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Stinson Pearce Ltd v Deep Sea Plus Ltd [2012] FJHC 1224; HBC7.2012 (20 July 2012)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION


Civil Action No. 7 of 2012


BETWEEN:


STINSON PEARCE LIMITED a limited liability company having its registered office at Motibhai Building, 1 Industrial Road, Nadi Airport, Nadi.
PLAINTIFF


AND:


DEEP SEA PLUS LIMITED a limited liability company having its registered office at Suva and engaged in the business of Night Club.
1ST DEFENDANT


AND:


ALBERT WILLIAM CHAND of 156 Rewa Street, Suva, Director.
2ND DEFENDANT


BEFORE: Master Deepthi Amaratunga


COUNSEL: Mr. Nagin S & Mr. Kapadia for the Plaintiff
Mr. R. Naidu for the Defendant


Date of Hearing: 18TH June, 2012
Date of Ruling: 20TH July, 2012


SUMMARY JUDGMENT


A. INTRODUCTION.


  1. The Plaintiff is seeking summary judgment against the Defendants for eviction from the premises. The premises in issue is leased to the 1st Defendant for a fixed term of six years from 1999, but the Plaintiff seeks to evict the Defendant for sub letting the premises in breach of clause 3n of the lease agreement. The Defendant admits entering in to a purported 'Business Management Agreement' with a third party. The Plaintiff alleges the said Business Management Agreement has violated the clause 3n of the lease agreement that prohibited 'transfer or assign tenancy or sublet or otherwise part with the possession of the said premises or any part thereof without the prior written consent of the Landlord'. No written consent obtained for the said Business Management Agreement with a third party where the possession of the premises was granted to the said third party to cater to 'Asian Clients'. The said Business Management Agreement expressly state that '2 Months Bond of $7,000.00 – refundable within 1 month written notice of vacating the premises either way.' Indicating that the premises dealt in the said agreement, was in possession of the third party and was required to give at least one month notice, which also indicate that the Plaintiff was not in exclusive possession of the entire premises and this is evinced from the rest the clauses in the said Business Management Agreement where the Defendant and the third party shared the electricity and water bills. The interpretation of the clauses in purported Business Management Agreement, between the Defendant and the third party, violated the clause 3n of the lease agreement and in the application of the principles laid in Investors Compensation Scheme Ltd v West Bromwhich Building Society [1997] UKHL 28; [1998] 1 WLR, 896, (by Lord Hoffmann), no oral evidence is needed to interpret the unambiguous provisions in the two contracts and the Defendants have sublet a part of the premises which gives the landlord the right to evict the Defendant. Summary Judgment is granted for the eviction of the Defendants as the issue of eviction will be decided on the interpretation of the contracts. The issue of damages cannot be determined by summary judgment, though by virtue of the breach the Plaintiff is entitle for damages.

B. FACTS


  1. The plaintiff by summons dated 28 March 2012 and filed on 27 March 2012 applies for summary judgment against the first and second defendants. The summons for summary judgment sought seeks:
  2. The defendant opposes this application and filed an affidavit in opposition and the parties have filed three affidavits for consideration.
  3. The second defendant is a tenant of a part of a commercial premises belonging to the plaintiff situated at Carnavon Street, Suva comprised and described in certificate of title numbers 4176 being Lot 4 section viii, 6055 being Lot 1 on DP 754 and 6056 being Lot 2 on DP 754. The Plaintiff entered into a lease agreement with the 1st Defendant, to lease the premises in issue to the Defendant for six year period commencing from 1st October, 2009.
  4. The defendants operate a night club and a bar and grill business from the said premises. In August 2010 the second defendant entered into a purported 'Business Management Agreement' with Lo Kin Ho, Meijing and Michael Chung. Under the said business management agreement Lo Kin Ho, Meijing and Michael Chung managed the defendant's bar and grill business situated in the said premises for one year.
  5. By a notice dated the 11th day of August 2011 and served on the second defendant on the 12th day of August 2011, the plaintiff gave the second defendant one month's notice to vacate the said premises.
  6. The plaintiff has alleged in the said notice that second defendant has breached the tenancy agreement by sub-letting the part of said premises and by allowing illegal activities to be carried on the said premises.
  7. The issue regarding illegal activities and arresting of 'Asian women' in the premises where the Defendants cater to 'Asian clients' is an action in the Magistrate's Court where the charge has not been proved yet and, I do not wish to deal with the issue of 'illegality' of the actions of the Defendants in this decision for summary judgment, for obvious reasons.
  8. The second defendant's position is that he did not enter into any sub-lease agreement and did not sub-lease the premises to anyone. Further the second defendant avers he did not allow illegal activities to be conducted from the said premises and that no illegal activities have been conducted from the said premises.

C. ANALYSIS


  1. Order 14 of the High Court deals with application for summary judgment. Order 14, r.1 requires the plaintiff to satisfy the court that the defendant has no defence.
  2. The no defence position and the obligations that the rules impose on the parties have been examined of authorities. In Pemberton – v – Chappell [1986] NZCA 112; [1987] 1 NZLR 1 at 3 the Court of Appeal said as follows:

"In this context the words "no defence" have reference to the absence of any real question to be tried. That notion has been expressed in a variety of ways, as for example, no bona fide defence, no reasonable ground of defence, no fairly arguable defence."


At page 4:


"On this the plaintiff is to satisfy the court; he has the persuasive burden. Satisfaction here indicates that the court is confident, sure, convinced, is persuaded to the point of belief, is left without any real doubt or uncertainty."


And further at 4:


"Where the only arguable defence is a question of law which is clear cut and does not require findings of disputed facts or the ascertained of further facts, the court should normally decide it on the application for summary judgment, just as it will do on an application to strike out a claim or defence before trial on the ground that it raises no cause of action or no defence."


The Court also commented on the position where a defence is not evident on a plaintiff's pleading and said at 3;


"If a defence is not evident on the plaintiff's pleading I am of opinion that if the defendant wishes to resist summary he must file an affidavit raising an issue of fact or law and give reasonable particulars of the matters which he claims ought to be put in issue. In this way a fair and just balance will be struck between a plaintiff's right to have his case proceed to judgment without tendentious delay and a defendant's right to put forward without tendentious delay and a defendant's right to put forward a real defence."


  1. A complete defence does not have to be shown by the defendant at the stage when summary judgment is sought: The Cloverdell Lumber Co Pty Ltd – v – Abbott [1924] HCA 4; [1924] 34 CLR 122 at 133 but if the defence is doomed to fail it should not be an obstacle to grant summary judgment for all or some of the claims of the Plaintiff as stated in Order 14 rule 1(1) of the High Court Rules.
  2. In Fancourt – v – Merchantile Credits Ltd (1983) HCA 25; [1983] 154 CLR 87 the plaintiff had applied for summary judgment pursuant to order 18 of the rules of the Supreme Court of Queensland. The court said (at 99):

"The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried.


  1. The following passage from the New Zealand Court of Appeal judgment in Doyles Trading Company Limited – v – Westend Services Ltd [ 1989] 1 NZLR 38 at 413 stated

"While the desirability of eliminating the frustration and delays which can be caused by unmeritorious or tendentious defence needs no emphasis, it is important to pay proper regard to the defendant's interest and to be wary of allowing the rule to become an instrument of oppression or injustice in the laudable interest of expediting litigation. It is true that "justice delayed is justice denied", but not at the expense of a fair hearing for both parties, unless the court is sure there is no real defence. It is unlikely to reach this conclusion if the affidavits disclose disputed questions of fact, the resolution of which depends on an assessment of credibility or reliability of witnesses." (emphasis added).


  1. The parties admit the execution of the two contracts, namely the lease or the tenancy agreement between the Plaintiff and the Defendants and the purported Business Management Agreement between the Defendants and the third party Mr. Lo kin Ho, Ms Mejing and Mr. Michel Chung. When the execution of the two contracts is admitted the interpretation of them would indicate the existence of subletting, without any oral evidence being considered.
  2. The affidavit must state the deponent's belief that there is no defence to that claim or part: The Supreme Court Practice, 1997, Volume 1, paragraph 14/2/4 (at pg. 154). Further, it is stated in paragraph 14/2/8 (at pg 155). "This statement is an essential part of the affidavit. The usual words in the affidavit are, "I verily believe that there is no defence to this action."
  3. Order 14 rule 1 states that summary judgment can be obtained '....on the ground that defendant has no defence to a claim included in the writ, or to particular part of such claim, or has no defence to such claim or part ...' and Order 14 rule 2 states as follows

'2.(1) An application under rule 1 must be made by summons supported by and affidavit verifying the facts on which the claim, or the part of a claim to which the application relates is based and stating that in the deponent's belief there is no defence to that claim or part, as the case may be, or no defence except as to the amount of any dames claimed.'


In paragraph 11 of the affidavit in support states as follows


'11. That I am advised the Plaintiffs Solicitors and verily believe that the Defendants have not shown any valid and meritorious grounds in their Statement of Defence and Counter Claim and they are just occupying the said property illegally and without any colour of right. Annexure "C" hereto is very clear the Defendants sublet the premises to Lo Kin Ho, Michael Chung and Mejing" (emphasis is mine)


  1. The contention of the Defendant is that the plaintiff has not complied with essential ingredients in the affidavit in support cannot be accepted. There is no other provision in the High Court Rules, indicting what the essential averments in the affidavit are in support, as in Order 16 rule 2(2). In the absence of such clear indication as to the contents of the affidavit what is needed is an affidavit in support of the summons and if the requirements as stated in Order 14 rule 1 and Order 14 rule 2, are satisfied it should be accepted. I accept the paragraph 11 of the affidavit in support as compliance with the Order 14 rule 1 of the High Court Rules of 1988. In any event the preliminary objection cannot be raises at this moment at the hearing in terms of the Order 2 rule 2 of the High Court Rules. I dismiss the preliminary objection to the affidavit in support, raised by the Defendant also on the ground that such preliminary objection to the affidavit is irregular and also on the ground that it is a belated. On the day fixed for hearing such preliminary applications are to be avoided as much as possible in the light of the provisions contained in the Order 2 rule 2 of the High Court Rules of 1988. I do not wish to state more on that issue, as the objection itself is irregular and belated and also without merits.
  2. The main issue before the court is whether the purported Business Management Agreement between the Defendants and third party was a violation of the clause 3n of the tenancy agreement between the Plaintiff and Defendants.
  3. The issue can be determined by interpretation of the documents, namely the tenancy agreement between the Plaintiff and the Defendants and purported 'Business Management Agreement' between the Defendants and the third party. Both are before the court and if the above issue is decided in favour of the Plaintiff there is clearly a fundamental breach of the tenancy agreement that specifically prohibited subletting and or possession the premises or part of it without written consent of the Plaintiff, and the Plaintiff has a right to terminate the tenancy agreement and for eviction of the Defendants.
  4. The defendants deny sub-leasing the premises to Lo Kin Ho or to anyone else for that matter and state that the plaintiff has not produced any sub-lease document. This is misconceived argument and what the Plaintiff has to show is breach of Clause 3n of the tenancy agreement between the Plaintiff and Defendants. So, there is no need of proof of any existence of sub-lease, to obtain summary judgment, as contended by the counsel for the Defendants.
  5. The tenancy agreement between the plaintiff and the Defendants is annexed to the affidavit in support marked as 'B'. The execution and the applicability of that is not in issue. The clause 3n of that agreement states as follows

'[n] Not to transfer or assign this tenancy or sublet or otherwise part with the possession of the said premises or any part thereof without the prior written consent of the Landlord which consent shall not be unreasonably or arbitrarily withheld.' (emphasis is added)


  1. The "Business Management Agreement" dated 1st August 2010 (Annexure "C" in the affidavit of Dhinesh Bala and "AWC 1" in the affidavit in answer of Albert William Chand) in full is quoted below

Business Management Agreement


MR ALBERT WILLIAM CHAND the proprietor of Deep Sea & Grill agrees to offer the business named of Deep Sea Bar & Grill to MR LO KIN HO, MS MEIJING and MR MICHAEL CHUNG for the period of one (1) year for the purpose manage for Asian clients and is subject to renewal at the end of the period subjected to mutual agreement.


Listed below are the items purchased by MR LO KIN HO and MR MICHAEL CHUNG from MR ALBERT WILLIAM CHAND for the operation of Deep Sea Bar & Grill.


Item Description
Quantity
Cost
18000 BTU Air Con
2
$3,000.00
Deep Freezer
1
$750.00
Chill Freezer
1
$2,000.00
Air Curtain
1
$500.00
Flies Catcher
1
$250.00
Total

$6,500.00

As agreed listed below is:


2 Months Bond of $7,000.00 – refundable within 1 month written notice of vacating the premises either way.


1 Month Fess of $3,500.00 + $437.50 = $3,937.50 Vip. Monthly Fee to be paid on the 1st day of every month.


Electricity bill is subject to monthly consumption of electrical appliances and usage hours. Electricity estimate usage by Deep Sea Bar and Grill is attached. Bill are to be paid according to these estimates.


Water bills are to be divided into 50% of total bill amount.


The parties hereto have signed this Agreement on the date herein before stated.


SIGNED by ALBERT WILLIAM CHAND ("the proprietor") after the contents thereof had been read over and understand by him


...............................

Albert William Chand


..........................

Date


SIGNED by LO KIN HO, MEIJING and MICHAEL CHUNG ("the Client") after the contents thereof had been read over and understand by them.


......................................

LO Kin Ho


......................................
Michael Chung
.....................................
Meijing

  1. The heading of the agreement is "Business Management Agreement." The description of the document in the heading, is not important as any reasonable tenant in commercial world would know, the consequence of sub letting a premises or part of the premises, without the consent of the landlord, and would be much inclined to name such subletting differently. If the court were to accept the nomenclature that the tenant gives to the agreement relating to the premises with third parties, that would make the law relating subletting a dead letter. So, the heading or the title of the document is not the paramount importance as opposes to the contents of it considering the clear prohibition of subletting without the written consent of the landlord and the consequence of breach of tenancy agreement.
  2. The heading of the document should not be used to circumvent the clear legal obligation that prohibits any kind of subletting of the premises without a written consent of the landlord.
  3. The agreement then reads "Mr. Albert William Chand the proprietor of Deep Sea & Grill agrees to offer the business named of Deep Sea Bar & Grill to Mr. Lo Kin Ho, Ms Meijing and Mr. Michael Chung for a period of one (1) year for the purpose manage for Asian clients and is subject to renewal at the end of the period subjected to mutual agreement."
  4. What was granted by the contract is the management of Deep Sea & Grill, but by offering the said 'management' of the business the Defendants have also granted the third party exclusive possession of part of the premises this is indicated by following clauses which expressly used the words 'written notice of vacating the premises' indicating the exclusive possession of a part of the premises and this is corroborated by sharing the electricity and water bills.

The agreement further stated:


"As agreed listed below is:


2 months Bond of $7,000.00 – refundable within 1 month written notice of vacating the premises either way.


1 month fees of $3500.00 + $437.50 = $3,937.50 Vip. Monthly fee to be paid on the 1st day of every month.


Electricity bill is subject to monthly consumption of electrical appliances and usage hours, Electricity estimate usage by Deep Sea Bar and Grill is attached. Bills are to e paid according to these estimates.


Water bills are to be divided into 50% of total bill amount." (emphasis added)


  1. The second defendant in his affidavit in answer, at paragraph 9 explains the above clauses. He states:
  2. The above explanation further substantiate the premises was in the possession of the Defendants, as they were to collect the income of the business. If a person is engaged to manage a business that person cannot collect the income unless he was in actual possession of the premises while managing the business. So, by admission of that fact by the Defendants that third party derived all the income of the business the third party 'managed', and paid only a fixed monthly sum to the Defendants further reinforce the contention of the Plaintiff that the purported business management agreement was a violation of the clause 3n of the tenancy agreement.
  3. If the agreement between the Defendants and the third party is 'Business Management Agreement', as alleged by the Defendants there should be a clear 'Business' to be managed by the third party and there should be a 'Management fee' payable by the Defendants to the third party for managing the defined business. The business is 'Deep Sea Bar & Grill' but any payment of management fee to the alleged 'managers' of the business, is lacking in this agreement and more importantly the purported Business Management Agreement the monthly fee is paid by the third party (managers of the business) to the Plaintiff (the proprietor of the business) while they retain all the profits derived from the 'business'.
  4. The plaintiff state the document titled "Business Management Agreement' as a breach of clause 3n. The defendants strongly dispute this. The "business management agreement" does not state that the defendants sublet the premises to Lo Kin Ho, Michael Chung and Meijing (the third party) and there is no such requirement as the only thing the Plaintiff has to prove is violation of clause 3n of the tenancy agreement by the Defendants.
  5. Any clause in a contract must be construed having regard to is context within the contract, which must in turn be set in its surrounding circumstances or 'factual matrix'. The general principles are to be found in a comparatively recent case of Investors Compensation Scheme Ltd v West Bromwhich Building Society [1997] UKHL 28; [1998] 1 WLR, 896, where they are summarized by Lord Hoffmann (at pages 912 H to 913E) as follows:

"(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.


(2)The background was famously referred to by Lord Wilberforce as the "matrix of fact", but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next. It includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.


(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.


(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of its words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax. (see Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] UKHL 19; [1997] AC 749).


(5) The "rule" that words should be given their 'natural and ordinary meaning' reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does to require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Neviera SA v Salen Rederierna AB [1985] 1 AC 191. 201;


"...if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense."


If one applies these principles, it seems to me that the judge must be right and, as we are dealing with one badly drafted clause which is happily no longer in use, there is little advantage in my repeating his reasons to greater length. The only remark of his which I would respectfully question is when he said the he was "doing violence" to the natural meaning of the words....


  1. The Defendants submit this is a question which cannot be decided on affidavit evidence. I do not accept this contention. What I need in the determination for summary judgment, as to the breach of the clause 3n in the tenancy agreement is purely a matter of interpretation of the purported business management agreement and whether it violate clause 3n of the tenancy agreement. There are no factual matters to be investigated through oral evidence and parole evidence rule even prohibits leading any evidence contrary to what was expressly agreed between the parties. This position is reinforced in the Investors Compensation Scheme Ltd v West Bromwhich Building Society [1997] UKHL 28; [1998] 1 WLR, 896.
  2. The tenancy agreement between the Plaintiff and the Defendants and the purported 'Business Management Agreement' between the Defendants and third parties were all documents executed in the commercial world for the purposes of business activities. The clauses in the documents are plain and simple and easily understandable to a person even without a commercial sense. Both the contracts are, in fact executed to conduct commercial activities and the meaning in the said two documents cannot be interpreted differently, than the plain meaning of them.
  3. The said 'Business Management Agreement' indicates the items that are purchased by the third party including air-conditioning unit, air curtain, in the operation of the business for 'Asian clients', indicating clear exclusive possession of a part of the premises, by the third party . There were items like deep freezer and chiller also purchased by the third parties for the said management of the business indicating exclusive usage of the said items by the third party. The sharing of electricity bill would be substantiated by the utilization of such electrical appliances in the premises rented by the Plaintiff, indicating possession of an exclusive are. The using of air conditioning unit separately with air curtain reinforces the plaintiff's contention of exclusive possession of part of the premises that was on rent to the Defendants. If the Defendants sought a third party to manage their business there is no need of purchasing items stated in the agreement as the purchase would clearly indicate the utilization of them in the 'management of the business' indicating exclusive usage of the said items by the third parties that would give them possession of those items and invariably the possession of the part of the premises. This is further reinforced by having a special provision where the third party was required to give notice to vacate the premises and a bond is also kept as security where a fixed amount is paid to the Defendants indicating subletting of part of the premises.

D. DAMAGES


  1. The Plaintiff also seeks damages in the summons for summary judgment. Neither Plaintiff nor the Defendant dealt with this issue at the hearing of this summons and none of them made any written submission on this issue. Since the Defendant has broken the contract the Plaintiff should be entitled to damages, but whether that is nominal damages or not cannot be decided from the material available to me, specially when neither party addressed it at the hearing. In determining whether the Plaintiff has suffered loss the factual issues other than the tenancy contract and the purported Business Management Agreement needs to be considered and that cannot be done through summary judgment. In The Baleares [1990] 2 Lloyd's Reports decided that in the determination of the damages for the breach of contract the overall position has to be considered, and relevant factors include any benefits derived from the broken contract R&M Stansfield Enterprises Ltd v Axa Ins (UK) Plc [2006] EWCA Civ 881 and in the circumstances, the type of damages (whether it is nominal or not) and quantum cannot be determined in this summary judgment and damages for the breach of tenancy agreement has to be determined by court as stated in Order 14 rule 1(1).

E. FINAL ORDERS


  1. That the defendants do give immediate vacant possession to the plaintiff of the premises being part of the certificate of title no's: 4176 and 6056.
  2. Damages to be assessed by the court.
  1. The cost of this application is summarily assessed at $1,000.
  1. The matter to take normal cause relating to other claims.

Dated at Suva this 20th day of July, 2012.


Master Deepthi Amaratunga
High Court, Suva

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