendant be allowed to operate the accounts of N. Mudaliar & Co.

3.	The parties had agreed that the defendants' application be heard first before the other applications are heard. The parties presented their written submissions in respect of the defendant's application. 

Case Background
4.	N. Mudaliar & Co. is a sole trader business in accounting practice duly registered under the Registration of Business Names Act, Cap. 249 and has been in operation since 1985.

5.	The plaintiff had been an employee of the firm since November 1995. Since 1998 he had been appointed as the office manager by the late Mr. Nitya Mudaliar, the principal of the firm.

6.	The 1st defendant is the daughter of late Mr. Nitya Mudaliar and the 2nd defendant is the husband of the 1st defendant.

7.	Mr. Nitya Mudaliar died testate on 26th October, 2008. He left a will dated the 15th day of January, 1994. 

8.	On 16th February, 2009 probate was granted in favour of Ms. Janki, appointing her as the sole executrix and trustee of the estate. Ms. Janki is the wife of the deceased.

9.	Sometimes in April, 2009, the defendants moved in the firm of N. Mudaliar & Co. and started operating the business. The basis on which the business was operated by the defendants was that the trustee of the estate had lawfully transferred the business in the name of the defendants, the registration being incomplete due to some technical problems. 

10.	The plaintiff was removed from the business. He became aggrieved and filed a substantive action on the 14th day of August, 2009 seeking various against the defendants:-

•	A declaration that the defendants acted unlawfully in operating N. Mudaliar & Co. as they are not the legal owners of the business and they are using their powers as beneficiaries to operate the business. It is illegal for them as beneficiaries to participate in the administration of the trust estate, nor to direct the trustee as to how and when to exercise her powers.

•	A declaration that the actions of the defendants be regarded as null and void.

•	An injunction order that the defendants be restrained from entering the business premises of N. Mudaliar and Co. since the business has been purchased by the plaintiff from the executrix.

•	An injunction order against the defendants restraining them from removing any confidential information, assets, client records and data from the office.

•	An injunction order against the defendants restraining them from dealing with the clients' financial information as they are in a serious breach of interest and confidentiality principles of the firm.

•	An injunction order that the defendants be restrained from trespassing, entering or taking any financial information of the clients until the final determination of the within action.

•	An injunction order that the defendants handover all the possession and control of the business to the plaintiff who is the legal owner.

•	An injunction order for the police to assist in the handing over of the possession and control of the business.

11.	The basis of the substantive action is that the plaintiff has bought the business in $190,000 from the trustee of the estate and as such he is the rightful owner of the business.

12.	The substantive application is opposed on the basis that the company has been transferred to the defendants by the trustee on 10th April, 2009. The defendants then assumed ownership and started running the business. The trustee's resident in New Zealand. There were some anomalies in the company's accounts and the plaintiff was questioned on those. He thereafter resigned and began a business styled "S.Pillay & Co". The nature of the business was the same and the plaintiff also uses the clients of N. Mudaliar & Co. The registration of the transfer was held back because the business could not be directly transferred to the defendants but should be transferred to the trustee first who could then transfer the same onto the defendants name. 

13.	On the 19th day of January, 2010 I had directed the plaintiff to deposit a sum of $13,508.85 which he had withdraw from the account of N. Mudaliar & Co on the 23rd day of October, 2009. The order was complied with.

14.	On the 23rd day of October, 2009 I had ordered that the accounts of N. Mudaliar & Co. be frozen until the determination of the current application.

The Grounds / Submissions In Support

15.	The defendants counsel firstly made submissions in respect of the striking out application. The counsel submitted that the substantive action has been brought about by a wrong procedure. The substantive action should have been brought about by a writ as there are substantial dispute of facts. The defendants were given time on the 14th day of September, 2009 to amend the originating process. The plaintiff chose to ignore this order of the court and continue with the proceedings in the current form. The plaintiff should now not be given further time to change its originating process. 

16.	Alternatively, it was argued that if the plaintiff is given leave to amend its originating process, it should be with costs on the higher scale. As a result of the wrong method used to initiate the claim, the courts process is abused and the action should be struck out.

17.	In respect of the injunction application, the defendants contend that the company N. Mudaliar has been transferred to the 1st Defendant Draveen Nandini Lal on or about April, 2009. The registration formalities were not completed due to some technicalities. Since the transfer the defendants together had been running the business.

18.	The first defendant had been depositing the income derived from the business. Unbeknown to her, the funds have been withdrawn from the business's bank account. The 1st defendant believes that the plaintiff and the trustee have been accessing the business's account. A bank statement was shown to indicate that a sum of $26,906.85 had been withdrawn from the business's bank account.

19.	It is averred that it is inequitable that the plaintiff and the trustee access the business's account as the defendants are owners of the business and earning the income. It is thus sought from court that the plaintiff and the trustee do not access the funds from the business accounts and further that the defendants be allowed to access the accounts for the running of the business.

20.	The counsel further submitted that the plaintiff cannot succeed in an injunction against the defendant because the cause of action against the defendants is speculative and have little chance of success. The company has been transferred to the defendants. There is thus no issue to be tried. Even if there is a serious question to be tried, the balance of convenience favours the defendants because damages will be an adequate remedy for the plaintiff, especially given the financial position of the defendants. More so, the plaintiffs undertaking as to damages is worthless to meet the loss and damage which the defendants are likely to suffer.

21.	The counsel also stated that the plaintiff will not suffer an irreparable harm if an interim injunction is granted against the plaintiff as he is operating his separate business. He also has not made payment of the purchase price to the trustee.

22.	The defendants have invested substantial money into the business after the transfer. The grant of interim injunction will determine the substantive rights of the parties and thus it is prudent that the status quo is maintained. 

23.	The fact that transfer had not been effected, cannot be used to deprive the defendants of their bona fide rights to own and operate the company.

24.	The plaintiff has not provided any undertaking as to damages.

25.	The defendants will suffer irreparable harm if the injunction is granted. They will be denied the opportunity to operate N. Mudaliar & Co. and will stand to lose the large sums of money used in the running of the business.

26.	The effect on third parties will be great if the injunction is granted against the defendants. The employees currently working at N. Mudaliar & Co. as well as the various clients of the business will be adversely affected.

Grounds / Submissions in Opposition
27.	On the application for striking out, the plaintiff's counsel further submitted that the choice of wrong procedure does not mean that there is no cause of action. There is a triable issue before the court and that is the issue as to who owns the business. The court can try this issue on the originating summons procedure as well.

28.	On the aspect of an injunction against the plaintiff, the plaintiff contends that he has purchased the business from Ms. Janki Mudaliar, who is the lawful trustee of the estate of late Mr. Nitya Mudaliar. The business purchase was paid the appropriate consideration. He runs the business in his own right and style. He should, he says, have the liberty to operate the business without any interference from anybody.

29.	The defendants should not be allowed to have any knowledge of the operations of the company as they are not the qualified tax agents and do not have the expertise to operate the nature of practice the business involves.

30.	The transfer formalities have never been completed and thus the defendants are not owners of the business.

31.	Whatever income is being generated from the operations of the business ought to be deposited into the bank account of the firm. It is fairly clear that not all the money that is being collected from the clients is being deposited into the business bank account as can be confirmed from the bank statement. The bank statements show deposits made up till 11th August, 2009 whereas the statement has been generated on the 5th October, 2009.

32.	If the defendants have any cause of action, they should go back to the trustee.
 
The Law and the Determination
33.	I will first of all deal with the application by the defendants to strike out the plaintiffs claim on the basis that there is no cause of action and that the proceeding is an abuse of the process of the court.

34.	The legislative provision governing striking out of claims is enshrined in order 18 Rule 18 (1) (a) and (d) of the High Court Rules, 1988.

35.	The main ground in support of the application for striking out is that the plaintiff should have filed a writ action instead of an originating summons procedure because there are substantial facts that are in dispute. It was also submitted that the court had ordered the plaintiff to amend the originating process and because they have failed, their process becomes one which abuses the process of the court.

36.	This court had never ordered amendment of the originating process. The issue of wrong choice of the originating process was raised in Court by the defendants counsel on the 14th day of September, 2009. The court had asked the plaintiff's counsel to look into the aspect and decide whether they wished to continue with the claim as if it was begun by a writ action. The plaintiff later, on the 20th day of October, 2009 advised the court that she wished to continue with the originating summons process.

37.	I have examined the originating summons claim and the affidavit in support of it. Both the parties claim ownership of the business and the defendants are currently operating the business having assumed ownership.

38.	The plaintiff is seeking an order from the Court to declare who is the rightful owner of the business. The request for declaration in itself is a cause of action against the defendants.

39.	Let us examine the legislative provisions pursuant to which the plaintiff's could sue for declarations.

40.	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".

41.	The case of Dyson v. Attorney General [1911] 1 KB 410 clearly discusses the subject of declarations. In this case of Dyson, order 25 Rule 5 of the English Rules gave right to sue for a declaration. Our order 15 rule 18 is verbatim of order 25 Rule 5 of the English Rules.

42.	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.

43.	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) 142 CLR 1 at 23:

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

44.	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."

45.	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."

46.	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".

47.	When suing for declarations, 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 Aboriginal Community benefit Fund Pty Ltd (1998) 194 CLR 247 at 257 per Gaudron, Gummow and Kirby JJ.

48.	It is useful to quote Lockhart's J's summary in Aussie Airlines Pty Ltd v. Australian Airlines Ltd (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 (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 Kunedin; and Forster v Jododex Australia Pty Limited (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 C omission (1992) 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."

49.	The choice of procedure which is alleged to be wrong does not make the claim an abuse of the process of the court. In the interest of justice, if the court is of the view that a wrong procedure to initiate a claim has been invoked, and a writ should have been filed instead of an originating summons, the court has the powers to continue proceedings as if the cause or matter was begun by a writ: Order 28 Rule 9 (1) of the High Court Rules, 1988. 

50.	The plaintiff wishes to maintain its originating summons process and I do not wish to interfere in the same. There is an existing and a valid cause of action against the defendants' and that action should be tried in order to determine the ownership of the business and the rights of the parties. If I find at any stage that the process should have been begun by a writ, I shall then make the necessary orders. I can also order oral hearing of the originating summons under Order 28 Rule 10 to allow the parties enough opportunity to cross- examine the witnesses on matters of controversy.

51.	The application for striking out is baseless and without merits.

52.	I now turn to the injunction application sought by the defendants against the plaintiff.

53.	The defendants are essentially in physical control of the premises, the assets and information of the subject firm. They are controlling and operating the company under the belief that they are the true and rightful owners of the firm. 

54.	Indeed, the court must try the issue as to ownership of the property. Some of the questions of fact which remains unresolved at this stage are:-

1.	Had the trustee properly transferred the business in question to the defendants or had the trustee properly sold the business in question?

2.	What are the pre-conditions of the transfer and/or sale? Have they been met?

3.	Who is the proper owner of the business?

55.	In order to answer the real questions that have arisen on the facts of the case, the Court may have to hear oral evidence from the parties and the trustee as well. The beneficiaries may also have to give evidence. The question for examination before the court is not a hypothetical question. There may be more to this that I have stated.

56.	One cannot say that a wrong procedure eliminates any cause of action. In this case controversial facts may come up during substantive hearing. A writ action would have been the ideal way to begin the case, but the originating process is not wholly inappropriate. The court can, whenever it deems appropriate, order parties to call specific oral evidence to prove or disprove a fact. The issue of ownership needs examination and determination. To disallow the defendants from operating the business would tantamount to determining the substantive question of ownership which is the subject of the originating summons relief.

57.	One party has to in the interim run the operations of the company. It is clear that the plaintiff and the defendants cannot work together. The defendants are in operation and the balance of convenience lies in favour of maintaining the status quo and allowing the defendants to run the company until the question of ownership is fully and comprehensively determined.

58.	If at the end of the day the defendants' actions are determined to be wrong, then the plaintiff can always seek damages that he would have suffered.

59.	 In order to effectively operate the business, the defendants have to keep a proper accounts of all business transactions and information of the clients. They will also have to operate the accounts of the company and a simultaneous act of the plaintiff of same nature will cause hindrance to the business. It is therefore prudent that the plaintiff at this stage does not interfere with the operations, clients and accounts of N. Mudaliar and Co.

Final Orders
60.	For the above reasons:-

(a)	The application for striking out is dismissed.

(b)	The defendants are to continue operating the business of N. Mudaliar & Co. until the final determination.

(c)	The defendants are at liberty to operate the account of the business until further determination of the matter. The defendants must keep a clear and comprehensive account of all transactions, assets, business and clients and furnish the same to the court as and when directed.

(d)	The plaintiff is restrained from interfering with the operation, accounts and clients of the company N. Mudaliar until the final determination.

(e)	Each party to bear its own costs.

(f)	Orders accordingly.

Anjala Wati
Judge

19.08.2011

To:

1.	Mr. Mohammed A. Khan, counsel for the plaintiff.
2.	Mr. Renee Lal and Ms. Rakai, counsel for the defendants.
3.	File: HBC 256 of 2009.