Deo Construction Development Company Ltd v Reddy [2016] FJHC 179; HBC67.2015 (18 March 2016)

IN THE HIGH COURT OF FIJI
WESTERN DIVISION
AT LAUTOKA

CIVIL JURISDICTION

CIVIL ACTION NO. HBC 67 of 2015

BETWEEN :

DEO CONSTRUCTION DEVELOPMENT COMPANY LIMITED A DULY REGISTERED LIMITED LIABILITY COMPANY HAVING ITS REGISTERED OFFICE AT Lot 11, Industrial Sub Division, Denarau Island, Nadi, Fiji.
PLAINTIFF

AND :

ANANTH AVIRAM REDDY of Lautoka.
DEFENDANT

Mr. Ashnil Kumar Narayan for the Plaintiff
Mr. Roopesh Prakash Singh for the Defendant

Date of Hearing : - 03rd December 2015
Date of Ruling : - 18th March 2016

RULING

(A) INTRODUCTION

(1) The matter before me stems from the Plaintiff’s application for Summary Judgment against the Defendant, by way of Summons dated 10th July 2015, made pursuant to Order 14, rule 1, 2, 3 and 8 of the High Court Rules, 1988 and the inherent jurisdiction of the Court.

(2) The Summons is supported by the Affidavit of Mr. Vimal Deo, sworn on 03rd July, 2015 (which for the sake of brevity, I shall hereafter refer to as “Deo’s Affidavit) and Mr. Krishnil Patel, sworn on 02nd July 2015 (which for the sake of brevity, I shall hereafter refer to as “Patel’s Affidavit).

(3) The Plaintiff by the Summons filed seeks the following Orders;

Para [1] A final judgment against the Defendant in the sum of

FJ$130,434.78;

[2] A final judgment against the Defendant in the sum of FJ$26,086.96;

[3] A final judgment on interest in the sums provided in [1] and [2] above at the rate of 13.5% per annum from the period 14th October, 2014 to the date of satisfaction of the amount in full pursuant to the Law Reform (Miscellaneous Provisions) (Death and Interest) Act;

[4] A final judgment on post judgment interest in the sums provided in [1] and [2] at the rate of 4% per annum from the date of judgment to the date of satisfaction of the amount in full;

[5] Costs of and incidental to this application in favour of the Plaintiff on a full Solicitor/Client indemnity basis; and

[6] Such further or other orders as this Honourable Court thinks just.

(4) The application for Summary Judgment is strongly resisted by the Defendant.

(5) The Defendant filed an Affidavit in Opposition, sworn on 17th August 2015, opposing the application for Summary Judgment followed by an Affidavit in reply thereto.

(6) The Plaintiff and the Defendant were heard on the Summons. They made oral submissions to Court. In addition to oral submissions, they filed a careful and comprehensive written submission for which I am most grateful.

(B) THE FACTUAL BACKGROUND

(1) What are the circumstances that give rise to the present application?

(2) To give the whole picture of the action, I can do no better than set out hereunder the averments/assertions of the Pleadings.

(3) The Plaintiff in its Statement of Claim pleads inter alia;

Para 1. The Plaintiff is a limited liability company duly incorporated

under the Companies Act [Cap 247] having its registered office at Lot 11, Industrial Sub Division, Denarau Island, Nadi, Fiji which, inter alia, is engaged in the business of construction and development of land in Fiji.

2. The Defendant is an Engineer by profession, a law graduate and also a businessman.

3. At all material times the Plaintiff was the registered proprietor of a residential property situated at Lot 17 Riverside Gardens, Denarau Island, Nadi (“the property”) particulars of which are as follows:

PARTICULARS OF THE PROPERTY

Certificate of Title No. 35901 being Lot 17 on Deposited Plan 9060 on the piece of land known as “Buabua” containing 1000sqm in the District of Nadi, in the Island of Vitilevu.

4. On or about 15th August 2012, by way of an undated agreement, the Defendant agreed to purchase the property subject to the terms and conditions provided therein (“the agreement”).

5. The agreement expressly required the Defendant to pay the consideration sum of FJ$1,000,000.00 [ONE MILLION FIJIAN DOLLARS] plus Value Added Tax (“VAT”), if applicable.

6. The agreement also required the Plaintiff and Defendant to execute and perform all acts, matters and things and take all necessary steps as may be necessary and/or requisite for the purpose of carrying into effect the matters set-out therein.

7. Subsequent to the registration of the Transfer of the property on 11th November, 2012, the Fiji and Revenue Customs Authority (hereinafter “the tax office”) on 14th October, 2014 during an audit of the Plaintiff, treated the consideration of the Transfer as $1,000,000.00 VAT inclusive price and thereby levied and deducted from the Plaintiff’s account a sum of FJ$130,434.78 [ONE HUNDRED THIRTY THOUSAND FOUR HUNDRED THIRTY FOUR FIJIAN DOLLARS AND SEVENTY EIGHT CENTS] and penalties in the sum of FJ$26,086.96 [TWENTY SIX THOUSAND EIGHTY SIX FIJIAN DOLLARS AND NINETY SIX CENTS].

8. The Plaintiff has satisfied the liability for the VAT and penalties in paragraph 7 hereof and despite a formal demand on behalf of the Plaintiff made to the Defendant on 1st April, 2015 to honour his obligations on the imposed VAT, the Defendant wrongly denied, refused and in breach of the agreement has failed to pay the Plaintiff the VAT and penalties imposed.

9. As a result of such breach the Plaintiff has suffered loss.

PARTICULARS OF LOSS

(i) The Plaintiff has been deprived of the use of its monies which it has now had to pay to the tax office on behalf of the Defendant.

(ii) The Plaintiff has lost the chance to make other investments and make profit.

10. The Plaintiff claims interest pursuant to the Law Reform (Miscellaneous Provisions) (Death and Interests) Act.

(4) Wherefore the Plaintiff claims from the Defendant;

[i] The sum of FJ$130,434.78 [ONE HUNDRED THIRTY THOUSAND FOUR HUNDRED THIRTY FOUR FIJIAN DOLLARS AND SEVENTY EIGHT CENTS];

[ii] Interest on the sum of FJ$130,434.78 [ONE HUNDRED THIRTY THOUSAND FOUR HUNDRED THIRTY FOUR FIJIAN DOLLARS AND SEVENTY EIGHT CENTS] from 14th October 2014 to satisfaction of the sum claimed at the rate of 13% per annum pursuant to the Law Reform (Miscellaneous Provisions) (Death and Interest) Act;

[iii] The sum of FJ$26,086.96 [TWENTY SIX THOUSAND EIGHTY SIX FIJIAN DOLLARS AND NINETY SIX CENTS;

[iv] Interest on the sum of FJ$26,086.96 [TWENTY SIX THOUSAND EIGHTY SIX FIJIAN DOLLARS AND NINETY SIX CENTS] from 14th October, 2014 to satisfaction of the sum claimed at the rate of 13% per annum pursuant to the Law Reform (Miscellaneous Provisions) (Death and Interest) Act;

[v] Damages;

[vi] Post Judgment Interest on any monetary judgment in favour of the Plaintiff at the rate of 4% per annum until satisfaction thereof.

[vii] Costs of this action on a full Solicitor/Client indemnity basis;

(5) Mr. “Vimal Deo”, the Director and shareholder of the Plaintiff’s Company, in his Affidavit in Support of Summons, sworn on 03rd July, 2015, deposed inter alia; (As far as relevant)

Para 3. The Plaintiff is a limited liability company duly incorporated

under the Companies Act having its registered office at Lot 11, Industrial Sub Division, Denarau Island, Nadi, Fiji. The Plaintiff is mainly engaged in the business of construction and development of land in Fiji. I now produce and annex a copy of the Certificate of Registration of the Plaintiff marked as “VD-2”.

4. Sometime in 2004, the Plaintiff purchased a parcel of freehold land in the residential estate “Riverside Gardens” at Denarau, Nadi (Lot 17) for development purposes (hereinafter referred to as “the property”). This land was purchased from the original developers, Tabua Investments Limited. Over the course of a number of years, the Plaintiff then erected and constructed on the property a three bedroom house. I now produce and annex a copy of the Certificate of Title No. 35901 marked as “VD-3”.

5. I first met the Defendant in or about 2008 whilst working on a project in Denarau where the Defendant was engaged as an Engineer. It was about this time that I became better acquainted with the Defendant who had informed me that he was an Engineer by profession and was close to obtaining his law degree (or may possibly have obtained it at that stage or certainly soon thereafter.) He further informed me that he is also a businessman operating a Company called “Avoser Limited”. I am aware that the Defendant currently operates the office of Avoser Limited from Port Denarau Commercial Centre in Nadi.

6. I any event, the Defendant further informed me throughout my social meetings with him from 2008 that his brother is also a lawyer engaged in the firm of Reddy Nandan & Associates.

7. The Defendant would from time to time express his impression of my successful businesses and other ventures given that I am not an educated man having only completed Form 4 secondary level education.

The Transfer

8. Towards early August, 2012 the Defendant approached me with an offer to purchase the property from the Plaintiff. Although I could have sold the property for a much higher price, I decided to agree to a cost of $1,000,000.00 plus Value Added Tax in good faith as the Defendant was adamant on living on Denarau yet most houses on dale in the area were unaffordable by him.

9. Pursuant to the aforesaid discussions, the Defendant then insisted that he would get together with his solicitors and prepare an agreement expressly providing the terms of our discussions in paragraph 8 above. Accordingly the Defendant provided me with a Sale and Purchase Agreement (hereinafter referred to as “the agreement”) which was executed on or about 15th August, 2012. I now produce and annex a copy of the undated Sale and Purchase Agreement marked as “VD-4”.

10. The Plaintiff was not represented by any solicitors until after the execution of the agreement. However to ensure that the conveyance went ahead diligently, I then engaged AK Lawyers to represent the Plaintiff for the purposes of the Transfer.

11. Accordingly an Instrument of Transfer for the property was thereafter executed by the parties on 9th October, 2012 and subsequently registered at the titles office on 11th November, 2012. I now produce and annex a file copy of the Stamped Transfer which was later registered and endorsed on the Certificate of Title marked as “VD-5”. I also produce a copy of a receipt of consideration sum paid by the Defendant to the Plaintiff’s solicitors marked as “VD-6”.

12. Almost two years later the Fiji Revenue and Customs Authority (hereinafter “the tax office”) conducted an audit of the Plaintiff’s business. The tax office had on 14th October, 2014 treated the sale of the property as $1,000,000.00 VAT inclusive price and thereafter levied and deducted from the Plaintiff’s account a sum of $130,434.78 together with $26,086.96 being the VAT amount levied and penalties thereto respectively. I now produce and annex a copy of the Tax Assessment dated 14th October, 2014 marked as “VD-7”. For reasons of confidentiality, the matters in respect of my other entities have been blacked out.

13. Between September, 2014 and March, 2015 I had on numerous occasions requested the Defendant to pay the said sums in paragraph 12 above to the Plaintiff since the agreement specifically stated that VAT would be payable by the Defendant if it were to be applicable. These requests were made over telephone and from time to time in person since the Defendant and I would meet each other at social gatherings in Nadi. On each of these occasions, the Defendant kept assuring me that he would get back to me soon on this issue and eventually started becoming obvious that he was merely delaying/avoiding his obligations to pay the sums due.

14. Upon my persistence and on or about March, 2015, the Defendant finally advised that he would not pay the VAT amount assessed and further advised me that he would delay any sum payable by him as long as he possibly could. HE reminded me that he was quite capable of that as he is a law graduate.

The Demand Notice

15. Due to the failure of the Defendant to honor his obligations under the agreement (as aforementioned), the Plaintiff instructed AK Lawyers to issue a demand notice for a breach of contract and recovery of the losses sustained by it. I now produce and annex a copy of the demand notice dated 1st April, 2015 issued by AK Lawyers to the Defendant marked as “VD-8” together with other relevant correspondences which have been provided to me by AK Lawyers.

16. Pursuant to instruction from the Plaintiff, AK Lawyers then issued a Writ of Summons and Statement of Claim against the Defendant on 24th April, 2015. I am aware from the Plaintiff’s solicitors that an Acknowledge of Service and Statement of Defence was filed by the Defendant on 14th May, 2015 and 29th May, 2015 respectively.

Conclusion

17. Despite the Defendant having filed a defence, I have been advised by AK Lawyers, such advice which verily believe to be true, that the Defendant has no merits on defence, such that the Defence filed in this action is a “sham defence”. Contrary to the Defendant’s allegations, I was never advised by the Defendant that the sale was to a “going concern: or that he was VAT registered at anytime during the transfer of the property. It was only during the audit process by the tax office that the Defendant informed me to advise the tax office that he was registered for VAT and therefore no VAT was payable by him.

18. I confirmed that the advice I was given by AK Lawyers pertaining to the sham defence is contained in the Affidavit of Krishnil Patel, a copy of which has been read, explained and understood by me and filed herewith.

(6) The Defendant opposed the application for Summary Judgment and supported his opposition by an Affidavit, sworn on 17th August 2015, which is substantially as follows; (as far as relevant)

Para 5. THAT as to paragraph 8 of the said affidavit I say that the

Deponent wanted to sell the subject property and had placed the same on the market. At the outset I was advised and therefore believed; by the deponent that the sale would not attract any value added tax (vat) as it was sold as a going concern. Hence the price was capped at $1,000,000.00 (One Million Dollars) and no vat was asked from me.

FURTHER I entered into the dealing solely on the representation made by the Deponent to me personally before we executed the sale and purchase agreement that the dealing will not attract any vat and the sale will be zero rated. This was re-emphasised to me by the deponent. I don’t agree with the remainder of the allegations in paragraph 8 of the said affidavit.

6. THAT as to paragraph 9 of the said affidavit I say that the sale and purchase agreement was a standard agreement. I was explained the sale and purchase agreement and more particularly clause 24 of the sale and purchase agreement. I was clear on this issue when I entered into the agreement.

7. THAT as to paragraph 10 of the said affidavit I say that the Plaintiff did take advice and I am aware as has been stated by the deponent that the Plaintiff is in the business of land development, construction and I believe sale of land within Fiji. Hence the Plaintiff is very much aware of land dealings as they had have been incorporated since September 1993. The Plaintiff ought to have known, in fact Plaintiff knew whether vat would be applicable or not prior to entering into the sale of the subject land with me, however chose to rely on the representation made to me that vat will not be applicable, and induced me to enter into the dealing.

8. THAT as to paragraph 11 of the said Affidavit I say that the sale price noted on the transfer instrument is $1,000,000.00 (One Million Dollars), I understand that the stamp duty by me has been paid on this value alone. The Plaintiff executed the transfer instrument with the sale price clearly stated therein.

FURTHER the dealing is now completed, the settlement has taken place and I have paid the sale price. Even at the time of settlement the Plaintiff did not demand payment of vat from me or alert me to this fact that the Plaintiff will want me to pay vat at a later date.

9. THAT as to paragraph 12 of the said Affidavit I say that the tax department has treated the dealing and sale price as vat inclusive not exclusive. I note from the Exhibit VD -7that the Plaintiff claimed vat on the sale when it knew that it had advised me that; a) vat will not be applicable in this dealing b) the sale and purchase agreement stated that all taxes was the Plaintiff’s responsibility. By the actions of the Plaintiff claiming vat the Plaintiff believed that the sale was zero rated as they had informed me. I further say that I was vat registered at the time of the sale and my vat number was TIN VAT/18-28386-0-0. I annex hereto and mark as Exhibit A is a copy of a Notice of Assessment – Vat confirming the same.

10. THAT as to paragraph 13 of the said Affidavit I say that the deponent did ask me to pay vat after the sale but I have steadfastly informed him at all times that I was not liable to pay vat for the reasons stated by me hereinabove. I deny that I have admitted to the deponent that I would pay vat and sought time from him to pay the same.

11. THAT as to paragraph 15 of the said Affidavit I say that my Solicitors appropriately replied to the Solicitors for the Plaintiff and I annex a copy of their letter dated 10th April, 2015 as Exhibit B.

12. THAT as to paragraph 17 of the said Affidavit I say that I am advised therefore believe that I have a valid defence to the claim by the Plaintiff.

FURTHERMORE the Plaintiff was aware at all times during the process of the sale that I was registered for vat and the sale was on “a going concern” basis and that is why the Plaintiff made strong representation that I will not be required to pay vat, the Plaintiff did not ask for vat at settlement of the dealing and the sale and purchase agreement provided that all taxes was the Plaintiff’s responsibility. The Plaintiff was aware that I was not to pay vat because vat was not applicable.

13. THAT I deny paragraph 18 and 19 of the said Affidavit and I take the Affidavit of Krishnil Patel sworn on the 2 July 2015 and filed herein (hereinafter referred to as Mr. Patel’s Affidavit.) (the contents of which I am informed by my Counsel amount legal opinions and submissions) however in reply say as follows;

13.1 Paragraph 6 of Mr. Patel’s Affidavit – I was informed that the sale will not attract any vat by Vimal Deo, the Plaintiff did not ask for vat from me at the time of settlement and the agreement at clause 24 clearly states that all taxes are the responsibility of the Plaintiff

13.2 Paragraph 7 and 8 of Mr. Patel’s Affidavit – the sale has now been completed. The transfer concluded. The Plaintiff did not raise any tax invoice at settlement for payment of vat. I believe they did not do so as they were of the believe as what they informed me, the dealing was zero-rated. Further Vat should not be applicable in any event to the dealing as the transaction because the sale was of an entity which was a going concern and it was incumbent on the Plaintiff to provide sufficient evidence to the Tax Department.

13.3 Paragraph 9 and 10 of Mr Patel’s Affidavit – the allegations are denied and I advised amount to legal submissions.

(7) The Plaintiff filed an Affidavit in Rebuttal deposing inter alia; (as far as relevant)

Para 4. I deny the contents of paragraph 5 of the Defendant’s Affidavit

as the price was never “capped at $1,000,000.00”. I rely on the contents of my earlier affidavit and further say that I had always maintained the sale was subject to VAT. It was the Defendant who had always insisted that VAT was not applicable to which I requested the agreement be made plus VAT if applicable. Accordingly, the Defendant pursuant to our discussions alluded to at paragraph 8 of my earlier affidavit, drafted the Sale and Purchase Agreement and provided a purchase price of 1 million dollars plus VAT “if applicable”. I deny that there were any representations to the contrary by me and as alleged by the Defendant. Furthermore I maintain that I was unaware that the Defendant was a “going concern” and had only become aware of it during the audit and imposition of the VAT levy by the Tax Office. I advised the Tax Office of the Defendant’s assertion that he was deemed a “Going concern” but their decision was quite clear as provided in annexure “VD-7” of my earlier affidavit.

5. As to paragraph 6 of the Defendant’s Affidavit, I note the admissions therein and have also been advised by the Plaintiff’s solicitors that the latter part of paragraph 6 is in breach of the rules of the High Court. I have been advised by the Plaintiff’s solicitors that this issue will be addressed at the hearing of the pending application.

6. I deny the contents of paragraph 7 of the |Defendant’s Affidavit for the reasons already provided in my earlier and current affidavit. I also deny that I am aware of intricate taxation law (or that I ought to know this) as I am not an educated man. In any event I have been advised by the Plaintiff’s solicitors that the contents therein are scandalous and irrelevant and ought to be expunged. |I have been further advised by the Plaintiff’s solicitors that this issue will be raised at the hearing hereof.

7. I deny the contents of paragraph 8 of the Defendant’s Affidavit as I have been advised by the Plaintiff’s solicitors that the price denoted in the Instrument of Transfer is irrelevant. Furthermore I have been advised by the Plaintiff’s solicitors that the Sale and Purchase Agreement was quite clear in respect of all the matters alluded to in paragraph 8 of the Defendant’s Affidavit.

8. I deny the contents of paragraph 9 of the Defendant’s Affidavit for the same reasons already provided in my earlier and current affidavit. I further state that this is the first time I have seen Exhibit A to the Defendant’s Affidavit.

9. I deny the contents of paragraph 10 of the Defendant’s Affidavit for the reasons already contained in my earlier and current affidavit.

10. As to paragraph 11 of the Defendant’s Affidavit, I note that the contents do not require a response from me and maintain the matters deposed at paragraph 15 of my earlier affidavit.

11. I deny that contents of paragraph 12 of the Defendant’s Affidavit for the reasons contained in my earlier and current affidavit.

12. I deny the contents of paragraph 13, 13.1, 13.2 and 13.3 of the Defendant’s Affidavit for the reasons contained in my earlier and current affidavit, and the contents of Krishnil Patel’s Affidavit in Support sworn on 2nd July, 2015. I further say that I have been advised by the Plaintiff’s solicitors that the issues therein will be addressed at the hearing hereof.

(C) THE STATUS OF THE SUBSTANTIVE MATTER

(1) The action was instituted by the Plaintiff on 24th April 2015, by Writ of Summons and Statement of Claim.

(2) The Defendant filed his Acknowledgement of Service on 14th May 2015 and his Statement of Defence on 29th May 2015.

(3) Thereafter, the Plaintiff filed the present application on 10th July, 2015, being a Summons for Summary Judgment.

(D) THE LAW

(1) Against this factual background, it is necessary to turn to the applicable law and the judicial thinking in relation to the principles governing Summary Judgment.

(2) Rather than refer in detail to the various authorities, I propose to set out hereunder important citations, which I take to be the principles of the play.

(3) The law relating to summary judgment is contained in Order 14 of the High Court Rules of 1988.

(4) I should quote Order 14, which provides;

SUMMARY JUDGMENT

Application by plaintiff for summary judgment (O.14, r.1)

1. (1) Where in an action to which this rule applies a statement of claim has been served on a defendant and that defendant has given notice of intention to defend the action, the plaintiff may, on the ground that the defendant has no defence to such a claim or part except as to the amount of any damages claimed, apply to the Court for judgment against that defendant.

(2) Subject to paragraph (3), this rule applies to every action begun by writ other than -

(a) an action which includes a claim by the plaintiff for libel, slander, malicious prosecution or false imprisonment.

(b) an action which includes a claim by the plaintiff based on an allegation of fraud.

(3) This Order shall not apply to an action to which Order 86 applies.

Manner in which application under Rule 1

Must be made (O.14, r2)

2. (1) An application under rule 1 must be made by summons supported by an 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 cause may be, or no defence except as to the amount of any damages claimed.

(2) Unless the Court otherwise directs, an affidavit for the purposes of this rule may contain statements of information or belief with the sources and grounds thereof.

(3) The summons, a copy of the affidavit in support and of any exhibits referred to therein must be served on the defendant not less than 10 clear days before the return day.

Judgment for Plaintiff (O.14, r.3)

3. (1) Unless on the hearing of an application under rule 1, either the Court dismisses the application or the defendant satisfies the Court with respect to the claim, or the part of a claim, to which the application relates that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial of the claim or part as may be just having regard to the nature of the remedy or relief claimed.

(2) The Court may by order, and subject to such conditions if any, as may be just, stay execution of any judgment given against a defendant under this rule until after the trial of any counterclaim made or raised by the defendant in the action.

(5) Reading as best, I can between the lines of Order 14, it seems to me that the whole purpose of a summary judgement procedure is to obtain a quick Judgment, where there is no defence to a claim and to prevent sham defences from defeating the rights of parties by delay, and at the same time causing great loss to plaintiffs who were endeavouring to enforce their rights. The onus remains on the Plaintiff throughout to establish that the Defendant has no defence.

(6) I bear in mind the principle behind the power to give summary judgment under Order 14, namely that it is:

“.............intended only to apply to cases where there is no reasonable doubt that a plaintiff is entitled to judgment and where therefore it is inexpedient to allow a defendant to defend for mere purposes of delay”

(Jones v Stone [1894] UKLawRpAC 2; [1894] A.C. 122).

It has been held that:

“As a general principle, where a defendant shows that he has a fair case for defence, or reasonable grounds for setting up a defence, or even a fair probability that he has a bona fide defence, he ought to have leave to defend:”

(Saw v Hakim (1889) 5 T.L.R. 72].

On the authorities it is quite clear that:

“leave to defend must be given unless it is clear that there is no real substantial questions to be tried’ (Codd v Delap (1905 92 L.T. 510 H.L.) That there is no dispute as to facts or law which raises a reasonable Doubt that the plaintiff is entitled to judgment (Jones v Stone [1894] UKLawRpAC 2; (1894) A.C. 122)

(7) Recently the court of Appeal in Carpenters Fiji Ltd v Joes Farm Produce Ltd, Civil Appeal number ABU 0019/2006 comprehensively listed principles at page 9 and 10 of the judgment as follows:-

“Here it is timely to state some of the well established principles relating to the entry of summary judgment:

(a) The purpose of .14 is to enable a plaintiff to obtain summary judgment without trial if he can prove his claim clearly and if the defendant is unable to set up, a bonafide defence or raise an issue against the claim which ought to be tried.

(b) The defendant may show cause against a plaintiff’s claim on the merits e.g. that he has a good defence to the claim on the merits or there is a dispute as to the facts which ought to be tried or there is a difficult point of law involved.

(c) It is generally incumbent on a defendant resisting summary judgment, to file an affidavit which deals specifically with the plaintiff’s claim and affidavit and states clearly and precisely what the defence is and what facts are relied on to support it.

(d) Set off, which is a monetary cross claim for a debt due from plaintiff, is a defence. A defendant is entitled to unconditional leave to defend up to the amount of the set of claimed. If there is a set off at all, each claim goes against the other and either extinguishes or reduces it Hanak v. Green (1958) 2 QB 9 at page 29 per Sellers LJ.

(e) Likewise when a defendant sets up a bona fide counterclaim arising out of the same subject matter of the action, and connect with the grounds of defence, the order should not be for judgment on the claim subject to a stay of execution pending the trial of the counter claim but should be fore unconditional leave to defend, even if the defendant admits whole or part of the claim; Morgan and Son Ltd v. S.Martin Johnson Co (1949) 1 KB 107 (CA).

(8) In Halsbury’s, Laws of England (4th Ed) Volume 37 paras. 413 – 415, the relevant portions of which read:

Where the plaintiff’s application for summary judgmentUnder Order 14 is presented in proper form and order, the burden shifts to the defendant and it is for him to satisfy the court that there is some other reason to be a trial. Unless the defendant does so, the court may give such judgment for the plaintiff against the defendant as may be just ............

The defendant may show cause by affidavit or otherwise to the satisfaction of the court. He must ‘condescend upon particulars’, in all cases, sufficient facts and particulars must be given to show that there is a genuine defence.

And in a note (Note 4) to the paragraph it is stated that:

“The normal everyday practice is for the defendant to show cause by affidavit, and except in a clear case, it is rare for the court to allow a defendant to show cause otherwise than by affidavit. A defence already served may be a sufficient mode of showing cause, but not if it is a sham defence served early to avoid showing cause by affidavit: see McLardy v. Slateum [1890] UKLawRpKQB 34; (1890) 24 Q.B.D. 504.

(9) Once a claim is established, the evidential and persuasive burden shifts to the Defendant (see Thomas J in Hibiscus Shopping Town Pty Ltd –v- Woolworths Ltd [1993] FLR 106 at 109) who must adduce affidavit evidence dealing specifically with the plaintiffs claim and affidavit and also state clearly and precisely what the defence is and what facts he relies on to resist the entry of summary judgment: Magan Lal Brothers Ltd –v- L.B.Masters & Company Civil Appeal No: 31/84.

If the Defendant has not filed an affidavit but a defence, the Court must then direct its mind on the issues raised in the defence to see whether it has merits and is not just a sham defence to delay judgment or avoid the necessity of showing cause by Affidavit (see the Fiji Court of Appeal in Magan Lal Brothers Ltd –v- L.B. Masters (supra); see also Halsbury’s, Laws of England (4th Edition) volume 37 Para 413 – 415, notes 4).

(10) In Vatukoula Gold Mines Ltd –v- Anand [2010] FJHC 46. HOBC 219 of 2008 it has been held:-

“Order 14 summary judgment procedure is available to any plaintiff who desires a quick judgment on his or her claim where there is no defence to a claim. It is also available where any defence raised is either not a bona fide defence or discloses no triable issues so as to merely delay a Judgment in favour of the plaintiff.”

(11) The onus is on the plaintiff in a summary judgment and the way it can be resisted was discussed by Fatiaki J in Fiji Development Bank –v- Inoke Moto & Others [1995] 41 FLR 236, where his Lordship quoted a New Zealand decision and stated:

The correct approach to an application for summary judgment is succinctly summarised in my view in the head note to the New Zealand Court of Appeal decision in Pemberton v. Chappel [1986] NZCA 112; [1987] 1 NZLR 1 where it was said of the N.Z. equivalent of Order 14”

“Held: ... the High Court Rules cast onto the plaintiff the onus of convincing the Court that the Defendant has no fairly arguable defence. Normally that onus will be satisfied by the plaintiff’s affidavit verifying the allegations in the Statement of Claim and his oath that he believes that the defendant has no defence to the claim. ... If a defence is not evident on the plaintiff’s pleading and the defendant wishes to resist summary judgment, the defendant 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. Where the only arguable defence is a question of law which is clear-cut and does not require findings on disputed facts or the ascertainment of further facts, the Court may, and normally should, decide it on the application for summary judgment. But where the defence raises questions of fact on which the outcome of the cause may turn it will not often be right to enter summary judgment.”

Over a century earlier in 1880 Lord Blackburn in Wallingford v. Mutual Society [1880] 5 A.C 685 said of the nature of the affidavit required from a defendant in opposing an Order 14 application at p. 704 and he quoted:- “I think that when the affidavits are brought forward to raise (a) defence they must, if I may use the expression, condescend upon particulars. It is not enough to swear “I say I owe the man nothing”. Doubtless, if it was true, that you owed the man nothing as you swear, that would be a good defence.But that is not enough. You must satisfy the judge that there is reasonableground for saying so ... And in like manner as to illegality, and every otherdefence that might be mentioned.”

(E) ANALYSIS

(1) Before passing to the substance of the Plaintiff’s Summons for Summary Judgment, let me record that the Counsel for the Plaintiff and the Defendant in their written submissions has done a fairly exhaustive study of the judicial decisions and other authorities which they considered to be applicable.

I interpose to mention that I have given my mind to the oral submissions made by the Counsel for both parties as well as to the written submissions and the judicial authorities referred to therein.

(2) As I mentioned earlier, this is an application for Summary Judgment against the Defendant.

After an in-depth analysis of the totality of the Affidavit evidence in the case before me, let me summaries my understanding of the salient facts as follows;

❖ The Plaintiff owned the property comprised in Certificate of Title No:- 35901, being Lot 17 on Deposited Plan 9060, the piece of land known as “Buabua” containing 1000sqm in the District of Nadi.

❖ On or about 15th August 2012, the Plaintiff and the Defendant entered into a Sale and Purchase Agreement. (Annexure “VD- 4” of Deo’s Affidavit)

❖ The Sale and Purchase Agreement expressly required the Defendant to pay the consideration sum of $1,000,000 plus Value Added Tax (VAT), if applicable. (Please see the second page of the Agreement at annexure “VD-4”)

❖ The property was formally transferred on 11th November 2012 on which date the Defendant paid to the Plaintiff $1,000,000.

❖ Subsequent to the registration of the transfer of the property on 11th November 2012, the Fiji Revenue and Custom Authority on 14th October 2014 during an audit of the Plaintiff treated the consideration of the Transfer as $1,000,000.00 VAT inclusive price and thereby levied and deducted from the Plaintiffs account a sum of $130,434.78 and penalties in the sum of $26,086.96.

❖ The Defendant refused to refund the VAT paid by the Plaintiff.

❖ Therefore, the Plaintiff through its Solicitors issued a demand letter and instituted the proceedings for the recovery of the sum owed by the Defendant.

Having considered the overall circumstances of the case, as I apprehend, the pivotal question that awaits determination by the Court is whether the sale and purchase agreement was subject to VAT. If the answer to this question is in the affirmative, then it would naturally follow that the Defendant would have to pay the Plaintiff its claim.

Let me now pass to the substance of Plaintiff’s Summons for Summary Judgment bearing the aforementioned salient facts and the legal principles uppermost in my mind.

(3) What is the rule of conduct of the Plaintiff and the Defendant in an application for Summary Judgment?

Let me have a close look at Order 14, rule 1, 2, 3 and 08 of the High Court Rules, 1988.

I should quote Order 14, rule 1, 2, 3 and 08 of the High Court Rules;

The relevant provisions as relevant provides;

SUMMARY JUDGMENT

Application by plaintiff for summary judgment (O.14, r.1)

1. (1) Where in an action to which this rule applies a statement of claim has been served on a defendant and that defendant has given notice of intention to defend the action, the plaintiff may, on the ground that the defendant has no defence to such a claim or part except as to the amount of any damages claimed, apply to the Court for judgment against that defendant.

(2) Subject to paragraph (3), this rule applies to every action begun by writ other than -

(a) an action which includes a claim by the plaintiff for libel, slander, malicious prosecution or false imprisonment.

(b) an action which includes a claim by the plaintiff based on an allegation of fraud.

(3) This Order shall not apply to an action to which Order 86 applies.

Manner in which application under Rule 1
Must be made (O.14, r2)

2. (1) An application under rule 1 must be made by summons supported by an 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 cause may be, or no defence except as to the amount of any damages claimed.

(2) Unless the Court otherwise directs, an affidavit for the purposes of this rule may contain statements of information or belief with the sources and grounds thereof.

(3) The summons, a copy of the affidavit in support and of any exhibits referred to therein must be served on the defendant not less than 10 clear days before the return day.

Judgment for Plaintiff (O.14, r.3)

3. (1) Unless on the hearing of an application under rule 1, either the Court dismisses the application or the defendant satisfies the Court with respect to the claim, or the part of a claim, to which the application relates that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial of the claim or part as may be just having regard to the nature of the remedy or relief claimed.

(2) The Court may by order, and subject to such conditions if any, as may be just, stay execution of any judgment given against a defendant under this rule until after the trial of any counterclaim made or raised by the defendant in the action.

Right to proceed with residue of action or Counterclaim (O.14, r.8)

8 (1) Where on an application under rule 1 the Plaintiff obtains judgment on a claim or a part of a claim against any defendant, he may proceed with the action as respects any other claim or as respects the remainder of the claim or against any other defendant.

(2) Where on an application under rule 5 a defendant obtains judgment on a claim or part of a claim made in a counterclaim against the plaintiff, he may proceed with the counterclaim as respects any other claim or as respects the remainder of the claim or against any other defendant to the counterclaim.

Let me see what authority there is on the rule of conduct of the Plaintiff and the Defendant in an application such as this?

The leading precedent as followed in the Fijian jurisdiction is that of the Fiji Court of Appeal decision in Maganlal Bros Ltd v LB Narayan & Company, Civil Appeal No. 31 of 1984 which has been followed in a number of local cases. The Fiji Court of Appeal held;

“The matter for consideration by the Judge on the determination of this matter are contained in Rules 3 and 4 of Order 14, the tenor and effect of which are conveniently summarised in Halsbury’s Laws of England (4th Ed) Volume 37 paras 413 – 415, the relevant portions of which read:

“413 Where the Plaintiff’s application for summary judgment under Order 14 is presented in proper form and order, the burden shifts to the Defendant and it is for him to satisfy the Court that there is some issue or question in dispute which ought to be tried or that there ought for some other reasons to be a trial. Unless the defendant does so, the court may give such judgment for the Plaintiff against the Defendant as may be just......

The Defendant may show cause by Affidavit or otherwise to the satisfaction of the Court. He must ‘condescend upon particulars’, and, in all cases, sufficient facts and particulars must be given to show that there is a genuine defence”.

And in a note (Note 4) to the paragraph it is stated that:

The normal everyday practice is for the Defendant to show cause by Affidavit, and except in a clear case, it is rare for the Court to allow a Defendant to show cause otherwise than by Affidavit. A defence already served may be a sufficient mode of showing cause, but not if it is a sham defence served early to avoid showing cause by Affidavit : see MacLardy v Slateum [1890] UKLawRpKQB 34; (1890) 24 Q.B.D. 504.”

(Emphasis Added)

The Fiji Court of Appeal in Carpenters Fiji Ltd –v- Joes Farm Produce Ltd, Civil Appeal Number ABU 0019/ at pages 9 and 10 set out the applicable principles for summary judgement and accepted the principles enunciated in Maganlal case :

“Here it is timely to state some of the well established principles relating to the entry of summary judgment.

(a) The purpose of 0.14 is to enable a Plaintiff to obtain summary judgment without trial if he can prove his claim clearly and if the defendant is unable to set up, a bona fide defence or raise an issue against the claim which ought to be tried.

(b) The defendant may show cause against a plaintiffs claim on the merits e.g. that he has a good defence to the claim on the merits or there is a dispute as to the facts which ought to be tried or there is a difficult point of law involved.

(c) It is generally incumbent on a Defendant resisting summary judgment, to file an Affidavit which deals specifically with the plaintiffs claim and affidavit and states clearly and precisely what the defence is and what facts are relied on to support it.

(d) Set off, which is a monetary cross claim for a debt due from plaintiff, is a defence. A Defendant is entitled to unconditional leave to defend up to the amount of the set of claimed. If there is a set off at all, each claim goes against the other and either extinguishes or reduces it Hanak v. Green (1958) 2 QB 9 at page 29 per Sellers LJ.

(e) Likewise where a Defendant sets up a bonafide counterclaim arising out of the same subject matter of the action, and connect with the grounds of defence, the order should not be for judgment on the claim subject to a stay of execution pending the trial of the counter claim but should before unconditional leave to defend, even if the Defendant admits whole or part of the claim; Morgan and Son Ltd v S.Martin Johnson Co (1949) 1 KB 107 (CA).

The onus is on the Plaintiff to prove each claim clearly and to satisfy the Court that the Defendant has no defence which has any realistic prospect of success.

Once a claim is established, at least the evidential and persuasive burden, shifts to the Defendant (Thomas J in Hibiscus Shopping Town Pty Ltd –v- Woolworths Ltd [1993] FLR 106 at 109) who must adduce Affidavit evidence dealing specifically with the Plaintiffs claim and Affidavit and also state clearly and precisely what the defence is and what facts he relies on to resist the entry of summary judgment; Magan Lal Brothers Ltd. –v- L.B. Masters & Company Civil Appeal No: 31/84.

And of course, if the Defendant has not filed an Affidavit, but has filed a defence, the Court must then turn its attention on the issues raised in the defence to see whether it has merits and is not just a sham defence to delay judgment or avoid the necessity of showing cause by Affidavit (see the Fiji Court of Appeal in Magan Lal Brothers Ltd. –v- L.B. Masters (supra); see also Halsbury’s Laws of England (4th Edition) Volume 37 Para 413 – 415, notes 4)

When reduced to its essentials, the law as I understand from the aforesaid legal provision and the judicial thinking is this;

❖ An application under Order 14, rule (1) must be made by Summons supported by an Affidavit verifying the facts on which the claim or part of the 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 damage claimed.

❖ Where the Plaintiff’s application for Summary Judgment under Order 14 is presented in proper form and Order, the burden shifts to the Defendant and it is for him to satisfy the Court that there is some issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial. Unless the Defendant does so, the Court may give such Judgment for the Plaintiff against the Defendant as may be just.

(4) Has the Plaintiff presented its application for Summary Judgment in proper form and Order?

Applying those principles to the present case what do we find?

The Plaintiff’s application for Summary Judgment is made by Summons supported by the Affidavits of Mr. Vimal Deo, sworn on 03rd July 2015 and Mr. Krishnil Patel, sworn on 02nd July 2015, verifying the facts on which the claim to which the application relates is based. Moreover, in the Patel’s Affidavit it is stated that in the deponent’s belief that the Defence raised in the Statement of Defence is misconceived and a sham. (Please see paragraph 10 of Patel’s Affidavit).

Thus, I cannot help feeling quite convinced that the Plaintiff presented its application for Summary Judgment in proper form and Order.

(5) Now the burdens shifts to the Defendant and it is for him to satisfy the Court that;

• ❖ There is some issue or question in dispute which ought to be tried.

OR

❖ There ought for some other reason to be a trial.

AND

❖ The Defendant must show cause by Affidavit to the satisfaction of the Court.

❖ The Defendant must condescend upon particulars and in all cases, sufficient facts and particulars must be given to show that there is a genuine defence.

(6) The Defendant has filed his Statement of Defence on 29th May 2015 and filed an Affidavit in Opposition to the Plaintiff’s Summons for Summary Judgment, sworn on 17th August 2015.

(7) At the oral hearing before the Court, the Counsel for the Plaintiff highlighted several inconsistencies between the Statement of Defence filed and the Affidavit in Opposition sworn by the Defendant.

I wish to emphasize that I turn my attention only on the Affidavit in Opposition sworn by the Defendant. I do not turn my attention on the Statement of Defence filed.

I turn my attention only on the issues raised in the Affidavit in Opposition sworn by the Defendant to see whether it has merits and is not a just sham to delay Judgment.

As I understand the law, the Court is not authorized to turn its attention on the issues raised in the Defence.

In order to defeat a Summons for Summary Judgment, when the moving party has complied with the requirements of Order 14, it is necessary for the opponent to set up, by Affidavit, facts showing what has been formed to be a real, or a genuine or an arguable defence. What the Attorney may say in his argument in Opposition is of no avail. The test is what is contained in Affidavit in Opposition submitted. (Please see; Dodwell & Co. Ltd v Silverman, 234 App. Division 362)

In “Hardy v Ziegenbalg”, (230 App. Div 708) the Court held;

“The appellant gives no explanation of why she made and signed the notes in suit. Her obligation on a motion of this character cannot rest upon the answer, but is to show by Affidavit such facts as would establish that there was an issue to be tried.”

(Emphasis Added)

The Affidavit in Opposition is not like a pleading. In a pleading, evidentiary facts are frowned upon. In an opposing Affidavit, conclusions are frowned upon and facts are desired. “Jessel” M.R. said on this point;

“If a man were allowed to say simply, “You have not given me credit for what you ought to have given me credit for”, without giving a simple item, a single date or a simple fact, I think Defendants would be only too ready to believe there were some mistakes in the account. |It would be quiet impossible to act upon such an unsupported Statement, or to look upon it as anything but a sham defence”.

Please see	* Anglo Italian Bank -v- Wells L.T.R. 197,200
	* Lion Brewery of New York -v- Loughram 223 App. Div 623

Even if the Statement of Defence is defective, if the affidavit in opposition sets forth facts showing an arguable defense, the Summon fails.

This was recognized by the Court of Appeals in the leading case of Curry v. Mackenzie:

“The defendant’s affidavit discloses a defense also of part payment, in that he paid for the later services after he was no longer general manager. His answer in that regard is, it is true, defective, for payment should have been stated as a defense, partial, if not complete, and is not to be proved under a denial. The facts, however, have now been shown, and the answer, though imperfect, may be amended at the trial or sooner. Technical defects in the pleading of an adversary are not available to a Plaintiff upon an application under this rule for the entry of summary judgment. The application is defeated if the defendant ‘shall show such facts as may be deemed, by the judge hearing the motion, sufficient to entitle him to defend (Rule 113). The remedy is to be administered in furthermore of justice.”

Please see

*Curry -v- Mackenzie 239 N.Y. 267

The court said that “technical defects in the pleading of an adversary are not available to a Plaintiff upon an application under this rule for the entry of summary judgment.” It would perhaps be more accurate to say that no defect in the pleading of an adversary is available to a moving party on an application for summary judgment.

Thus in Perlman v Perlman, 235 App Division 313, the Court below, granted the Plaintiff’s motion for summary judgment with leave to defendant to serve an amended answer within five days, and further provided that upon failure so to amend the Plaintiff might enter judgment. The Appellate Division held that such ruling was based upon a misconstruction of the very nature of the remedy invoked. If the facts set forth in the opposing affidavit showed an arguable defense, the defect in the answer should have been disregarded and the motion should have been denied. If on the other hand, regardless of the answer, the opposing affidavit did not show the existence of a substantial defense, there was no reason to grant leave to amend. The higher court said:

“The sufficiency of pleadings attacked by a motion for summary judgment under Rules 113 and 114 of the Rules of Civil Practice is not determinative. The basic principle of such a motion is whether the party whose pleading is attacked has shown by a affidavit or otherwise a tribal issue or a right to defend. Even though the pleading itself be deemed insufficient, the motion must be denied if the affidavits show facts sufficient to constitute a defense entitling the pleader to defend. Conversely, if sufficient facts are not shown, no leave to plead anew should be granted.”

Please see

* Perlman -v- Perlman 235 App. Div. 313

“Some question has risen whether the rule is applicable to a situation where a defendant has failed to set up a counterclaim, not arising out of the transaction in suit, but nevertheless one which under the Civil Practice Act he had a right to interpose. It would seem that even in such a case, if the opposing affidavit sets up facts showing the existence of a counterclaim of this kind, summary judgment may not be granted. This should be the rule, if we follow to its logical conclusion the principle that on a Summons for summary judgment the affidavits and not the pleadings of the opposing party are determinative.” Please see; Bernard L.Shientag on “Summary Judgment”, 4 Fordham L.Rev. L86 (1935)

(8) To my own understanding, the summary judgment is a “two-edged weapon”; useful if it precludes the interposition of defenses solely for delay, but dangerous if it deprives a Defendant of the opportunity to have a trial of seriously contested questions of fact. Therefore, the Summary Judgment conferred by Order 14 must be used with great care. A Defendant ought not to be shut out from defending unless it was very clear indeed that he had no case.

I now turn my attention to what is contained in the Affidavit in Opposition filed, bearing the aforementioned legal principles uppermost in my mind.

Has the Defendant set up, by Affidavit in Opposition, facts showing what has been termed to be a real or a genuine or an arguable defence?

As I understand the evidence, the Defendant has raised the following issues of fact in the Affidavit in Opposition filed.

Paragraph (5) THAT as to paragraph 8 of the said affidavit I say that the

[First Issue] Deponent wanted to sell the subject property and had placed the same on the market. At the outset I was advised and therefore believed; by the deponent that the sale would not attract any value added tax (vat) as it was sold as a going concern. Hence the price was capped at $1,000,000.00 (One Million Dollars) and no vat was asked from me.

FURTHER I entered into the dealing solely on the representation made by the Defendant to me personally before we executed the sale and purchase agreement that the dealing will not attract any vat and the sale will be zero rated. This was re-emphasised to me by the deponent. I don’t agree with the remainder of the allegations in paragraph 8 of the said affidavit.

(Emphasis Added)

Paragraph (7) THAT as to paragraph 10 of the said affidavit I say that the [Second Issue] Plaintiff did take advice and I am aware as has been stated by

the deponent that the Plaintiff is in the business of land development, construction and I believe sale of land within Fiji. Hence the Plaintiff is very much aware of land dealings as they had have been incorporated since September 1993. The Plaintiff ought to have known, in fact Plaintiff knew whether vat would be applicable or not prior to entering into the sale of the subject land with me, however chose to rely on the representation made to me that vat will not be applicable, and induced me to enter into the dealing.

(Emphasis Added)

Paragraph (13.2) Paragraph 7 and 8 of Mr. Patel’s Affidavit – the sale has now [Third Issue] been completed. The transfer concluded. The Plaintiff did not

raise any tax invoice at settlement for payment of vat. I believe they did not do so as they were of the believe as what they informed me, the dealing was zero-rated. Further Vat should not be applicable in any event to the dealing as the transaction because the sale was of an entity which was a going concern and it was incumbent on the Plaintiff to provide sufficient evidence to the Tax Department.

(Emphasis Added)

Paragraph (13.1) Paragraph 6 of Mr. Patel’s Affidavit – I was informed that the [Fourth Issue] sale will not attract any vat by Vimal Deo, the Plaintiff did not

ask for vat from me at the time of settlement and the agreement at clause 24 clearly states that all taxes are the responsibility of the Plaintiff.

(9) Let me now come back to the first issue of fact raised in the Affidavit in Opposition. I should express my views on the merits of the first issue.

The Plaintiff denied the alleged oral representations that the dealing will not attract any VAT and the sale will be zero rated.

Leave that aside for a moment.

According to the Sale and Purchase Agreement at annexure VD-4 of Deo’s Affidavit, at the time of entering into the Agreement, the Defendant was represented by “Reddy and Nandan Lawyers” and the Plaintiff was unrepresented.

The terms and conditions of the written Sale and Purchase Agreement was explained to the Defendant by his Solicitor.

According to the Purchase Price Clause at Page 02 of the Agreement, it expressly required the Defendant to pay the consideration of FJ$1,000,000.00 plus Value Added Tax (VAT), if applicable.

For the sake of completeness the Purchase Price and Payment Clause in the Sale and Purchase Agreement is reproduced below in full.

PURCHASE PRICE AND PAYMENT

Purchase Price:	$1,000,000.00 plus VAT if applicable
Purchase Price:	The Purchase Price must be paid to the Solicitor by Bank Cheque on the Settlement Date - $1,000,000.00 plus VAT if applicable.

The Defendant does not deny that the Sale and Purchase Agreement was entered into, on the terms stated therein. (Please see paragraph 08 of the Affidavit in Opposition).

The Defendant cannot admit the Agreement and terms thereof and then later say that the Agreement was not what the previous representations were between the parties, because the clause 21 of the Agreement provides;

ENTIRE AGREEMENT

“This Agreement forms the whole of the Agreement between the parties respecting the subject matter hereto and no representation warranty or statement not included or specifically provided for herein shall form part of the Agreement between parties.”

(Emphasis Added)

As I mentioned earlier, the clause in relation to purchase price at page two of the Sale and Purchase Agreement clearly states and it presents no difficulty that the purchase price is $1,000,000.00 plus VAT if applicable. In the words of Lord Wright in “Scammell (a) & Nephew Ltd v Austen (1941) AC 251, it is clear to me that in the case before me the words in the clause in relation to purchase price mentioned in the Sale and Purchase Agreement are not so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention.

I wish to emphasize that the terms of the written Sale and Purchase Agreement takes precedence over any prior oral representations which included that the purchase price was VAT inclusive. What the Plaintiff may have said in the course of the negotiations is irrelevant when determining the meaning to be attributed to the clause in relation to purchase price.

Therefore, the alleged oral representations made by the Plaintiff that VAT will not be applicable to the sale should be excluded as inadmissible. The Defendant cannot adduce oral evidence to vary or contradict the written Agreement.

It is a rule of evidence applicable both to Courts of Equity and of law, that where a Contract is reduced into writing, where the Contract appears in the writing to be presumed that the writing contains all the terms of it, and evidence will not be admitted of any previous or contemporaneous representations which would have the effect varying or contradicting it in any way.

Please see;

* Mercantile Bank of Sydney

-v-

Taylor

[1891] NSWLawRp 87; (1891) 12. L.R. (N.S.W.) 252

* Bacchus Marsh Concentrated Milk Company Ltd.

-v-

Joseph Nathan & Co. Ltd [1919] HCA 18; (1919), 26 C.L.R. 410 P.

If a contract is wholly in writing, the discovery of what was written normally presents no difficulty, and its interpretation is a matter exclusively within the jurisdiction of the Court. But on this hypothesis, the Courts have long insisted that the parties are to be confined within the four corners of the document in which they have chosen to enshrine their agreement. Neither of them may adduce evidence to show that his intention has been miss-stated in the document or that some essential feature of the transaction has been omitted.

Please see;

* Bower, L.J in Bentsen v Taylor,

Sons & Co (No.2) (1893) 2 O.B. 274

* Gordon v Macgregor

[1909] HCA 26; (1908), 8 C.L.R. 316

* Gelling v Crespin

[1917] HCA 44; (1917), 23 C.L.R. 443

A greater guidance can be derived from the observations of Lord Hoffman when delivering the Judgment of the majority in the House of Lords in “Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; (1998) 1 AER 98 at p. 114.

“My Lords ... I think I should preface my explanation of my reasons with some general remarks about the principles by which contractual documents are nowadays construed. I do not think that the fundamental change which has overtaken this branch of the law, particularly as a result of the speeches of Lord Wilberforce in Prenn v. Simmonds [1971] 3 All ER 237 at 240-242 [1971 1 WLR 1381 at 1384 – 1386 and Reardon, Smith Line Ltd. v. Hansen-Tangen, Hansen-Tangen v. Sanko Steamship Co. [1976] 3All ER 570, [1976]

1 WLR 989, is always sufficiently appreciated. The result has been, subject to one important exception, to assimilate the way in which such documents are interpreted by judges to the common sense principles by which any serious utterance would be interpreted in ordinary life. Almost all the old intellectual baggage of ‘legal’ interpretation has been discarded. The principles may be summarized 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 in not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammar; 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 enable the reasonable man to choose between the possible meaning 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 Investment Co Ltd. v. Eagle Star Life Assurance Co. Ltd [1997] UKHL 19; [1997] 3 All ER 352, (1997) 2 WLR 945).

(5) The ‘rule’ that words should be given their ‘natural and ordinary meaning’ reflects the commonsense 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 not 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 Cia Naviera SA v SWalen Rederierna AB. The Antaias [1984] 3 All ER 229 at 233, [1985] AC 191 at 201:

“.... If detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense.”

Lord Hoffman’s approach was adopted by the Court of Appeal in New Zealand in Boat Park Ltd v Hutchinson [1999] 2 NZLR 74, 81.

The above proposition of law received the sanction of the Supreme Court of Fiji in Dalip Kumar & Another v The National Insurance Company of Fiji Ltd, Civil Appeal No. CRV 009 of 2008 where the Court said:

“13. In my opinion the modern law on construction of documents is authoritatively set out by the speech of Lord Hoffman when delivering the Judgment of the majority for the House of Lords in Investors Compensation Scheme Ltd v. West Bromwich Building Society [1997] UKHL 28; (1998) 1 All ER 98 at page 114.

14. Lord Hoffman explained:

“My Lord, I will say at once that I prefer the approach of the learned judge. But I think I should preface my explanation of my reasons with some general remarks about the principles by which contractual documents are nowadays construed. I do not think that the fundamental change which has overtaken this branch of the law, particularly as a result of the speeches of Lord Wilberforce in Prenn v Simmonds [1971] 3 All ER 237 at 240-252 [1971] 1 WLR 1381 at 1384.

- 1386 and Reardon Smith Line Ltd v Hansen Tangen; Hansen-Tangen v. Sanko Steamship Co [1976] 3 All ER 570 [1976] 1 WLR 989, is always sufficiently appreciated.

The result has been, subject to one important exception, to assimilate the way in which such documents are interpreted by Judges to the common sense principles by which any serious utterance would be interpreted in ordinary life. Almost all the old intellectual baggage of ‘legal’ interpretation has been discarded. The principles may be summarised 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 his 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 documents 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 tis words. The meaning of 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 enable 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 Mannal Investment Co. Ltd v. Eagle Star Life Assurance Co. Ltd). [1997] UKHL 19; [1997] 3 All ER 352, [1997] 2 WLR 945)

(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 not 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 Cia Naviera SA v. Salen Rederierna AB. The Antaios [1984] 2 All ER at 233, [1985] AC 191 at 201:

“If detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense.”

15. The Court of Appeal in Fiji adopted Lord Hoffman’s Statement of the law in Hassan Din and Finance Sector Management Staff Association v. Westpac Banking Corporation Civil Appeal ABU 0006/2003S Judgment 26 November 2004 (Ward P.Barker and Tompkins JJA).”

The Fiji Court of Appeal in Hassan Din (supra) said:

“What is clear from this approach, particularly the observations in paragraph (3), is that the evidence relating to the negotiations between the Union and the Bank that led to the collective agreement should have been excluded as inadmissible.

What the parties may have said or done or offered or rejected in the course of those negotiations is irrelevant when determining the meaning to be attributed to the clause in question. Similarly what the parties say they intended the clause to mean is inadmissible and irrelevant.

It is also clear from Lord Hoffman’s approach that the interpretation of the clause is to be approached objectively. It is the meaning that the clause would convey to a reasonable person having the relevant background knowledge that is to be determined, not the meaning that the parties to the agreement thought the clause would have.”

At the oral hearing before the Court, the Counsel for the Defendant said that the Court should consider the oral representations “that took place prior to the execution to ascertain the true understanding of the parties”. He relied on the decision in “Dick Bentley Ltd, and Anor v Harold Smith (Motors) Ltd, [1965] EWCA Civ 2; (1965) 2 A.E.R. 65. That was a case concerned with an agreement made partly in writing and partly orally, whereas in the present case it is very different. In the case before me, the written Sale and Purchase Agreement constituted a binding Contract between the parties which they had acted in.

In my Judgment, that decision has no application to the present case. The submissions of Counsel for the Defendant are in conflict with the rule of law enunciated in Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; (1998) 1 AER 98 at p. 114., Boat Park Ltd v Hutchinson [1999] 2 NZLR 74, 81 and Dalip Kumar & Another v The National Insurance Company of Fiji Ltd, Civil Appeal No. CRV 009 of 2008.

I can see no reason why the rule of law enunciated in the aforesaid judicial decisions should not be applied in this case.

Therefore, I venture to say beyond a per adventure that the first issue of fact raised in the Affidavit in Opposition filed is not a substantial issue of fact. It is wholly misconceived. There is in the truth nothing to be tried. It is clear to me that there is no real substantial question of fact to be tried. I am left with the strong impression that even if this question of fact goes to trial, the defence will not succeed.

In CJ Patel and Company Ltd v Queensland Insurance (Fiji) Ltd, Justice Pathik referred to the case of In Express Newspapers Plc v News (UK) Ltd and Others [1990] 3 All E.R. 376 at 379 Browne-Wilkinson V-C that:

“Summary judgment is a means of short-circuiting that system in the clear case where it is shown that, even if it went to trial, the defence could not succeed”

(Emphasis Added)

(10) Let me now come back to the second issue of fact raised in the Affidavit in Opposition filed. I should express my views on the merits of the second issue of fact.

The question is, for the purpose of this application, whether the Court is authorised to draw any inference from the fact that the Plaintiff is in the business of land development, construction and dealings.

In the context of the present case, I adopt the robust approach of the High Court in “Charan Katonivere Holdings Ltd v NBF Management Bank” 2000 FJHC 61, HBC 0058J. 99s, and allow my doubts to be submerged in what I think I may just call current of authority.

The High Court in “Charan Katonivere Holdings v NBF Management Bank” in arriving at the decision cited “Taciqua Transport Company Ltd v Vakatora Holdings and Others”, Civil Action No. HBC 191 of 1998, held as follows;

“Scott J, in the authority cited by Counsel for the Plaintiff, in Tacirua Transport Company Ltd. –v- Vakatora Holdings and Others Civil Action No. HBC 191 of 1998, said at page 2:

“In Fiji, the expression “VIP” is generally used not to describe lounges at airports but to mean “VAT Inclusive Price”.

In that case tenders had been invited “with VAT Inclusive Prices”. The Plaintiff had made an offer including VAT. It had been accepted and a contract drawn up for a sum inclusive of VAT. It later transpired that no VAT was payable to the Inland Revenue Department and the Plaintiff sought orders to refund 10% of the purchase price. Scott J found for the Plaintiff saying at page 5:

“The point is that the 2nd Defendant knew perfectly well that he was receiving $38,180 worth of the total amount of $420,000 not as part of the purchase price but contingently by way of VAT and that therefore in the outcome when in fact VAT was not found to be payable it was not his to retain.”

I consider that the same principle applies in this case. Although the tenders called for did not specify VAT, and although the Defendant’s acceptance of the Plaintiff’s offers did not specify VAT, both sale and purchase agreements stated that the purchase prices included VAT. If there was any uncertainty at the time of negotiation about the VAT component, it was clarified at the time of the execution of the agreements. If the Defendant knew at that time that VAT was not payable and if the Plaintiff knew this as the Defendant claims he did, then there is no reason why the parties should list the purchase price as a VAT inclusive price. I decline to draw any inference from the fact that the Plaintiff is a property developer or investor, and that its officer knew that VAT was exempt. Furthermore, I decline to draw any inference from the several tenders made by the Plaintiffs for the purchase of the properties, that the company was involved in some dishonest scheme to obtain the properties for less than the agreed amount.

For these reasons, I find for the Plaintiff in the sum of $140,909.09.”

(Emphasis added)

On the strength of the rule of law enunciated in the aforementioned judicial decision (as I understand those words), I decline to draw any inference from the fact that the Plaintiff is in the business of land development, construction and dealing.

(I should add that in the aforementioned case the Defendant called for tenders on a mortgagee sale. The Plaintiff forwarded an offer for $550,000.00 VIP. The Defendant replied and accepted “$550,000.00” but was silent on the VAT issue. After the conclusion of the transaction, the Inland Revenue Department determined that no VAT was payable on the sale. The Plaintiff then moved to seek a refund of the VAT component of the sale. The Defendant disputed the request for refund and the parties had different views on whether the purchase price was subject to VAT.)

Therefore, I am left with the strong impression that the second issue of fact raised in the Affidavit in Opposition filed is wholly misconceived. There is in the truth nothing to be tried. If this question of fact goes to trial, the defence will not succeed. There is no real substantial question of fact to be tried.

(11) Let me now come back to the third issue of fact and express my views on the merits of the third issue of fact.

The Defendant says that the sale is entered and that no invoice was raised at the settlement.

This is wholly misconceived. The Clause 12 of the Agreement clearly provides that the parties as still bound by their warranties and obligations despite the transaction concluding and title passing.

For the sake of completeness, the Clause 12 of the Agreement is reproduced below;

NO MERGER

That the agreements obligations and warranties of the parties hereto herein set forth in so far as the same have not been fulfilled at the time of completion of this transaction shall not merge with the giving and taking of title to the said property.

Moreover, the Defendant says that VAT should not be applicable because the sale was of an entity which was a going concern.

The proposition put forward by the Defendant is manifestly incorrect.

I refer to annexure VD-7 of Deo’s affidavit which is the decision of Fiji Revenue & Customs Authority – At page (3) of the document it provides:

“The purchaser for LOT 17 a Mr Ananth Reddy is a non registered person thus cannot be treated as a going concern.”

(Emphasis Added)

Therefore, I am left with the strong impression that the third issue of fact raised in the Affidavit in Opposition filed is wholly misconceived. There is in the truth nothing to be tried. If this question of fact goes to trial, the defence will not succeed. There is no real substantial question of fact to be tried.

(12) Let me now come back to the 4th issue of fact and express my views on the fourth issue of fact raised in the Affidavit in Opposition filed.

The Defendant says that according to Clause 24 of the agreement all taxes are the responsibility of the Plaintiff.

For the sake of completeness, Clause 24 is reproduced below.

COSTS & DISBURSEMENTS

The purchaser shall pay all legal costs and all statutory disbursements payable on this Agreement and on all allied documents flowing from this Agreement including stamp duties and registration fees. The vendor will be responsible for all his own taxes including any capital gains, tax or for his legal fees should he choose to be represented separately.

I must say that the words in the clause 24 are not so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention.

What did the parties intend?

What is the meaning that would be conveyed by the Clause 24 to a reasonable person with the relevant background knowledge? Such a person would be aware that the Clause 24, in the context of the Sale and Purchase Agreement as a whole, was intended to provide that the Plaintiff’s obligation to pay taxes to the relevant Department to FIRCA does not absolve the obligation of the Purchaser (Defendant) to first pass to the Plaintiff the VAT if applicable.

I should add that the interpretation of Clause 24 should be approached objectively. It is the meaning that the Clause would convey to a reasonable person having the relevant background knowledge that is to be determined, not the meaning that the parties to the agreement thought the Clause would be.

“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 words is a matter of dictionaries and grammar; 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 enable the reasonable man to choose between the possible meaning 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 Investment Co. Ltd v. Eagle Star Life Assurance Co. Ltd [1997] UKHL 19; [1997] 3 All ER 352, (1997) 2 WLR 945).

Therefore, I am left with the strong impression that the fourth issue of fact raised in the Affidavit in Opposition filed is wholly misconceived. There is in the truth nothing to be tried. If this question of fact goes to trial, the defence will not succeed. There is no real substantial question of fact to be tried.

Due to the reasons which I have endeavoured to explain, I cannot help feeling quite convinced that issues of facts raised in the Affidavit in Opposition filed are plainly unsustainable, even if goes to trial, the defence will not succeed.

In CJ Patel and Company Ltd v Queensland Insurance (Fiji) Ltd, Justice Pathik referred to the case of In Express Newspapers Plc v News (UK) Ltd and Others [1990] 3 All E.R. 376 at 379 Browne-Wilkinson V-C that:

“Summary judgment is a means of short-circuiting that system in the clear case where it is shown that, even if it went to trial, the defence could not succeed”
(Emphasis Added)

I should add that the issues raised are not genuine, but feigned, and that there is in truth nothing to be tried.

“Phantom issues” will not suffice. A shadowy semblance of an issue is not enough to defeat the Summons. The very object of the Summons for Summary Judgment is to separate what is formal or pretended in denial or averment from what is genuine or substantial, so that only the latter may subject a suitor to the burden of a trial.

See; Richard v Credit Suisse N.Y. 346 (1926).

Order 14, Rule 1, 2, 3 of the High Court Rules would serve no purpose whatever if frivolous and transparently, insufficient proofs and arguments such as have been brought forward here be held to create a tribal issue. The already overcrowded trial terms calendars would be cluttered up with phantom issues, the disposition of which would usurp and waste the time of the Court. The Defendant must show real and substantial facts “sufficient to entitle him to defend” if he is to avert Summary Judgment under these rules which were carefully devised to eliminate unnecessary delay and further the prompt administration of justice.

It is an important principle of the Summary Judgment procedure that the onus remains on the Plaintiff throughout to establish that the Defendant has no real substantial question to be tried.

The Court is satisfied on this point. The Plaintiff has succeeded in establishing his case and satisfying Court in evidence to obtain Summary Judgment pertaining to paragraph (1) of the Summons (VAT sum claimed).

I could see nothing to change my opinion even on the basis of exhaustive work contained in,

❖ “Commentary on Litigation”, by Cokes
❖ “A practical approach to Civil Procedure”, by Stuart Simen, Thirteenth Edition
❖ “Pleadings and Practice” by Ogers, 13th Edition
❖ “Precedents of Pleadings” by Bullean and Lecke

For these reasons, I order Judgment for the Plaintiff against the Defendant in the sum of FJ$130,434.75 (VAT sum claimed).

(13) The Plaintiff has asked for interest on the judgment sum. The next issue for consideration is interest.

In this context, I would prefer to adopt the robust approach of the Fiji Court of Appeal in “Maganlal Brothers Limited v L.B. Narayan & Co.”, Civil Appeal No. 31 of 1984 , and allow my doubts to be submerged in what I think, I may just call current of authority. The Court of Appeal held;

“Mr Shankar sought interest on the amount claimed. Section 3 of the Law Reform (Miscellaneous Provisions) Death and Interest Act (Cap. 27) provides that:

“In any proceedings tried in the Supreme Court for the recovery of any debt or damages the Court may, if it thinks fit, order that there shall be included in the sum for which Judgment is given interest at such rate as it thinks fit on the whole or any part of debt ..... for the whole or any part of the period between the date when the cause of action arose and the date of judgment ....”

In the Supreme Court Practice, in the notes to O.14, r.1 at page 127 para. 14/3-4/18, is one to the effect that proceedings under Rules of the Supreme Court Order 14 concluded by summary judgment were not proceedings tried because there was no trial, and that accordingly interest could not be awarded.

It has now been held in Gardner Steel Ltd. V Sheffield Brothers (Profiles) Ltd (1978) 3 All E.R. 399 by the Court of Appeal, adopting the view expressed by Lord Denning M.R. in Wallersteniner v Moir (No.2) (1975) Q.B. 373 that the learned editors of the Supreme Court Practice had placed too narrow a construction on the word “tried” and that interest can be ordered. We respectfully agree with that view.

In the present case, the defence raised by the respondent is no more than a delaying tactic and we think that the appellant should have interest from the date of the initial demand namely 25th July, 1983 at 13.5%.

We order that the Judgment of the Supreme Court be vacated and that Judgment be entered in that Court for the sum of $2,290.21 (not the amount claimed in the Writ which included $15 or for costs sought in the letter of demand) together with interest thereon at 13.5% from 26th July, 1983. The appellant is also entitled to an Order for costs here and below. If the quantum of such cannot be settled by agreement, then as taxed.”

(Emphasis added)

On the strength of the rule of law enunciated in the aforementioned judicial decision (As I understand those words);

• I grant interest on the judgment sum at the rate of 8% per annum, from 14th October 2014 to the date of judgment pursuant to Law Reform (Miscellaneous Provisions) (Death and Interest) Act Cap 27.
  
• I grant post Judgment interest of 4% per annum from the date of final judgment to the date of final satisfaction of the judgment sum.
  

(14) The Plaintiff has moved for tax penalty.

The Court decline to grant order on the Tax penalty due to the grounds adduced below;

❖ The Affidavit in Support of Deo does not particularise how this penalty is made up and how it has been calculated.

❖ The Notice served on the Defendant (exhibit VD-8 in the Deo’s Affidavit) does not contain the claim for payment of penalties which is included in the Statement of Claim and the Summons for Summary Judgment.

❖ There was no Agreement between the Plaintiff and the Defendant on the tax penalty.

(15) The Plaintiff moved for indemnity costs. The next issue for consideration is costs. Obviously Counsel for the Defendant says this is not justified in the case.

Let me see the basis upon which the Plaintiff seeks indemnity costs.

Counsel in his submissions writes;

Reference is made to paragraph 9.1 and 9.2 of written submissions

“It is quite clear that the defences raised by the Defendant are a “sham” and clearly designed to delay his obligations and frustrate the Plaintiff.

The Plaintiff has incurred significant legal costs in pursuing what is rightfully due to it under the agreement. The provisions of the agreement and obligations are unambiguous. This Honourable Court would note the letters written by the Plaintiff’s solicitors putting the Defendant on notice of their sham defence and right to seek full indemnity costs”

Against this factual background, it is necessary to turn to the applicable law and the judicial thinking in relation to the principles governing “indemnity costs”.

In approaching this question, I am mindful that costs are compensatory and in no regard are they to be treated as punitive. The Defendant in this action is liable for party/party costs in any event. It remains to be considered if any special circumstances exist for full indemnity costs.

Order 62, rule 37 of the High Court Rules empower courts to award indemnity costs at its discretion.

For the sake of completeness, Order 62, rule 37 is reproduced below.

Amount of Indemnity costs (O.62, r.37)

37.- (1) The amount of costs to be allowed shall (subject to rule 18 and to any order of the Court) be in the discretion of the taxing officer.

G.E. Dal Pont, in “Law of Costs”, Third Edition, writes at Page 533 and 534;

‘Indemnity’ Basis

“Other than in the High Court, Tasmania and Western Australia, statute or court rules make specific provision for taxation on an indemnity basis. Other than in the Family Law and Queensland rules – which define the ‘indemnity basis’ in terms akin to the traditional ‘solicitor and client basis’ – the ‘indemnity basis’ is defined in largely common terms to cover all costs incurred by the person in whose favour costs are ordered except to the extent that they are of general law concept of ‘indemnity costs’. The power to make such an order in the High Court and Tasmania stems from the general costs discretion vested in superior courts, and in Western Australia can arguably moreover be sourced from a specific statutory provision.

Although all costs ordered as between party and party are, pursuant to the ‘costs indemnity rule’, indemnity costs in one sense, an order for ‘indemnity costs’, or that costs be taxed on an ‘indemnity basis’, is intended to go further. Yet the object in ordering indemnity costs remains compensatory and not penal. References in judgments to a ‘punitive’ costs order in this context must be seen against the backdrop of the reprehensible conduct that often justifies an award of indemnity costs rather than impinging upon the compensatory aim. Accordingly, such an order does not enable a claimant to recover more costs than he or she has incurred.”

Now let me consider what authority there is on this point.

The principles by which Courts are guided when considering whether or not to award indemnity costs are discussed by Hon. Madam Justice Scutt in “Prasad v Divisional Engineer Northern (No. 02)” (2008) FJHC 234.

As to the “General Principles”, Hon. Madam Justice Scutt said this;

• A court has ‘absolute and unfettered’ discretion vis-à-vis the award of costs but discretion ‘must be exercised judicially’: Trade Practices Commission v. Nicholas Enterprises (1979) 28 ALR 201, at 207
• The question is always ‘whether the facts and circumstances of the case in question warrant making an order for payment of costs other than by reference to party and party’: Colgate-Palmolive Company v. Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225, at 234, per Sheppard, J.
• A party against whom indemnity costs are sought ‘is entitled to notice of the order sought’: Huntsman Chemical Company Australia Limited v. International Cools Australia Ltd (1995) NSWLR 242
• That such notice is required is ‘a principle of elementary justice’ applying to both civil and criminal cases: Sayed Mukhtar Shah v. Elizabeth Rice and Ors (Crim Appeal No. AAU0007 of 1997S, High Court Crim Action No. HAA002 of 1997, 12 November 1999), at 5, per Sir Moti Tikaram, P. Casey and Barker, JJA
• ‘... neither considerations of hardship to the successful party nor the over-optimism of an unsuccessful opponent would by themselves justify an award beyond party and party costs. But additional costs may be called for if there has been reprehensible conduct by the party liable’: State v. The Police Service Commission; Ex parte Beniamino Naviveli(Judicial Review 29/94; CA Appeal No. 52/95, 19 August 1996), at 6
• Usually, party/party costs are awarded, with indemnity costs awarded only ‘where there are exceptional reasons for doing so’: Colgate-Palmolive Co. v. Cussons Pty Ltd at 232-34; Bowen Jones v. Bowen Jones [1986] 3 All ER 163; Re Malley SM; Ex parte Gardner []2001] WASCA 83; SDS Corporation Ltd v. Pasonnay Pty Ltd &Anor [2004] WASC 26 (S2) (23 July 2004), at 16, per Roberts-Smith, J.
• Costs are generally ordered on a party/party basis, but solicitor/client costs can be awarded where ‘there is some special or unusual feature of the case to justify’ a court’s ‘exercising its discretion in that way’: Preston v. Preston [1982] 1 All ER 41, at 58
• Indemnity costs can be ordered as and when the justice of the case so requires: Lee v. Mavaddat [2005] WASC 68 (25 April 2005), per Roberts-Smith, J.
• For indemnity costs to be awarded there must be ‘some form of delinquency in the conduct of the proceedings’: Harrison v. Schipp [2001] NSWCA 13, at paras[1], [153]
  
• Circumstances in which indemnity costs are ordered must be such as to ‘take a case out of the "ordinary" or "usual" category ...":MGICA (1992) Ltd v. Kenny & Good Pty Ltd (No. 2) [1996] FCA 862; (1996) 140 ALR 707, at 711, per Lindgren J.
• ‘... it has been suggested that the order of costs on a solicitor and client basis should be reserved to a case where the conduct of a party or its representatives is so unsatisfactory as to call out for a special order. Thus, if it represents an abuse of process of the Court the conduct may attract such an order’: Dillon and Ors v. Baltic Shipping Co. (‘The Mikhail Lermontov’) (1991) 2 Lloyds Rep 155, at 176, per Kirby, P.
• Solicitor/client or indemnity costs can be considered appropriately ‘whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known ... he had no chance of success’: Fountain Selected Meats (Sales) Pty Ltd v. International Produce Merchants Ltd & Ors [1988] FCA 202; (1998) 81 ALR 397, at 401, per Woodward, J.
• Albeit rare, where action appears to have commenced/continued when ‘applicant ... should have known ... he had no chance of success’, the presumption is that it ‘commenced or continued for some ulterior motive or ... [in] willful disregard of the known facts or ... clearly established law’ and the court needs ‘to consider how it should exercise its unfettered discretion’: Fountain Selected Meats, at 401, per Woodward, J.
• Where action taken or threatened by a defendant ‘constituted, or would have constituted, an abuse of the process of the court’, indemnity costs are appropriate: Baillieu Knight Frank (NSW) Pty Ltd v. Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359, at 362. per Power, J.
• Similarly where the defendant’s actions in conducting any defence to the proceedings have involved an abuse of process of the court whereby the court’s time and litigant’s money has ‘been wasted on totally frivolous and thoroughly unjustified defences’: Baillieu Knight Frank, at 362, per Power, J.
  
• Indemnity costs awarded where ‘the defendant had prima facie misused the process of the court by putting forward a defence which from the outset it knew was unsustainable ... such conduct by a defendant could amount to a misuse of the process of the court’: Willis v. Redbridge Health Authority (1960) 1 WLR 1228, at 1232, per Beldam, LJ
• ‘Abuse of process and unmeritorious behaviour by a losing litigant has always been sanctionable by way of an indemnity costs order inter parties A party cannot be penalised [for] exercising its right to dispute matters but in very special cases where a party is found to have behaved disgracefully or where such behaviour is deserving of moral condemnation, then indemnity costs may be awarded as between the losing and winning parties’: Ranjay Shandil v. Public Service Commission (Civil Jurisdiction Judicial Review No. 004 of 1996, 16 May 1997), at 5, per Pathik, J. (quoting Jane Weakley, ‘Do costs really follow the event?’ (1996) NLJ 710 (May 1996))
• ‘It is sufficient ... to enliven the discretion to award [indemnity] costs that, for whatever reasons, a party persists in what should on proper consideration be seen to be a hopeless case’: J-Corp Pty Ltd v. Australian Builders Labourers Federation Union of Workers (WA Branch)(No. 2) [1993] FCA 70; (1993) 46 IR 301, at 303, per French, J.
• ‘... where a party has by its conduct unnecessarily increased the cost of litigation, it is appropriate that the party so acting should bear that increased cost. Persisting in a case which can only be characterised as "hopeless" ... may lead the court to [determine] that the party whose conduct gave rise to the costs should bear them in full’: Quancorp Pty Ltd &Anor v. MacDonald &Ors [1999] WASC 101, at paras[6]-[7], per Wheeler, J.
• However, a case should not be characterised as ‘hopeless’ too readily so as to support an award of indemnity costs, bearing in mind that a party ‘should not be discouraged, by the prospect of an unusual costs order, from persisting in an action where its success is not certain’ for ‘uncertainty is inherent in many areas of law’ and the law changes ‘with changing circumstances’: Quancorp Pty Ltd &Anor v. MacDonald &Ors [1999] WASC 101, at paras[6]-[7], per Wheeler, J.
• The law reports are replete with cases which were thought to be hopeless before investigation but were decided the other way after the court allowed the matter to be tried: Medcalf v. Weatherill and Anor [2002] UKHL 27 (27 June 2002), at 11, per Lord Steyn
• Purpose of indemnity costs is not penal but compensatory so awarded ‘where one party causes another to incur legal costs by misusing the process to delay or to defer the trial and payment of sums properly due’; the court ‘ought to ensure so far as it can that the sums eventually recovered by a plaintiff are not depleted by irrecoverable legal costs’: Willis v. Redbridge Health Authority, at 1232, per Beldam, LJ
• Actions of a Defendant in defending an action, albeit being determined by the trial judge as ‘wrong and without any legal justification, the result of its own careless actions’, do ‘not approach the degree of impropriety that needs to be established to justify indemnity costs ... [R]egardless of how sloppy the [Defendant] might well have been in lending as much as $70,000 to [a Plaintiff], they had every justification for defending this action ... The judge was wrong to award [indemnity costs] in these circumstances. He should have awarded costs on the ordinary party and party scale’: Credit Corporation (Fiji) Limited v. Wasal Khan and MohdNasir Khan (Civil Appeal No. ABU0040 of 2006S; High Court Civil Action No. HBC0344 of 1998, 8 July 2008), per Pathik, Khan and Bruce, JJA, at 11

Defining ‘Improper’, ‘Unreasonable’ or ‘Negligent’ Conduct in Legal Proceedings as Guide to Indemnity Costs Awards: Cases where ‘wasted costs’ rules or ‘useless costs’ principles have been applied against solicitors where their conduct in proceedings has led to delay and/or abuse of process can provide some assistance in determining whether conduct in proceedings generally may be such as to warrant the award of indemnity costs. These cases specifically relate to solicitors’ conduct rather than directly touching upon the indemnity costs question; nonetheless the analysis or findings as to what constitutes conduct warranting an award of costs can be helpful. See for example:

• Ridehalgh v. Horsefield and Anor [1994] Ch 205
• Medcalf v. Weatherill and Anor [2002] UKHL 27 (27 June 2002)
• Harley v. McDonald [2001] UKPC 18; [2001] 2 AC 678
• Kemajuan Flora SDN Bh v. Public Bank BHD &Anor(High Court Malaya, Melaka, Civil Suit No. 22-81-2001, 25 January 2006)
• Ma So So Josephine v. Chin Yuk Lun Francis and Chan Mee Yee (FACV No. 15 of 2003, Court of Final Appeal Hong Kong Special Administrative Region, Final Appeal No. 15 of 2003 (Civil)(On Appeal from CACV No. 382 of 2002, 16 September 2004)
• SZABF v. Minister for Immigration (No. 2) [2003] FMCA 178
• Heffernan v. Byrne [2008] FJCA 7; ABU0027.2008 (29 May 2008)
  

Some of the matters referred to include:

• At the hearing stage, the making of or persisting in allegations made by one party against another, unsupported by admissible evidence ‘since if there is not admissible evidence to support the allegation the court cannot be invited to find that it has been proved, and if the court cannot be invited to find that the allegation has been proved the allegation should not be made or should be withdrawn: Medcalf v. Weatherill and Anor, at 8, per Lord Bingham
  
• At the preparatory stage, in relation to such allegations – not necessarily having admissible evidence but there should be ‘material of such a character as to lead responsible counsel to conclude that serious allegations could properly be based upon it: Medcalf v. Weatherill and Anor, at 8, per Lord Bingham
• Failures to appear, conduct which leads to an otherwise avoidable step in the proceedings or the prolongation of a hearing by gross repetition or extreme slowness in the presentation of evidence or argument are typical examples of wasting the time of the court or an abuse of its processes resulting in excessive or unnecessary costs to litigants: Harley v. McDonald, at 703, para[50] (English Privy Council)
• Starting an action knowing it to be false is an abuse of process and may also involve knowingly attempting to mislead the court: Ma So So Josephine v. Chin Yuk Lun Francis and Chan Mee Yee (FACV No. 15 of 2003, Court of Final Appeal Hong Kong Special Administrative Region, Final Appeal No. 15 of 2003 (Civil)(On Appeal from CACV No. 382 of 2002, 16 September 2004), at para[43], per Ribeiro, PJ (Li, CJ, Bokhary and Chan, PJ and Richardson, NPJ concurring)
• Lending assistance to proceedings which are an abuse of the process of the court – using litigious procedures for purposes for which they were not intended, ‘as by issuing or pursuing proceedings for reasons unconnected with success in the litigation or pursuing a case known to be dishonest’ or evading rules intended to safeguard the interests of justice ‘as by knowingly failing to make full disclosure on ex parte application[s] or knowingly conniving at incomplete disclose rue of documents’: Ridehalgh v. Horsefield [1994] Ch 205, at 234, per Bingham, MR
• Initiating or continuing multiple proceedings which amount to abuse of process: Heffernan v. Byrne [2008] FJCA 7; ABU0027.2008 (29 May 2008), per Hickie, J.

Specific Circumstances of Grant/Denial Indemnity Costs: Specific instances supporting or denying the award of indemnity costs include:

• Indemnity costs follow per a ‘Calderban offer’, that is, where a party makes an offer or offers prior to trial, which is/are refused, and that party succeeds at trial on a basis which is better than the prior offer: Calderbank v. Calderbank [1975] 3 WLR 586
• However, no indemnity costs awarded where Calderbank letter contains no element of compromise, making it not unreasonable for the party not to accept the offer. The question is ‘... whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs ...’: SMEC Testing Services Pty Ltd v. Campbelltown City Council [2000] NSWCA 323, at para[37], per Giles, JA Hence, if the offer is not a genuine offer of compromise and/or there is no appropriate opportunity provided to consider and deal with it, then no indemnity costs follow: Richard Shorten v. David Hurst Constructions P/L; D. Hurst Constructions v. RW Shorten [2008] Adj LR 06/17 (17 June 2008), per Einstein, J. (NSW Supreme Court, Equity Division T&C List); Leichhardt Municipal Council v. Green [2004] NSWCA 341, at paras[21]-24], [36], per Santow, JA, Stein, JA (concurring); Herning v. GWS Machinery Pty Ltd (No. 2) [2005] NSWCA 375, at paras[4]-[5], per Handley, Beazley and Basten, JJA; Elite Protective Personnel v. Salmon [2007] NSWCA 322, at para [99]; Donnelly v. Edelsten [1994] FCA 992; [1994] 49 FCR 384, at 396
• Indemnity costs awarded:
  • upon a winding-up petition’s being presented on a debt known to the petitioner to be genuinely disputed on substantial grounds;
  • the clearly established law being that a winding up order will not be granted in such circumstances, meaning that the petitioner ‘had no chance of successfully obtaining a winding up order’;
  • where in these circumstances the filing of the petition ‘constituted a deliberate tactical manipulation of the winding up process by the [petitioner, the State Government Insurance Commission ‘SGIC’] for the purposes of bringing very substantial pressure to bear’ on Bond Corp Holdings ‘BCH’;
  • this in the circumstances meant that the ‘filing of the petition was an abuse of process of the court in the true sense of that expression’;
  • the discretion to stay the petition should not be exercised because this would ‘cause BCH serious harm’ meaning it would be ‘extremely difficult for BCH to be able to conduct its business normally if the petition [were] not dismissed’: citing Re Lympne Investments [1972] 1 WLR 523, at 527, per Megarry, J.; also Re Glenbawn Park Pty Ltd [1977] 2 ACLR 288, at 294, per Yeldham, J.
  • an abuse of process ‘having been established in the circumstances outlined, justice requires the award of solicitor and client, or, rather, "indemnity" costs’ so that ‘the SGIC should be ordered to pay all the costs incurred by BCH except insofar as they are of an unreasonable amount or have been unreasonably incurred, so that, subject to [these] exceptions, BCH be completely indemnified by the SGIC for its costs’, citing Foundation Selected Meats (Sales) Pty Ltd v. International Produce Merchants [1988] FCA 202; (1988) 81 ALR 397, at 410, per Woodward J.: Re Bond Corp Holdings Ltd (1990) 1 ACSER 350, at 13, per Ipp, J.
    
• Indemnity costs are appropriate where an applicant (in an unfair dismissal):
  • 'insists' over a respondents' objections that an application should proceed to trial rather than await the outcome of other possible litigation (including a police investigation);
  • fails repeatedly, despite allowances, to meet deadlines for lodgment of a witness statement;
  • fails to advise her lawyers of her whereabouts so denying them of the ability to inform the court of reasons for seeking an unqualified adjournment less than a week prior to trial;
  • fails to comply with directions to provide a current address, consult a medical specialist and obtain a report of fitness to attend the trial;
  • fails to appear at the final hearing when on notice that the application will be dismissed in event of such failure: Nicole Pender v. Specialist Solutions Pty Ltd (No. B599 of 2004. 17 May 2005), per Bloomfield, Commissioner
    
• Indemnity costs denied as against a Plaintiff who discontinued a claim for a permanent injunction to restrain a Defendant's industrial action, where the Defendant had filed a chamber summons seeking to have the Plaintiff's claim struck out as an abuse of process: Cooperative Bulk Handling Ltd v. Australian Manufacturing Workers Union (WA Branch)(Unreported, WASC, Lib. No. 970190, 30 April 1997), per Wheeler, J.
  
• Indemnity costs cannot be awarded in a criminal appeal, albeit 'in criminal appeals, as in civil cases, unreasonable conduct by the unsuccessful party might increase a usual award': Sayed Mukhtar Shah v. Elizabeth Rice and Ors(Crim Appeal No. AAU0007 of 1997S, High Ct Crim Action No. HAA02 of 1997, 12 November 1999), at 4, per Sir Moti Tikaram, P., Casey and Barker, JJA
• Indemnity costs awarded then reversed on appeal where solicitor held liable for costs (under a 'wasted costs' order) in initiating action for clients where solicitor taken to have known that the basis of the clients' action was wholly false"
  

Let me now proceed to examine the basis upon which the Plaintiff seeks indemnity costs bearing the aforementioned legal principles uppermost in my mind.

As I mentioned earlier, the Plaintiff seeks indemnity costs on the following grounds.

Reference is made to paragraph 9.1 and 9.2 of the written submissions.

"It is quite clear that the defences raised by the Defendant are a "sham" and clearly designed to delay his obligations and frustrate the Plaintiff.

The Plaintiff has incurred significant legal costs in pursuing what is rightfully due to it under the agreement. The provisions of the agreement and obligations are unambiguous. This Honourable Court would note the letters written by the Plaintiff's solicitors putting the Defendant on notice of their sham defence and right to seek full indemnity costs"

What concerns me is that, is it a correct exercise of the Court's discretion to direct the Defendant to pay costs on an indemnity basis to the Plaintiff for putting forward a sham defence?

Costs are of course a matter which lies in the discretion of the court. However, that discretion, being a judicial, rather than an unfettered one, must be exercised in accordance with established principles. The usual principle to be applied in inter partes litigation is that costs follow the event, those costs being taxed on a party and party basis.

The circumstances in which one is justified in departing from that established principles are, as it seems to me, limited, and it seems to me that, as a general rule, and order that costs be taxed on an indemnity basis is justified only where the procedures taken, or the procedures threatened, by a party constituted, or would have constituted, an abuse of the process of the court, or where the actions of the party, in the conduct of the proceedings, have involved an abuse of the process of the court, in the sense that the court's time, and the other parties money has been wasted on totally frivolous and thoroughly unjustified proceedings.

In my view, the conduct of the Defendant in putting forward a defence which is patently unsustainable and which is not genuine, but feigned, and that there is in truth nothing to be tried and maintaining a denial of liability amounted to a misuse of the process of the Court, which will justify an order for indemnity costs.

In "Afzal v Ford Mater Co Ltd (1994) 4 ER 720 at 747 the Court held that such conduct by a Defendant would amount to a misuse of the process of the Court.

Justice Lyons in Chindamy Goundar v The National Insurance Co. Ltd Civil Action No. HBC 0337.94L provided that a party is entitled to indemnity costs where there has been reprehensible conduct on the part of the other party. His Justice said at page 21 of his Judgment.

"I consider it must be behavior of such a reprehensible nature that it inevitably causes their opponent to be drawn into litigation which the unsuccessful party well knew at the commencement thereof (if the truth had been told) would not be in fact successful. There must be, I think a deliberate and persistent holding of that truth by the unsuccessful party".

Any practitioner in the field should have known the clear state of the law. The Defendant and its practitioner must have known that they had no possibility of success against the Plaintiff's claim. Looking at the case once more, as I have done so often, it seems to me that the Defendant persisted in contesting the Plaintiff's claim in what should a proper consideration be seen to be a hopeless defence. It clearly shows the endless effort on the part of the Defendant who is so insistent in contesting the Plaintiff's claim with no regard to any merits whatsoever.

I am satisfied there is reprehensible oppressive and vexatious conduct by the Defendant, the penalty for which should be an Order for costs on an indemnity basis.

I could see nothing to change my opinion even on the basis of exhaustive work contained in G.E. Dal Pont, "Law of Costs", Third Edition.

Essentially that is all I have to say!!!

(F) FINAL ORDERS

(1) I grant Judgment for the Plaintiff against the Defendant in the sum of FJ$130,434.78 (Vat sum claimed)

(2) I grant interest on the judgment sum at the rate of 8% per annum, from 14th October 2014 to the date of judgment pursuant to Law Reform (Miscellaneous Provisions) (Death and Interest) Act Cap 27.

(3) I grant post Judgment interest of 4% per annum from the date of final judgment to the date of final satisfaction of the judgment sum.

(4) I decline to grant order on the tax penalty.

(5) The Plaintiff's application for indemnity costs is allowed.

(6) The Plaintiff is directed to file and serve its detailed costs for the assessment of the indemnity costs within 14 days from the date hereof.

I do so order.

.......................................
Jude Nanayakkara
Master of the High Court

At Lautoka
18th March 2016