DNS Contracting Ltd v Yaukuve Island Resort - Judgment [2014] FJHC 384; Civil Action 243.2005 (28 May 2014)

In the High Court of Fiji at Suva
Civil Jurisdiction

Civil Action No. 243 of 2005

DNS Contracting Ltd
Plaintiff

And:

Yaukuve Island Resort Limited
Defendant

Appearances: Mr V. Kapadia for the plaintiff
Mr Devanesh Sharma for the defendant

JUDGMENT

1. Introduction
   

1.1. The plaintiff claims that it hired several items of equipment to a construction company. The company was using the equipment in the construction of a resort for the defendant, on Yaukuve Island.In the second year of the construction contract between the company and the defendant, the company was requested to leave the island,but was not allowed to remove the equipment.The plaintiff obtained an injunction requiring the defendant to hand over the equipment to the plaintiff, to be stored in a garage in Suva, pending the hearing.The plaintiff claims damages for the detention of the equipment by the defendant, storage costs and special damages.

1.2. The defendant contends that the equipment belongs to a joint venture entity, comprising of the construction company and another.The hire agreements are a sham. The defendant counter-claims for damages for trespass by the plaintiff, in sending a bailiff to retrieve the equipment from the island,and obtaining an interim injunction by misrepresenting that it owned the equipment.

1.3. In the course of these proceedings, the defendant released the equipment to the plaintiff.

1.4. After the hearing was concluded, the defendant filed summons to strike out the action on the ground that there was no corporate entity by the name of the plaintiff, as it had changed its name and from then on, was in liquidation.The plaintiff's riposte was that the action could go on with the name change and in view of the fact it was in voluntary, and not compulsory liquidation.

2. The amended statement of claim
   

2.1. The amended statement of claim states that the plaintiff was duly incorporated in New Zealand, as a construction company and recites its history of name changes and ultimate incorporation on 10thMarch,2004.

2.2. The plaintiff states it entered into agreements to hire eight items of equipment to Ca'Bella Pacific Construction(Fiji)Limited,(Ca'bella) in 2004. Ca'bella was using the equipment in the construction of a resort for the defendant.A dispute arose between Ca'Bella and the defendant in March,2005. Ca'Bella was given notice to leave the island.The defendant took possession of the equipment on the work site On 30thApril,2005,the plaintiff demanded payment of its hire charges from Ca'Bella.

2.3. On 18th May,2005,the defendant wrongfully refused to allow its bailiff, to take possession of the equipment.

2.4. On 8th August,2005,Singh J had restrained the defendant from using,transferring or disposing the equipment, and ordered the defendant to hand over the equipment to the plaintiff,to be stored in a reputable garage in Suva.

2.5. The plaintiff claims damages for the detention of its equipment and storage costs at a recurring monthly charge of $500, effective from 18th August,2005.The plaintiff claims as special damages, loss of hiring charges, costs incurred in repossessing and transportation of the equipment and repair charges totalling a sum of $164,765.97.

3. The statement of defence and counterclaim
   

3.1. The statement of defence provides that the plaintiff is a $1,000.00 company registered on 10th March, 2004.As a result of a search undertaken, it was revealed that DNS Contracting Limited was incorporated on 10th March 2004, in New Zealand.It was also revealed that EOT Contracting Limited, a company incorporated on 8 March 2002, is currently in liquidation.

3.2. The defendant entered into a construction contract with Cabella Pacific Construction(Fiji)Limited/Lomac Construction and Project Services Ltd(Cabella -Lomac Construction) to construct a resort. Cabella-Lomac Construction failed to perform its obligations under the contract. The defendant took possession of the work site and all plant and equipment,in terms of clause 25(5) of the construction contract, in order to complete the works.

3.3. The plaintiff did not own the equipment at the time of the purported seizure nor when the items were subsequently returned by the defendant.

3.4. The defendant states that the alleged hire contracts are not duly executed or stamped.The leasing arrangements do not appear in the monthly financial statements submitted by Cabella-Lomac Construction.

3.5. The bailiff had no right to enter the defendant's land without proper authority or court order.

3.6. The defendant counter-claims for damages for trespass and disruptions caused by the bailiff, as plaintiff's agent, and obtaining an injunction to deliver the equipment on grounds of material non disclosure and misrepresentation.

4. The reply
   

The plaintiff, in its reply to the statement of defence states that:

1. The defendant was only entitled to take over Ca'Bella's plant and equipment.
2. All financial transactions between Ca'Bella and the plaintiff and its predecessors took place before the defendant effectively terminated the contract with Ca'Bella.
3. The hire agreements were duly executed.The plaintiff and Ca'Bella had agreed that that hire charges would not be required, until the contract was completed. No payments were recorded in the creditor's list of Ca'Bella.
4. The bailiff was experienced and acting on its instructions.
5. The reply concludes that it was necessary to obtain injunctive orders,as the defendant was continuing to use the equipment .
   

5. The defendant's application to strike out
   

5.1. After the hearing was concluded, the defendant filed summons on 1 March,2012, for the plaintiff's action to be struck out with costs on the basis that there is no corporate entity by the name DNS Contracting Limited.

5.2. In an affidavit in support, Grahame Kennedy, construction manager of the defendant company stated:

1. On 4th and 5thFebruary,2012,Glen Rich swore under oath that he was a director of the plaintiff company.
   
2. On "7th February 2012, internet investigation's revealed "the following facts.
   
   1. On 28th March 2011,the Plaintiff changed its name to Vatumami Holdings Limited. A copy of the Certificate of Incorporation and particulars of name change of Vatumami Holdings Limited is annexed..
      
   2. On 29th March 2011, Vatumami Holdings Limited further changed its name to Highway 16 Limited. A copy of the certificate of Incorporation and particulars of name change of Highway 16 Limited is annexed..
      
   100. On 21st April 2011, Highway 16 Limited was placed into liquidation and John Michael Gilbert was appointed as the Receiver on that date. A copy of the Special Resolution dated 21st April 2011 is annexed..
        
3. Glen Rich led the Court to believe that the plaintiff was still in operation .This was tantamount to perjury and deliberate suppression of material information.
   
4. The plaintiff changed its name on 28th March,2011, but took orders to release equipment to DNS Contracting Limited on 4th April, 2011.
   

5.3. The cumulative effect of the argument advanced by Mr Sharma,counsel for the defendant was that the deliberate concealment by the plaintiff's witness of its name changes, liquidation and continuation of the action without the approval of the liquidator, constituted an abuse of process.

5.4. Mr Kapadia, counsel for the plaintiff advanced four arguments in reply.On the name change,he submitted quite obviously that a change of name by a company does not affect legal proceedings, as provided in section 23(4)(b) of the New Zealand Companies Act,1993.The proceedings may be continued under its new name.

5.5. On the second contention, Mr Kapadia submitted that in a voluntary winding-up, the leave of court was required only, in the case of a compulsory liquidation citing section 242(1)(a) of the Fiji Companies Act. It would appear that in terms of section 248 of the New Zealand Act,the permission of the liquidator is required to continue legal proceedings, in both compulsory and voluntary liquidation.

5.6. Thirdly, it was submitted that the evidence of Glen Rich was directed at events that occurred before the changes.

5.7. On the last point, Mr Kapadia quite correctly submitted that the equipment was returned by consent by the defendant on 4thApril,2011, which was prior to the shareholders' resolution to voluntarily liquidate the company.

5.8. Be that as it may, the defendant's internet investigations relate to a resolution made on 21st April, 2011, ten months before the hearing commenced. It was not "evidence (which) could not have been obtained with reasonable diligence at the trial",in the words of Denning L.J. in Ladd v Marshall, (1954)3 All ER 745 at 748 .

5.9. In my view, the defendant should have made investigations prior to the hearing, rather than two days after the hearing concluded. It appears to me to permit this course would "open the door to infinite litigation", to use the phraseology of Edmund Davies L.J. in Cowling v Matbro,Ltd, (1969) 2 All ER 664 at 667.

5.10. On the admissibility of what is termed fresh evidence, Williams J in Young v Harper, (1889) 8 NZLR at 176 stated:

With respect to the discovery of fresh evidence, it is a most dangerous ground on which to grant a new trial. It ought only to be allowed under extremely exceptional circumstances. In England there are only two or three cases in the books in which a new trial has been allowed on this ground. There can be no more fruitful encouragement to perjury than the granting of new trials for this reason.(emphasis added)

5.11. This passage was cited by Pathik J in Murgessa v Shell (Fiji) Ltd,(HBC no.0065 of 1997) . He concluded:

The determination of the issue in this case is a matter for the discretion of the Court. There is no denying the fact that the Court has a discretion to permit any party to introduce 'further evidence' at any stage of the proceedings. It has been said that this power in the Court is necessary to cope with surprise and matters occurring after the commencement of the hearing or even to allow for slips, accidents or oversights. But that is not the case here. At no time prior to the application herein there is any evidence of a search for the missing document ever having been made or even if there had been any that such document existed. (emphasis added)

5.12. In my judgment, the defendants' summons is misconceived and must be dismissed. The defendant shall pay the plaintiff cost summarily assessed in a sum of $ 1500 in respect of its application.

6. The determination
   

6.1. I proceed to consider the substantive matter. A host of issues were raised at the pre-trial conference.The preliminary issues which lie at the core of this case read as follows:

1. Whether the equipment is owned by the Plaintiff or by Ca'bella?
2. Whether on the 10th January2004, 30th July,2004 and 30th August 2004, the Plaintiff entered into contracts to hire the following items of equipment with.. (Ca'bella).
   

Nos.	Date of Hire	Name of Asset	Serial No.	Monthly Repayments
1.	10/01/14	Wingate concrete batcher mixer	300MJ0482	$1,000.00
2.	10/01/14	JCB Front End Loader	125 03900	$2,580.00
3.	30/07/04	Mitsubishi Canter Truck-blue	DT2 385 AY	$250.00
4.	30/07/04	Perkins Generator 45 kva	PE44E1	$500.00
5.	30/08/04	Bobcat skid steer	5240 1133	$3,225.00
6.	30/08/04	Hitachi excavator, spades and driller	EX 5OU	$3,225.00
7.	17/07/04	Atlas Copco Compressor	N/A	No charge
8.	17/07/04	Honda Quad bike and trailer	N/A	No charge

Who is the owner of the equipment?

6.2. The plaintiff's sole witness,PW1(Glen Rich) produced invoices and receipts issued by Ca'Bella for the plaintiff's purchases of the items of equipment set out in 1 to 4 and 7 to 8 of the preceding table.Invoices and credit notes issued by the plaintiff to Ca'bella, in respect of items 5 and 6, were also produced.

6.3. Mr Sharma contends that the invoices and receipts of payments produced are computer generated documents.He goes on to point out that these documents are not stamped with the dates of receipt and payment, as ordinarily contained in company documents.

6.4. PW1 testified that the plaintiff purchased the Wingate concrete batcher mixer and JCB Front End Loader from Ca'bella on 9thJanuary,2004, and hired these items to Ca'bella on 10th January,2004. But the plaintiff was incorporated two months later on 10th March,2004, as evidenced in the certificate of incorporation produced.

6.5. The amended statement of claim states that these two purchases were made when the plaintiff was operating as DNS Contracting Ltd, incorporated on 18th February,2003.The reply to the statement of defence and counterclaim explains that: (a) on 5th March,2004,DNS Contracting Ltd changed its name to EOT Contracting Limited and transferred all its business undertakings and assets to the plaintiff, and (b)EOT Contracting Limited was liquidated by a shareholders' resolution on 24th May,2004. The deed of assignment to the plaintiff was not produced to support this proposition, albeit this point was raised as an issue at the pre-trial conference.

6.6. In my judgment, the plaintiff's claim to be the owner of the Wingate concrete batcher mixer and JCB Front End Loader fails, in the face of its certificate of incorporation of 10th March,2004.It follows that the two hire agreements of 10th January,2004, are "sham" documents, as concluded by Mr Sharma, in his closing submissions.

6.7. Next, PW1 said that the Hitachi excavator,spades and driller was purchased by the plaintiff from "Tonner Machinery and Truck Sales Ltd" on 15th July,2004, sold to Ca'bella on the same day and one week later, a credit note was issued by the plaintiff, as Ca'bella was "unable to complete the purchase because of its cash flow position"- paragraph 7 of its amended statement of claim. The invoice issued by "Tonner Machinery and Truck Sales Ltd" provides that the purchase price was $ 69750 and a balance sum of $ 56,250 was due from the plaintiff. It is manifest that the plaintiff did not have ownership, when this item was allegedly sold to Ca'bella. Further, no evidence was adduced that the balance was paid by the plaintiff to "Tonner Machinery and Truck Sales Ltd".

6.8. I find more incongruous the alleged sale of the Bobcat skid steer to Ca'bella, on the same day it was purchased from "Tonner Machinery and Truck Sales Ltd". The invoice dated 20 July,2004, issued by that company provides that the purchase price of $ 52,312.50 was to be paid in three tranches commencing on 20 July, 2004 and culminating on 20 September,2004. No evidence was adduced that any of these payments were met by the plaintiff.

6.9. DW1(Graham Kennedy) the only witness for the defence produced an application for duty concession for the generator dated 27th April,2004. The application was made by Cabella -Lomac Construction, the joint venture entity comprising of Ca'bella and Lomac Construction and Project Services Ltd.

6.10. PW1, in evidence in chief, said that the purchase monies for the equipment was sent to Ca'bella, as contained in a document titled "Summary of purchases from Ca'Bella by DNS Contracting".This document provides that the purchases from Ca'bella by the plaintiff totalled $ 61,999.99 for the JCB Loader, Wingate mixer,Perkins Generator, Quad bike, Mitsubishi Truck and Atlas Compressor. It also provides that the plaintiff had sent a sum of $ 78,499.41 to Ca'bella, in three tranches.

6.11. It transpired in PW1's cross-examination that the sum of $ 78,499.41 was sent by the plaintiff to the bank account of "Cabella -Lomac Cons Joint Venture", as evident in the bank statements of that entity. In my view,the absence of documentary evidence that funds were transferred to Cabella -Lomac Construction, on the request of Ca'bella, as contended by PW1, brings the plaintiff's case to the brink of collapse.

6.12. PW1 admitted in cross-examination, that he has no documentary evidence to establish that Ca'bella was the owner of the equipment, in the first instance. At the forefront of the plaintiff's case, as put forward by PW1, in his evidence in chief,was the proposition that Ca'bella was cash strapped. It was for this reason that the plaintiff purchased the equipment from Ca'bella,then hired it to Ca'bella and made no claim for hire charges.The question then that necessarily follows is how did Ca'bella have the funds to purchase the equipment?

6.13. The defence relies on a document titled "PRELIMINARY & GENERAL 10th MARCH 2005 TO 15TH DECEMBER 2005" sent to the plaintiff by Cabella -Lomac Construction. This document states that all eight items were "Already purchased " by Cabella -Lomac Construction. In re-examination, PW1 confirmed that this document was prepared by Cabella -Lomac Construction, albeit as Mr Kapadia clarified the document was neither signed nor dated.

6.14. It is notable that PW1 was a director of both the plaintiff company and Ca'bella. It emerged in his cross-examination that his Secretary had prepared the invoices. This clearly established that he exercised control over both companies, in short, he was the alter ego of both companies.

6.15. It is appropriate for me to consider at this point,the impact the witnesses made on me.I did not find PW1 to be a reliable witness. He was unable to give satisfactory answers in crucial areas,as I have highlighted.I found his testimony to be contradicted by the pleadings and the documents he produced. This appears to me to be quite implausible. In contrast, I found DW1 to be a truthful witness. He gave forthright evidence, particularly on the counterclaim, which I have declined.

6.16. In my judgment, the only deduction that I can make is that the equipment were purchased by Cabella -Lomac Construction with the mobilisation fee of $ 856000 paid by the defendant to Cabella -Lomac Construction. It follows and I find that Cabella -Lomac Construction was the owner of the equipment.

6.17. On a consideration of all the evidence, it seems to me to be the inescapable truth that in the versatility of human ingenuity, the invoices and receipts produced by the plaintiff were fictitious documents created by the plaintiff, in the aftermath of the defendant determining the contract with Cabella -Lomac Construction, in order to claim ownership of the equipment and hire charges, as I find in the next part of my judgment.

6.18. In my judgment, the defendant did not act unlawfully in refusing to permit the plaintiff to take possession of the equipment.

The hire agreements

6.19. PW1 stated that the agreements were signed in Fiji. Mr Sharma, in his closing submissions argues at length that the plaintiff had not obtained a foreign investor's certificate to carry out business activity in Fiji. I agree entirely with Mr Kapadia that it is not open for the defendant to take this point, as illegality was not pleaded in the statement of defence.

6.20. The other arguments raised by the defence were that the agreements are (a) not duly stamped,(b) do not bear the company seal of either party, (c) the signatures of the contracting parties were not witnessed and, (d) the equipment was leased to Ca'bella,when the party that was using the equipment was Cabella -Lomac Construction.

6.21. PW1's response in cross-examination to these contentions was that he did not foreshadow a court action, so the parties did not comply with the Stamp Duties Act(cap 205). He said that there was no necessity for witnesses, as he was a Director of both the plaintiff and Ca'bella

6.22. I do find that the agreements are indeed ominous, in that it does not contain the company seal of either party and contravenes the Stamp Duties Act.Stepping closer,clause 2 of the agreements provides that the equipment will be used at a "location specified in the Schedule and will not be removed from that location".I find that there is no location specified in the schedule.This mirrors another unsatisfactory feature of these agreements.

6.23. More importantly, it transpired in the cross examination of PW1, that the signatory for the hirer,Noel Marsh was not a Director of Ca'bella. His signature was not witnessed.PW1's contention that he had authorised him to sign, was unsubstantiated. Not surprisingly, Noel Marsh was not called to testify.

6.24. Next, the agreements stipulate the monthly hire charges payable by Ca'bella for the respective periods commencing from 10th January,2004, 30th July,2004, 30th August,2004,(as the case may be) to 31st December, 2004.Strangely, the plaintiff made a demand for its hire charges, only in the aftermath of the defendant taking possession of the equipment in March,2005.The demand was made on 30th April,2005. I find no provision in the agreements for deferment of charges.PW1's silence to the question put to him in cross-examination, as to why the plaintiff claimed hire charges only in April, 2005,was deafening.

6.25. PW1 admitted in cross examination, that the defendant was not given notice by the plaintiff that it was the owner of the equipment, as contended in these proceedings.

6.26. The defence produced an illuminating and undisputed document titled the list of creditors of Cabella-Lomac Construction as at 28th February,2005. Interestingly, the plaintiff is not featured as a creditor. In contrast, Credit Corporation which also had machines on the work site,(as testified by DW1) is mentioned.

6.27. On a review of the totality of the evidence, I am of the view that the hire agreements are fictitious documents created by the plaintiff, in order to claim hire charges from the defendant.

7. The counterclaim
   

7.1. Passing now from the case of the plaintiffs, I come to the counterclaim. The defendants counterclaim for damages for trespass and disruptions caused by the bailiff, as plaintiff's agent and in obtaining an injunction to deliver the equipment on grounds of material non disclosure and misrepresentation.

7.2. The plaintiff, on 18th May,2005, had sent a bailiff to take possession of the equipment. The defendant contends that the bailiff had no right to enter the defendant's land without proper authority or court order. It transpired in the cross-examination of DW 1, that the bailiff was invited to come to the island. The claim for trespass fails.

7.3. The defendant also claimed damages it suffered, as a result of the interim injunction obtained by the plaintiff by misrepresenting that it was the owner of the equipment.

7.4. I have found that the plaintiff is not the owner of the equipment. The equipment belonged to Cabella-Lomac Construction. It follows that the plaintiff obtained the interim relief by misrepresenting that it was the owner. The defendant is entitled to damages. The defendant however, did not adduce evidence on any loss and damage, it suffered.

7.5. The counterclaim fails and is declined.

7.6. I note that the defendant has not counterclaimed for the return of the equipment, but rather voluntarily handed over the equipment to the plaintiff.

8. Orders
   

I make orders as follows:

1. I dismiss the defendant's summons of 1 March,2012.
2. I dismiss the plaintiff's action.

100. I dismiss the defendant's counterclaim.

4. The plaintiff shall pay the defendant costs summarily assessed in a global sum of $ 5000, having deducted the sum of $ 1500, which I awarded to the plaintiff,as costs in respect of the defendants' s summons.
   

28th May,2014

A.L.B.Brito-Mutunayagam
Judge