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High Court of Fiji |
IN THE HIGH COURT OF FIJI
At Suva
CIVIL JURISDICTION
Civil Action No: HBC 164 of 2009S
BETWEEN:
RESORT IN PARK AND GARDEN LIMITED
a limited liability company incorporated under the Companies Act having its registered office at Suva
Plaintiff
AND:
RICHARD NAIDU and
FLORENCE FENTON and
JON APTED and
NICK BARNES
as partners in a firm trading as MUNRO LEYS
a partnership having its registered office at Pacific House, Butt Street, Suva
First Defendant
AND:
COURTESY BENCH COMPANY INCORPORATION,
an entity incorporated in the State of Washington, United States of America.
Second Defendant
INTERLOCUTORY JUDGMENT
Judgment of: Ms Dias Wickramasinghe J.
Counsel : Mr J Savou for the Plaintiff
Mr J Apted for the Defendants
Solicitors : J Savou esq for the Plaintiff
Munro Leys for the Defendants
Date of Judgment : 7 April 2011
Date of Hearing : 24 August 2010
INTRODUCTION
[1] The first defendant- Munro Leys, by its summons dated 28 July 2009, made an application in terms of O 18 r 18 of the High Court Rules 1988, to either strike out the plaintiff - RIPGL's originating summons dated 21 July 2009, or in the alternative to order $ 50,000 as security for costs in terms of section 402 of the Companies Act. The second defendant - CBCI also filed a summons for an order for security for costs on the same day. Both summonses are determined simultaneously in this judgment.
[2] In support of the originating summons, the plaintiff filed the affidavit of Kim Woo Sik sworn on 10 June 2009.
[3] The first defendant's summons for striking out was supported by the affidavit of Florence Tuirewa Fenton of 28 July 2009. The plaintiff then filed an affidavit disclosing its financial status through its alternative secretary Edmund Sang Woo Kim on 3 September 2010. Munro Leys then filed another affidavit dated 20 September 2010 of Florence Tuirewa Fenton in reply to the aforesaid affidavit of the plaintiff. The plaintiff responded to the said affidavit by filing the affidavit of Edmund Sang Woo Kim on 24 September 2010. Accordingly, this court has four affidavits of the parties.
[4] The parties also filed six sets of written submissions viz:
- 'Submissions of plaintiff in response to first and second defendants' applications for striking out of action and security for costs' dated 11 August 2009;
- 'Submissions of plaintiff in response to first and second defendants' applications for striking out of action and security for costs' dated 17 September 2009 with twenty six judgments;
- 'Applicants'/ Defendants' final reply dated 22 September 2009';
- 'First and second defendants' submissions on security for costs' dated the 20 September 2010'; and,
- 'Submissions of the plaintiff in response to first and second defendants further submissions on security for costs' dated 24 September 2010'.
[5] The matter was first listed for hearing on 22 September 2009 and thereafter adjourned to 26 October 2009. It was then heard by his Lordship Justice Pathik and was adjourned for continuation of the hearing on 22 November 2009. However, His Lordship could not conclude the matter due to his illness and subsequent retirement. Subsequently, the matter was listed before me.
[6] Before I proceed to make my determination, let me state that the voluminous affidavits and written submissions making up approximately 775 pages, required me to read to make a determination on these well settled points of law.
BACKGROUND OF FACTS
[7] RIPGL attempted to purchase land from the second defendant-CBCI. To facilitate this purchase, the parties executed Head of Agreement dated 29 November 2007, a Sales and Purchase Agreement dated the 22 April 2008 and an extension to the settlement date. A sum of $USD1150233.50 (United States dollars One million one hundred and fifty thousand two hundred and thirty three dollars and fifty cents) was paid into the trust account of Munro Leys as a part payment of the purchase price. RIPGL alleges it was unaware that the prior statutory consent was required for the transaction and Munro Leys did not inform RIPGL of the requirement before the payments were made to the trust account of Munro Leys. RIPGL therefore seeks judgment against Munro Leys and CBCI for the return of the money, as the agreements are invalid for want of ministerial consent.
LEGAL MATRIX
[8] Munra Leys' striking out application is made under O 18 r 18 of the High Court Rules and premised on the ground that it does not disclose a reasonable cause of action against the first defendant and it is frivolous, vexatious and otherwise an abuse of process.
[9] Order 18 rule 18 of the High Court Rules reads:
- (1) The Court may at any stage of the proceedings order to be struck out or amended any pleading or the indorsement of any writ in the action, or anything in any pleading or in the indorsement, on the ground that-
- It discloses no reasonable cause of action or defence, as the case may be; or
- It is scandalous, frivolous or vexatious; or
- It may prejudice, embarrass or delay the fair trial of the action; or
- It is otherwise an abuse of process of the court;
and may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be.
(2). No evidence shall be admissible on an application under paragraph (1)(a).
(3). This rule shall, so far as applicable, apply to an originating summons and a petition as if the summons or petition, as the case may be, were a pleading.
NO REASONABLE CAUSE OF ACTION
[10] Order 18 rule 18(1)(a) of High Court Rules, confers on the court the power to strike out a pleading at any stage of the proceedings, if such pleading does not disclose a reasonable cause of action. Order 18 r 18(2) of the High Court Rules prohibits the court assessing evidence when such an application is considered. Order 18 r 3 of the High Court Rules stipulates that r 18 must, as far as applicable, apply to originating summons and a petition.
[11] This case was initiated on an originating summons. While O 18 r 18 (1)(a) of the High Court Rules stipulates that the pleading can be struck out 'if a cause of action is not disclosed', O 7 r 3(1)[1] of the High Court Rules stipulates that the contents of the originating summons only requires the plaintiff to set out 'sufficient particulars to identify the cause of action'. Therefore, when cases are initiated on originating summons, a prima facie examination of the originating summons may not necessarily disclose a cause of action, as the rules requires the summons to provide only sufficient particulars to identify the cause of action. The court will therefore have to examine the affidavit evidence filed in support of the originating summons to determine whether the affidavit sets out the basis of the cause of action. However, such examination must exclude evidence as O 18 r 18 (2) prohibits the examination of the evidence when determining an application under r 18(1)(a).
[12] In the case of National MBF Finance (Fiji) Ltd v Buli [2000] FJCA 28; ABU0057U.98S (6 July 2000), it was held that, when examining the facts, the court must also draw a legal fiction to assume that the party alleging such facts would be proving such facts. Moreover, amass of case law on this point enumerate that if a legal issue can be raised on the facts as pleaded, then the court should not strike out a pleading. Therefore, a case should only be struck out if such case is ex facie unsustainable on the facts pleaded and judicial notice can be taken of the falsity of the facts.
[13] His Lorship Justice Hettiarchchi in the case of Rakesh Kumar & Reen Kumari Ram V Habib Bank Limited Civil Action No: HBC 248 Of 2009 held that;
'It must be emphasised that a mere statement of claim is not automatically indicative of a cause of action. The reasonable cause of action means a cause of action with some chance of success. The plaintiff must show some real prospect of his statement of claim. He cannot succeed by showing some whimsical claims on the statement of claim. If the statement of claim fails to address the legal foundation of claim and fails to state what and how the defendant is liable it shall be struck out'.
[14] It is in the backdrop of these legal principles that I will now determine whether the plaintiff had disclosed a reasonable cause of action against first Defendant, Munro Leys.
[15] The originating summons of RIPGL pleads inter alia the flowing reliefs:
- It be Declared that the Heads of Agreement dated and executed by the Plaintiff and Second Defendant on 29th September 2007 is in breach of section 6(1) of the Land Sales Act (Cap 137);
- It be Declared that the Sale and Purchase Agreement dated and executed by the Plaintiff and Second Defendant 22nd April 2008 is in breach of section 6(1) and 7(1) of the Lands Sales Act (Cap 137);
- It be Declared that the purported extension to the settlement date under the Sale and Purchase Agreement dated and executed by the Plaintiff and Second Defendant 22nd April 2008 is null and void and of no legal effect;
- It be ordered that the total amount paid by the Plaintiff into Trust with the First Defendant totaling $USD1150233.50 (United States dollars One million one hundred and fifty thousand two hundred and thirty three dollars and fifty cents) be paid to the Plaintiff by the First Defendant forthwith; and,
- It be ordered that any portion of the monies paid by the Plaintiff into Trust with the First Defendant which has been disbursed by the First Defendant to the Second Defendant, or any other third party, be immediately paid to the Plaintiff by the First Defendant and Second Defendant and/or either of them jointly and severally forthwith.
[16] To determine this point, I perused the affidavit of Kim Woo Sik dated 10 June 2009 and examined its clauses and not the attachments, which form the evidence. I specially examined clauses 13, 14, 16, 17, 18,19, 21, 22 and 27 of the affidavit and found that the cause of action against Munro Leys is formed on the basis that it failed to inform or advise RIPGL prior to payments being made into the trust account of Munro Leys that the land transaction required the prior written ministerial consent in terms of section 6 and 7 of the Land transfer Act. I am of the view that this is an issue, which has a wealth of case law forming trite law that the statutory consent of the Minister is a prerequisite to transactions, which falls within the ambit of these provisions. However, since the matter relates to the substantive issue, I do not wish to dwell more or pre-judge except to say that I am convinced that there is a reasonable cause of action against Munro Leys on the facts pleaded.
FRIVOLOUS, VEXATIOUS AND OTHERWISE AN ABUSE OF PROCESS.
[17] Once again, these grounds also forms trite law and I do not wish to set out the case law on the issue.
[18] However, as I have earlier said, I have already determined that there exists a reasonable cause of action. I am, therefore, not inclined to hold that the RIPGL's action is frivolous, vexatious and otherwise an abuse of process.
[19] As viewed by Phillips J in the case of Fiji Development Bank v Richard Ihaka [2006] HBC 6/05L, 4 August 2006, I am not inclined to strike out the originating summons pre-emptorily on the glib use of summary procedure.
[20] Accordingly, I dismiss Munro Leys' application to strike out the plaintiff's originating summons.
Security for costs
[21] The defendants move for F$ 50,000 each to be provided by the plaintiff as security for their costs.
[22] Both defendants invoke the court's jurisdiction for security for costs in terms of section 402 of the Companies Act. Additionally, the second defendant moves the court to exercise its inherent jurisdiction to grant this application. The defendants have not invoked the jurisdiction of this court in terms of O 23 of the High Court Rules.
Section 402 of the Company Act reads:
402. Where a limited company is plaintiff in any suit or other legal proceeding, any judge having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the company will be unable to pay the costs of the defendant if successful in his defence, require sufficient security to be given for those costs, and may stay all proceedings until the security is given.
[23] An examination of the aforesaid section indicates that there are two threshold requirements for application of this section, and the defendants would succeed only if both these requirements are satisfied viz:
- There is credible testimony that the plaintiff is unable to pay costs; and,
- The defendant will be successful in the defence.
[24] The defendants have not filed an affidavit in reply to the originating summons. The affidavit of Florence Tuirewa Fenton dated 28 July 2009, at paragraph 2, stated that the contents of her affidavits relate only to the interlocutory application. I am, therefore, unable to determine whether the defendants would be successful in their defence. As I said earlier, I do not wish to pre-judge the plaintiff's case except to say that the plaintiff's cause of action ex facie seems to have merit. Therefore, the defendants' application must fail on this requirement alone.
[25] In any event, let me consider whether the defendant has provided 'credible evidence' to demonstrate that the plaintiff will be unable to pay costs.
[26] In this regard, Inoke J in the case of Denarau Investments Limited et al v Costerfield Limited Company et al [2010] Civil Action 137 of 2010L examined the standard required to establish the point where his Lordship held that:
'The Defendants must therefore show by credible testimony that the Plaintiffs will be unable to pay the Defendants' costs and that the Defendants will be successful in their defence. It seems to me that the words "credible testimony" and "will" used in the section indicate that proof must be to a high standard. In this regard I do not think I differ from Fernando J in Strategic Air Services Ltd v Airports Fiji Ltd [2010] FJHC 344; HBC212.2007 (10 August 2010)'.
[27] Whist concurring with the above views expressed by their Lordships Inoke J and Fernando J, let me now determine whether the defendants have provided credible evidence to prove that the plaintiff is unable to pay costs if awarded.
[28] Florence Tuirewa Fenton on behalf of the defendants filed two affidavits in support for security of cost. The affidavit evidence discloses inter alia that RIPGL does not have assets in Fiji or elsewhere sufficient to meet the costs of the defendants; the paid up capital of the company is only $10,000 as at 12 October 2008 and 12 October 2009; although RIGPL had attempted to increase its authorized capital to $ 1,752,540 the paid up capital has not been paid; and a certificate issued by Registrar of Titles and the Land Transport Authority confirms that the plaintiff does not own any land or motor vehicles in Fiji. The affidavits also state that all the shareholders of the company are Korean nationals and they are not domiciled in Fiji and do not have a physical address in Fiji except a box number. The affidavit also attached a letter written by Cromptons, (which led to several correspondence alleging breach of the fiduciary duty of lawyer client relationship) which demonstrates that an outstanding sum of F$ 33,588.35 is owing as legal fees as at 2 February 2009. The second defendant CBCI did not file any affidavit in support of its application. Florence Fenton in her affidavit avers that her affidavits relate to both the defendants.
[29] Two affidavits were filed by Edmund Sang Woo Kim on behalf of RIPGL, disclosing its financial Status. The evidence includes a tax return for 2009, which discloses RIPGL's registered office to be at Flat 2, 71, Gordon St, Suva and a PO Box 15734 Suva; the Financial statement for the year ended 31 December 2009 filed on 13 May 2010; ANZ bank statements which confirms that the plaintiff maintained two bank accounts and as at August 2010 the accounts had cash balance of $19,342 and $20,000 respectively.
[30] The plaintiff also attached the Reserve Bank approval and Fiji Trade and Investment Bureau approval received for its investment in Fiji. These documents envisage that the investment is subject to tight regulatory controls, which requires approvals at all junctures. RIGPL also avers that the increase of the preferential capital is subject to a notification process, which is currently being processed. The affidavit also states that the present regulatory framework does not permit RIPGL to freely purchase investment assets in Fiji.
[31] On a consideration of the aforesaid affidavit evidence, I do not have credible evidence or reasons to believe that the plaintiff will be unable to pay costs to the defendants if awarded. Nonpayment of paid up capital or unpaid legal fees would not be sufficient criteria for me to determine that the company will be unable to pay costs.
[32] Furthermore, the defendants are moving for $50,000 each as costs. The basis of the cost as averred in Florence Futon's affidavit as 'having regard to the work involved in responding to the papers filed, legal research, and preparation for and attending at hearing (s) including pre –trail matters'.
[33] In my mind, the calculation of the amount of costs is speculative and exploratory. It lacks justifiable particulars. In this regard I concur with Inoke J in the case of Denarau Investments Limited (supra) where His Lordship in a similar application held that:
' I do not think it is sufficient to just take the global figure which the solicitor uses for work of this kind and multiply it by the number of Defendants to come up with the amount to be paid into Court as security'.
[34] The defendant has not proved the threshold requirements stipulated in section 402 of the Companies Act. As such, I do not view that this is a fit case to grant security for costs. Accordingly, I refuse the Defendants' applications for security for costs.
Converting to a writ of summons
[35] Having perused a voluminous documents, I find that the parties are at variance on many facts and issues. To name a few, RIPGL alleges that Munro Leys acted and held the monies as ad midio as a stakeholder but Munro Leys states that they were acting as agents, solicitors of CGCI. Munro Leys alleges that 'deposits' were paid out of time but states they are unaware of the reasons for the delay. This might be therefore a fit case to convert to a writ. However, I wish to leave it to the trial judge to make a decision after considering the affidavits in reply and the response.
[36] Courts have repeatedly requested counsel the dwell on the viability of interlocutory applications before filing them. In this regard, Her Ladyship Justice Wati in the case of Rosie Tours v Labour Officer HBA 10 of 2009, said:
' Interlocutory matters of this nature only wastes good resources and causes immense delay. Counsel with experience (must) take some time out and think about the viability of any potential application that they wish to make. Perhaps a little analysis may assist them and the court as well'.
Sir Donald Nicholls in Re Unisoft Group Ltd (No 2) 1993 BCLC (Butterworth) 532 cited by Fernando J in Strategic (supra) also said:
"This would be yet another example of an ill which all too frequently bedevils the interlocutory stages of too many actions; one or the other or both parties spend time and money sniping at each other which would be much better spent on pressing ahead speedily and directly to the trial at which alone their substantive dispute can be effectually decided".
COSTS
Costs to be in the cause.
ORDERS
The Orders are:
............................................................
Ms D. Dias Wickramasinghe
Judge
[1] Order 7 Rule 3 (1) of the High Court Rules;
Every originating summons must include a statement of the questions on which the plaintiff seeks the determination or direction of the High Court or, as the case may be, a concise statement of the relief or remedy claimed in the proceedings begun by the originating summons with sufficient particulars to identify the cause or causes of action in respect of which the plaintiff claims that relief or remedy.
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