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Vunimoli Sawmill Ltd v Samshood [2011] FJHC 802; HBC08.2007 (15 December 2011)

IN THE HIGH COURT OF FIJI AT SUVA
CIVIL JURISDICTION


CASE NUMBER: HBC 8 of 2007


BETWEEN:


VUNIMOLI SAWMILL LIMITED
FIRST PLAINTIFF


AND:


BASHIR KHAN
SECOND PLAINTIFF


AND:


MOHAMMED SAMSHOOD and ROZEENA BANO (T/A SAM CIVIL SERVICES)
DEFENDANTS


Appearances: Mr. A. Singh for the plaintiffs.
Mr. S. Shah and Mr. A. Ram for the defendants.
Date/Place of Judgment: Thursday, 15th December, 2011 at Suva.
Judgment of: The Hon. Madam Justice Anjala Wati.


JUDGMENT


Catchwords:
SALE AND PURCHASE AGREEMENT - specific performance – parties obligations under the agreement – whether and what breach occurred under the said agreement – damages-interest and costs.


  1. This is one legal situation where all the parties had substantially abandoned their stand from the pleadings they first filed in Court to the time they took stand for trial.
  2. I see no need to state the parties' contention from the pleadings but how they stood factually after the trial.
  3. The claim stems from the sale and purchase agreement of 2nd September, 2006 entered between the parties. The plaintiffs were the vendors and the defendants were the purchasers. The property to be sold was all that piece or parcel of land known as Lot 1 on T 950 (s) Waidamudamu [pt of] and comprised in the reference LD 4/9/5174 on SO5367, NLTB reference No. 4/9/8008, the Sawmill located on the said lease, and all those items enunciated in schedule A and B of the said sale and purchase agreement.
  4. Both the parties have in no uncertain terms informed the Court during the trial and in the closing submissions that they wish to go ahead with the sale.
  5. However, the plaintiffs have additionally sought a sum of $1,000 per month from 15th December 2006 vide clause 7.1(iv) of the agreement, on the basis that the defendants had breached the agreement and as such they ought to be penalized pursuant to the said clause.
  6. The defendants want the sale of the properties, with payment of the purchase price to be made by monthly instalments. Additionally, the defendants contend that they are not liable to pay any damages as they have not defaulted on their part of the bargain. The defendants further seek general and special damages, interest and costs of the action on the basis that the plaintiffs breached the agreement by unlawfully terminating the same on the 23rd day of December, 2006.
  7. There was extensive evidence, oral and documentary, from both parties as well as closing submissions in writing. I have considered the parties evidence and the submissions in detail in order to determine the issues.
  8. Due to the extensive nature of the evidence and the submissions, it is not possible that the same be summarized in any form. The Court record comprehensively contains the same. I shall thus only refer to the evidence and the submission in its specific form as and when necessary.
  9. The parties have expressly agreed that the price of the Sawmill, the Lease, and the items mentioned in schedules A and B was covered by clauses 1 and 2 of the sale and purchase agreement. These clauses also spell out the obligations of each party and are important to examine to determine as to whether and what failure occurred and what remedies are suitable in the circumstances.
  10. It was also agreed by the parties that the said clauses had prescribed two payment options, termed by the parties as option A and option B. I shall follow this terminology for ease of reference.
  11. Option A was covered or spelt out in clauses 1.1 to 2.5 of the sale and purchase agreement and option B was covered by clauses 2.6 to 2.8 of the same agreement.
  12. The clauses read as follows:-
    1. Price
  13. Mode of Payment

2.1 The purchasers shall pay a deposit of $105,000.00 (one hundred five thousand dollars) as a going concern with VAT if any to be paid into trust account of Messrs. Sheik H. Shah Esq. upon grant of consent of NLTB to the transfer of the lease.


2.2 Subject to clause 3.1 and 3.2 upon transfer of Vunimoli Sawmill license No. 80/2006 and/or approval from Conservator of Forest to the purchasers to operate sawmill as per the agreement the solicitor shall pay the vendors a sum of $35,000.00 (thirty five thousand dollars) as a going concern with VAT if any from the deposit of $105, 000.00 (one hundred and five thousand dollars). The purchasers shall simultaneously take over the operation of Vunimoli Sawmill at Waidamudamu, Labasa.


2.3 The purchasers though its solicitors shall pay the vendors a sum of $35,000.00 (thirty five thousand dollars) as a going concern with VAT if any on the 31st day of October, 2006 and a further sum of $35,000.00 as a going concern with VAT if any (thirty five thousand dollars) on 15th day of November, 2006. The vendors shall pay the FDB loan account from the money received by the purchasers and discharge the security held at FDB for the property described in schedule A and B with any debenture. The vendors shall not sell or deal in any manner the discharged property unless the purchasers fails to purchase the same or terminates this agreement on purchasers' option.


2.4 In the event the purchasers obtains finance to settle the balance amount of $795,000.00 (seven hundred ninety five thousand dollars) as a going concern with VAT if any the vendors shall be paid the said sum of $795,000.00 (seven hundred ninety five thousand dollars) upon settlement on 15th day of December 2006 or further 2 weeks grace period ending on 29th day of December, 2006.


2.5 That if the financier gives the purchasers any letter of undertaking for the loan, then the vendors shall grant purchasers further extension for such period until all the papers are executed and the money paid out.


2.6 To the exclusion of clause 2.4 and 2.5 above in the event if the purchasers fails to secure loan for final settlement the purchasers shall then make payment in instalments, the purchasers though its solicitors shall make a further deposit of $250,000.00 as a going concern with VAT if any (two hundred fifty thousand dollars) to the vendors upon settlement at Registrar of Titles office in Suva and security of the said property and the said business shall be held by the vendors. The purchase price on instalment payment shall be $1.1 million (one million one hundred thousand dollars) as a going concern with VAT if any.


2.7 The purchasers shall make a payment of $18,625.00 (eighteen thousand six hundred twenty five dollars) as a going concern with VAT if any on the last day of each month for a period of forty (40) months, a total repayment sum of $745,000.00 (seven hundred forty five thousand dollars) as a going concern with VAT if any.


2.8 A rebate on the purchase price shall be calculated at $5,000.00 (five thousand dollars) plus VAT if any per month if the total purchase price is paid in full before the term of forty (40) months".


  1. The plaintiffs version is that the defendants breached the agreement in the following ways:-
  2. The defendants' contention is that the plaintiffs had not completed the option B procedures for the defendants to default under Plan B. In simple terms, the defendants state that the plaintiffs were never ready with the settlement documents on the 15th day of December, 2006 for the plaintiff to pay $250,000. They further say that the plaintiffs had wrongfully terminated the agreement on 23rd December, 2006, thereby breaching the agreement.
  3. I will first determine whether and in which way (if any) was the agreement breached. This will invariably resolve all the issues.
  4. The plaintiffs contention is that the defendants did not apply for loan until 1st December, 2006 and that gave rise to breach of the agreement. The agreement by clause 1.2 states that "the purchasers shall upon execution of this agreement take all necessary steps to obtain a loan from any bank ..."
  5. The defendants did obtain a valuation of the property and got his accountant to prepare and lodge the loan proposal. The loan proposal was lodged on 1st December 2006. These matters of valuation, preparation of loan proposal, and lodgment of the proposal takes times and I cannot hold the defendants in default for the time they took to make an application for the loan. Further, the sale and purchase agreement did not stipulate the time within which the loan was to be applied. It simply said that all necessary steps should be taken to obtain a loan. Valuation, preparation of loan proposal, and lodgment of loan proposal are necessary preparations to obtain the loan. I simply do not find that the defendants had defaulted in their obligation when the loan proposal was lodged on the 1st day of December, 2006.
  6. I also do not find any basis for the contention that the defendants breached the agreement by not getting a bank loan. Both parties had appreciated at the time of the agreement that the defendants may not be successful in getting a loan that is why an alternative mode of payment was worked out and agreed upon. If the bank did not give the loan, that was no fault of the defendants. That factor of successfully obtaining a loan was beyond the control of the defendants.
  7. The third breach that the plaintiffs allege are that the defendants did not give the plaintiffs notice in writing that it wanted to exercise option B and that it did not deposit a sum of $250,000 with the plaintiff before the settlement and before the plaintiffs prepared the security documents to take charge of the properties.
  8. Let me first look at the issue of the payment of $250,000. This aspect is carefully covered by clause 2.6 of the sale and purchase agreement. Clause 2.6 succinctly provides that:-
  9. I do not accept the plaintiffs' contention that the sum of $250,000 was to be deposited before settlement or before the plaintiffs prepared the security documents. The agreement is very clear on this aspect that the monies were to be paid upon settlement at the Registrar of Titles Office in Suva. The monies were not paid because the settlement did not take place.
  10. There was no time and date for settlement stipulated in the agreement. Of course, it cannot be 15th December, 2006, as it was specifically for settlement of option A. Option B only came into play after 15th December, 2006, if finance was available, and after 29th December, 2006 if the financier gave the defendants undertaking as to the loan.
  11. The plaintiff, Mr. Bashir Khan, himself testified that the defendants told him on the 13th day of December, 2006 that their finance was not approved. By that time there was only one day left for settlement. It would obviously be impossible to get all the security documents prepared and get the necessary statutory requirements on security documents in order, like, consent to mortgage from the Native Land Trust Board, in a day's time.
  12. If the plaintiffs were not informed on 13th December, 2006 that the defendants did not manage to secure the loan or gave to the plaintiffs any undertaking as to the loan, then the plaintiffs would have only known on 15th December 2006 that option A was out and option B kicked in. In these circumstances, the contention that settlement on option B was to take place on 15th December 2006 is not sustainable and could not have been agreed upon.
  13. The plaintiffs themselves would not have had all the security documents to take charge over the properties on 15th December 2006, to maintain that settlement was to take place on 15th December, 2006 because on 15th December, 2006, the plaintiffs would only have been ready for settlement on option A.
  14. I further find upon details analysis of the evidence that the plaintiffs were never ready effectively for a settlement on the 15th day of December, 2006, for the defendants to pay the money.
  15. Mr. Bashir Khan himself testified that he was not ready with the signed transfers of all the vehicles which were to be sold. He said he waited for the deposit of $250,000. There was no need to wait for the deposit as that was to be paid on the settlement date. Mr. Khan had also not obtained consent to mortgage the lease from Native Land Trust Board. It is not disputed by the parties that this consent was a pre-requisite for any dealing in the land. The security documents were also not ready as there is no evidence that Mr. Sadiq, who acted for the plaintiffs' or the plaintiffs themselves, prepared any. The time for payment of $250,000 had thus not arisen.
  16. Further, there is enough evidence to conclude that Mr. Bashir Khan only had the discharge of the security documents from the previous mortgagee on 20th December, 2006. How could the plaintiffs then be ready to settle on the 15th December, 2006 on any option for that matter?
  17. I do not find that the defendants had defaulted in the payment of $250,000 on 15th December 2006 or at any time thereafter, as the plaintiffs were never ready for settlement and shortly thereafter the plaintiffs terminated the agreement.
  18. Mr. Bashir Khan also contended that he should have been informed in writing that the purchasers or the defendants wanted to go to option B. I find this contention outrageous. What was the need for a notice in writing:-
    1. When there was no requirement for this in the sale and purchase agreement; and
    2. When it was clear to the plaintiffs on 13th December 2006 and on 15th December 2006 that option A was not possible and that option B would take effect.
  19. It is crystal clear from the evidence that the parties ought to have known that the option A purchase price was not possible and as such option B was to take effect.
  20. Since option B purchase price did not stipulate a time for settlement, it should have been mutually worked out by the parties. If the defendants did not respond to the plaintiffs request to perform their part of the bargain, then the plaintiffs could have resorted to legal action for appropriate remedies under clause 7.1 of the agreement.
  21. Instead of taking this course of action, the plaintiffs terminated the contract on 23rd December, 2006. The plaintiffs wanted to then move into possession but they were unsuccessful. The relationship of the parties went sour thereafter.
  22. On my assessment of the matter in the aforementioned parts of my judgment, I have reached the conclusion that the termination was improper and wrong at law and by terminating the agreement the plaintiffs committed a breach of the said agreement. The termination is null and void and of no effect.
  23. I am reinforced in my view by clause 7.1 of the agreement which reads as follows:-

"If the purchasers shall make default in payment of any monies hereby agreed to be paid and if such default shall continue for the space of ninety (90) days from the due date then and in such case the vendors without prejudice to their remedies may at their option exercise the following remedies: ...."


[Underlining is Mine]


  1. It is very clear that clause 7.1 relates to payment of any monies, be it the deposit of $105,000, $250,000 or the monthly repayments of $18,625.00. I do not accept the defendants' contention that it applies to installment payments. The word payment is used in clause 7.1(iv). This is the clause that relates specifically to installment payments:-

"In default of payment as agreed, the purchasers shall pay a penalty of $1,000 (plus VAT if any) (one thousand dollars) per month to the vendors, in the event the default continues for ninety (90) days. The vendors may take possession of the property forthwith."


  1. Even if I hold for the plaintiffs that the settlement date was to be 15th December, 2006 for option B too, and that the plaintiffs were ready with all settlement documents, then the plaintiffs should have waited for 90 days from the 15th day of December, 2006 to exercise its rights to terminate the agreement. Indeed it acted hastily and wrongly when it did terminate the agreement on 23rd December, 2006.
  2. Since the plaintiffs wrongfully terminated the agreement, the agreement came to an end from the plaintiffs' side, and as I said, the parties stopped any friendly dealings between them thereafter. Thus, apart from the payment in Court of a sum of $200,000, pursuant to an order of the Honourable Justice Jitoko of 14th February 2007, the defendants made no other payments in Court or to the plaintiffs. The matter ended up in Court in early 2007 and the parties have been trying to get some legal pronouncement of their rights and remedies since then.
  3. The default clauses, thus, under clauses 7.1 and 7.1(iv) could not be activated for two reasons. One which I have earlier stated to be that the defendants did not default in the payment of $250,000 as there was no settlement and secondly, for the reason that the obligation to pay and the right to receive monthly payments never came into play after the saga from 15th December 2006 until date as there was no settlement.
  4. However, the defendants ought to have set aside the balance of $50,000 and installment payments of $18,265.00 monthly or deposited the same in an interest bearing account so that they are ready with the payments when called upon to. They had the full benefit and possession of the Sawmill, which should have generated income. The parties also had the benefit of the lawyers who could have advised them of the effect of Justice Jitoko's orders, which both parties have accepted by conduct and by not appealing the same. On 10th October 2008, the Court had ordered that the sum of $100,000 from the deposit of $200,000 be released to the plaintiffs and that the sum be reflected as part of the consideration for the sale of the Sawmill and that the term of the agreement be varied accordingly. The acceptance of the orders itself indicates that both parties maintained that the agreement was still on foot and that each one of them was going to exercise their rights of specific performance. The defendants always had made a claim for specific performance and as such they ought to have run the mill on the basis that they would finally have the legal proprietorship of the same.
  5. It is a farce for the defendants to contend that it could not develop the mill to its full potential and avoid its obligation to set aside the said sums of $50,000 and $18,625 monthly repayments on which they could have accumulated the interest. They also cannot ask for the payments for the sale of the Sawmill to be ordered from the date of the judgment as the monies should have been collected by now.
  6. The parties are thus are entitled to specific performance in the manner that the defendants must pay to the plaintiffs the balance purchase price from option B in lump sum and the plaintiffs must in return transfer the said properties in the name of the defendants.
  7. The Plaintiffs are thus not entitled to any other remedy including any interest. To award interest to the plaintiffs would not be equitable as it is the plaintiffs who themselves wrongfully terminated the agreement and tried to gain possession of the property and thus shattering the good relationship that existed between the parties. No payments thus were forthcoming from the defendants. If they had used the correct approach of coming to Court due to uncertainties or disagreements, they would have been paid the monies due and owed to them. Their hasty and improper conduct in the entire transaction does not entitle them to any interest.
  8. Now that I have made a finding that the defendants ought to pay a lump sum of $795,000 in exchange for the transfer of all the properties agreed to be sold, the remaining question left is for the Court to decide whether the defendants are entitled to general and special damages, and interest.
  9. The defendants claim for general damages are on the following basis:-

The defendants claim for $500,000 agreed damages is unsustainable in light of the orders for specific performance. That was never part of the agreement. Clause 7.2(iii) states that the damages of $500,000 are an alternative remedy to specific performance. I need not say more than this.


(b) The defendants could not develop the mill to its fullest potential since September, 2006 until now as they did not have the title to the property and mill. Further there was a Court action hanging over their heads, the future was uncertain and the defendants faced a real risk that all their basic improvements to get the mill running could be lost.

A court action was no bar to developing the mill, as, if the defendants were unsuccessful in the legal arena, they could have claimed for the improvements on the property. This is an excuse that the defendants are using for their sheer neglect to develop the mill.


(c) The plaintiffs had unlawfully attempted to take possession of the mill. There were assaults and tension was high. The defendants are therefore entitled to trespass for land.

Possession was attempted but not successful after the physical battle. There was no trespass to the land. I accept Mr. Khan's evidence that he did not enter the mill but was on the road when he got assaulted and prevented from entering the mill.


(d) The defendants could not log the concession area as the plaintiffs' witnesses blocked the roads. The defendants said that they lost about $60,000 to $70,000 in making the road to the concession area. The defendants did not log in that concession area for the fear that the defendants' machines may be damaged.

If the defendants were in so much fear of loss of items on property or during work, it could have obtained police assistance with injunctive orders to take care of the uncertainties and continued to log the concession area. They slept on their rights and it is improper to award them any damages for sleeping on their rights.


(e) Due to the dispute, the defendants' ability to obtain logging concession was affected.

This obtaining of concession was a matter for negotiation by the defendants. They should have used their ability, business techniques and negotiation to obtain the logging concession. The assertion that they could not obtain the logging license is a sham.


(f) The defendants were not able to raise loans with the bank as there was no title to the property.

(g) The defendants ability to get trade suppliers was severely affected

The defendants were at all times in possession of the mill and maintained a claim for specific performance. It thus follows that they ought to have looked after their interest to develop the mill and obtain maximum profit from the same. If the mill failed in terms of production, it is the defendants making as it had successfully obtained and maintained possession of the mill. Even if the bank and the trade creditors refused to deal with them, they could have used the profits and income from the business to develop the business and run the same.


Further, the defendants' inability to obtain the logging license and the co-operation of trade creditors are matters that are always foreseeable and expected in business life and could occur even in absence of Court action. If the defendants had produced good output from the Sawmill, they could have made profits and justified their ability to pay the mataqali and the trade creditors through their financial standing. This in itself would have assisted them to obtain the license and the co-operation of the trade creditors. They had to work hard to be able to maintain the business and the business dealings of the Sawmill. They cannot use the Court action to justify their losses.


  1. The defendants also sought special damages for all that had been spent on the property. All the expenditure on the property, after an order for specific performance belongs to the defendants so there is no legal basis to claim the said expenses.
  2. The defendants cannot succeed in their claim for damages under any head.
  3. The question of interest, to the defendants, thus, does not arise.
  4. On the aspect of costs, I must say that if both parties had been patient, diligent and co-operative with each other, this matter would not have seen the day in Court. All are equally responsible by their attitude for not making the agreement work and as such both should bear their own costs of the legal proceedings.
  5. In terms of final orders:-

__________________________________


Anjala Wati
Judge


15.12.2011


To:


  1. Mr. F. Vosarogo, counsel for the plaintiffs.
  2. Mr. Adrian Ram/ Mr. S. Shah, counsels for the defendants.
  3. File: HBC 8 of 2007.

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