Wynyard v Trustees for the Colony of Fiji of the Methodist Church in Fiji [2016] FJHC 211; HBC405.2008 (31 March 2016)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION
CIVIL ACTION NO. HBC 405 OF 2008

BETWEEN:

TOM WYNYARD
FIRST PLAINTIFF

AND:

GULF PACIFIC (FIJI) LIMITED
SECOND PLAINTIFF

AND:

THE TRUSTEES FOR THE COLONY OF FIJI OF THE METHODIST CHURCH IN FIJI
FIRST DEFENDANTS

AND:

MCF HOLDING TRUST
SECOND DEFENDANT

Counsel : Mr. P. Knight for 1st and 2nd Plaintiffs
Mr. S. Valenitabua and Ms. P. Salele for 1st and 2nd Defendants
Date of Hearing : 1st and 2nd February, 2016
Date of Judgment : 31 March, 2016

JUDGMENT

INTRODUCTION

The subject matter was an island, namely Kaba Island and an Options Agreement was entered for purpose of obtaining a feasibility report and necessary approvals for development of it. The said agreement contained certain obligations on parties. The Plaintiff had not complied with the said agreement, gave notice of the exercise the option. The Plaintiff filed this action against the two defendants seeking Specific Performance of the Option Agreement and or damages in lieu of that. The Plaintiff also claimed a lien over the subject matter (Kaba Island) of the Option Agreement (OA). The Plaintiff alternatively claimed damages for the breach of contract.

FACTS

According to the Pre-trial conference minutes contained in the copy pleadings the agreed facts are as follows

The Defendants in June, 2006 became the registered proprietor of the freehold land in the District of Cuvu in the province of Nadroga, known as Kaba Island (Kaba Island).
1st Plaintiff and the Defendants entered in to an OA on 20th May, 2005. A consideration of $50,000 was paid to the 1st Defendants by the 1st Plaintiff.
The parties consented that in the event that the 1st Plaintiff exercised the option within the time, the parties would enter into a Development Lease (DL) attached to the OA.
The DL was for a period of 5 years from the date of execution.
In terms of the OA the option was to be exercised by the 1st Plaintiff or his nominee giving written notice of such exercise to the 1st Defendant within 1 year from 20.5.2005 or an extension of 6 month period for the exercise of the option upon a payment of further sum of 25,000.
By a letter of 18th May, 2006 the solicitors of 1st Plaintiff informed the 1st Defendant the right to exercise the extension of the option for 6 months and paid the additional sum.
On 17th November, 2006 the 1st Plaintiff wrote a letter exercising the option.
The 1st Plaintiff upon exercising the option issued a cheque to the 2nd Defendant in a sum of $47,000
The said sum was for part payment of premium and rentals payable upon the issue of DL over Kaba Island, but no such DL was executed.
The solicitors for the Plaintiffs rejected the said exercise of OA and also returned the $47,000.
By letter dated 20th August, 2007 the solicitors for the Defendants accepted the exercise of OA.
The sum of $47,000 was paid by the Plaintiffs to the Defendant.
No DL was entered into between the parties.

For the Plaintiff Ian Hobson, a partner of the proposed project in Kaba Island gave evidence, and marked P1, P2, P3 and P4 from the bundle of documents for consideration at the hearing. For the Defendant Usaia Vunibola the Secretary for Land and Development of the Methodist Church gave evidence, and marked D1to D12 from the same bundle of documents.

The Plaintiff in the prayer of the statement of claim sought following orders
Specific performance of OA
Damages in lieu of or in addition to Specific Performance.
A declaration that the 1st Plaintiff or the 2nd Plaintiff is entitled to a lien over Kaba Island for all payments mad e to the 1st Defendant pursuant to the OA.(with interest)
Alternatively, for breach of contract against 1st or 2nd Defendant.
An order that 2nd Defendant enters into and executes the DL.
Costs.

In the statement of defence there was no counterclaim and only sought dismissal of the action with costs.

There was no agreed bundle of documents filed in this action. So the burden of proof of the documents was with the Plaintiff.

ANALYSIS

The witness for the Plaintiff was a Barrister and Solicitor in New Zealand and according to him he was familiar with the project of the 1st Plaintiff relating to Kaba Island. According to him he got involved shortly after OA was entered on 20th May, 2005. Though he said that he was familiar with the project, in his evidence he could point out the feasibility study of the project. It was a primary requirement for a project similar to this one and also a prerequisite in terms of clause 1 of the OA which stated '...conditions referred to herein subject however to the satisfactory completion of and approval of the feasibility study for a development generally in accordance with the intent of clause 2 thereof'.

The feasibility study was a condition that the Plaintiffs needed to fulfil but the Plaintiff was unable to point out to a feasibility study. Ian Hobson admitted that they had full access to the land for feasibility study, and he couldn't state any hindrance from the Defendants for obtaining a feasibility study.

The clause 2 of the OA, contained the purpose or intent of the project, but the Plaintiff being the prospective developer could deviate from it and the Defendants could not unreasonably refuse such a request for change.

He also admitted that there was no consent in terms of Section 6 of Land Sales Act at the time of the exercise of the option.

The obligation to obtain the consent was with the Plaintiffs in terms of the Clause 3 of the OA which reads:

'The Option shall remain open for period of one (1) year from the date thereof provided that, if the feasibility study has not been completed or if all necessary consents and approvals, including the consent of the Minister of Lands under the Land Sales Act, the consent of Fiji Islands Trade and Investment Bureau and the requisite planning approvals have not been obtained by the expiry of the said period for a further 6 months on payment of the further Option Price of 25,000 to the owner. The Owner agrees to provide all necessary assistance to obtain the consents and approvals referred t in this clause.'(emphasis added)

The obligation on the part of the Defendants were to 'provide all necessary assistance to obtain the consents and approvals referred' in the said provision. There was no evidence of denial of any assistance to obtain the said approval.

The Plaintiff had neither done a feasibility study nor obtained necessary consents contained in the said clause 3 of the OA though the OA was extended for further 6 months for the said purpose. The purpose of entering into OA was to allow the Plaintiffs to comply with the requirements contained in the OA. So, by the time of the exercise of the option, the preliminary requirements needed to be fulfilled by the Plaintiffs.

The witness could not refer to any feasibility study on the proposed project at Kaba Island. This was a vital document and without this it would not be possible to understand the feasibility of the project and this was also important for determination of the rentals for the lease and also for any approvals contained in the said clause 3.

The said OA also had an annexed lease (DL) and this was the prospective DL that parties would enter, subject to any amendments parties agree during the option period. (See clause 10 of OA). The DL could be further negotiated between parties and they were required to act reasonably and also in good faith.

The Plaintiffs contend that the exercise of the option would compel the entering of the DL, even though no feasibility study, environment report or any consent contained in the said OA were obtained.

Clause 8 of the OA states the manner in which the OA should be exercised, but this cannot be considered in isolation. It has to be dealt in the context of entire OA.

The witness for the Defendant said the 1st Plaintiff seemed a broker, than a genuine investor and the Defendants had written to the 1st Plaintiff by letter dated 25th August, 2006 requesting certain things but the 1st Plaintiff had not complied with the said requests. (See D8)

This document was accepted by the Defendant and was produced to the court by the Plaintiff and contained in their bundle of documents at page 76. The Defendant's gave sufficient notice for comply.

No environment report was submitted to the Defendants. No such report was proved in this hearing by the Plaintiff. Without these vitals reports it would not be possible for the parties to enter in to any long term agreement for lease with any certainty.

Practically, it would not be possible to agree to such an agreement without the preliminary work, for which the OA allowed more than 18 months. There was no evidence that the Defendants had caused this delay or that they have unreasonably refused any requests from the Plaintiffs relating to the said project that caused the Plaintiff not obtaining a feasibility study of the project.

Without submission of feasibility study or obtaining necessary approvals from the authorities the Plaintiff now seeks to compel the Defendants to enter into DL annexed in to the OA.

The OA was not the final document but was subject to further negotiations during the option period where the Plaintiffs were required to submit the feasibility study and also the necessary consents and this opportunity for negotiations were lost due to the actions of the Plaintiffs failure to submit a feasibility study.

If the Plaintiffs were keen on the said project the feasibility study was the first thing and considering that it involved Kaba Island, and surrounding marine life, an environment impact should also be assessed through an environment report as requested by the Defendants.

The Plaintiff could not state a reason for not obtaining feasibility study during the option period, as required by the OA. No explanation offered for their failure.

It was the failures of the Plaintiff do comply with the requirements contained in the clause 1 and 3 of the OA that resulted the failure of entering of DL.

The Plaintiffs cannot seek specific performance when they had breached the OA, by not providing a feasibility study. Any clause in a contract must be construed having regard to its context within the contract, which must in turn be set in its surrounding circumstances or 'factual matrix'. The general principles are to be found in the case of Investors Compensation Scheme Ltd v West Bromwhich Building Society [1997] UKHL 28; [1998] 1 WLR, 896, where they are summarized by Lord Hoffmann (at pages 912 H to 913E) as follows:

"(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2)The background was famously referred to by Lord Wilberforce as the "matrix of fact", but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next. It includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of its words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax. (see Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] UKHL 19; [1997] AC 749).
(5) The "rule" that words should be given their 'natural and ordinary meaning' reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does to require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Neviera SA v Salen Rederierna AB [1985] 1 AC 191. 201;

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

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

Application of the said criteria to the evidence presented to me at this hearing including the documents P1-P4 and also D1-D9 show that the Plaintiffs have not utilized the option period for the purpose intended by both parties at the time of the signing of the OA.

The exercise of the option cannot be considered in isolation and it cannot oblige the Defendants to enter in to DL, even without a feasibility study or other consents. It would be illegal for the Defendants to enter into the DL as contained in the Annexed without the said consent contained in the section 6 of the Land Sales Act.

The exercise of the option was done by the solicitors of the 1st Plaintiff, and admittedly he was a non resident.(see D1). The said letter specifically mention that the decision to exercise the option was taken by 1st Plaintiff and the solicitor was acting on behalf of him.

So the residential status of the 2nd Plaintiff was irrelevant as the notice of option to lease was exercised by the 1st Plaintiff through his solicitors.

The Defendants through their solicitors at the time had written to the 1st Plaintiff's solicitor on 15th November, 2006 reiterating the importance of feasibility study and failure on the part of the 1st Plaintiff to that effect. The said letter is marked D11.

The 1st Plaintiff did not comply with the requests contained in the said letter 'D11', but through their solicitors notified the exercise of the option by letter 'D1'. It should also be noted that the said notice of option was two days after the 'D11', indicating that there were major issues that were not resolved between the parties. (See D11).

So, the Defendants could not have entered in to DL upon the said notice of option days prior to the expiration of the extended time for the exercise of the option.

It was the failure on the part of the Plaintiff that had resulted the non execution of DL. He had violated the OA by not providing feasibility study and also by not obtaining necessary consents and approvals. In such a situation the Defendants could not be compelled for specific performance and or for damages for the failure to entering the DL.

The breaches of the 1st Plaintiff had resulted to his detriment and he cannot complain about non execution of DL by the Defendants.

The Plaintiffs rely on the clause 10 of the OA, but this clause cannot be taken in isolation to the other provisions contained in the said contract. (See Investors Compensation Scheme Ltd v West Bromwhich Building Society [1997] UKHL 28; [1998] 1 WLR 896).

The Clause 10 of the OA, also states that the DL annexed should be the 'general form' indicating that it was not the finalized and fully negotiated one. This was expressly stated by allowing negotiations and amendments to the DL during the 'option period'. How could there be any negotiations when the Plaintiff did not even complete the feasibility study and other preliminary requirements under the proposed project.

The Plaintiff claimed damages for the breach of contract. The Plaintiffs have clearly breached the OA when they failed to provide feasibility study in terms of Clause 1 and 3 of the OA. So they cannot insist on the exercise of DL by the Defendants, and there failure as breach of contract, by the Defendants.

CONCLUSION

The feasibility study was a primary requirement under OA. The other essential requirements were contained in the clause 3 of the OA. The Plaintiffs' failure to comply with those provisions had resulted the non execution of DL. There was no breach of contract from the Defendants as they were prevented from any form of negotiations about DL due to the actions of the Plaintiff. A project as outlined in clause 2 cannot be approved without feasibility study, environment impact assessment and also other necessary consents from the relevant authorities. So the action for specific performance and or damages fails. At the same time the action for breach of contract by the Defendant fails. The Plaintiff had also claimed lien over the land. There cannot be common law lien over the said land. No submission was made on this point either at the hearing or in the written submission. The action is dismissed and struck off. Considering the circumstances of the case I do not award any costs.

FINAL ORDERS

The statement of claim is dismissed and struck off.

No costs.

Dated at Suva this 31st day of March 2016

Justice Deepthi Amaratunga
High Court, Suva