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Jaduram Industries Ltd v Nawi Island Ltd [2018] FJHC 927; HBC13.2016 (26 September 2018)

IN THE HIGH COURT OF FIJI

AT LABASA

CIVIL JURISDICTION


CASE NUMBER: HBC 13 of 2016


BETWEEN: JADURAM INDUSTRIES LIMITED

PLAINTIFF

AND: NAWI ISLAND LIMITED

DEFENDANT


Appearances: No Appearance of the Plaintiff.

Mr. Devanesh Sharma for the Defendant.

Date/Place of Judgment: Wednesday 26 September 2018 at Suva.

Coram: Hon. Madam Justice Anjala Wati.

_____________________________________________________________________________________

  1. Catchwords:

CONTRACT – Breach –Damages recoverable –Special Damages – Interest and bank charges can be recovered as damages on which interest can be granted - Whether the defendant entitled to difference in contract price and related charges: is the loss such that the breaching party at the time of entering into the contract ought to have known that it is not unlikely to occur for an award of such loss to be made – Certainty as to damages – Costs.


  1. References:

(i). Legislation


  1. State Lands Act 1945 (“SLA”): s. 13(1).

(ii). Cases

  1. Bushwall Properties v. Vortex Properties [1975] 1. W.L.R. 1649.
  2. Czarnikow v. Koufos [1969] 1 A.C. 350.
  3. Hartle V. Laceys [1991] Lloyd’s rep. P. N. 315, CA.
  4. The President of India v. La Pintada Compania Navigacion [1985] A. C. 104.
  5. Wadsworth v. Lydall [1981] 1 W.L.R. 598.

___________________________

Cause/Background

  1. On the day of the trial, the plaintiff failed to prosecute its claim as a result of which the claim was struck out. The defendant proceeded with its claim for damages for breach of contract which it had maintained by way of a counter-claim. Only one witness for the defendant gave evidence.
  2. Although the plaintiff’s claim no longer exists to be determined, for full comprehension of facts, it is necessary that I identify the salient background facts and the parties’ position in the respective pleadings.
  3. The plaintiff is a limited liability company involved in the business of civil engineering works. Its head office is in Labasa. The defendant is also a limited liability company engaged in the construction of a Marina and a Resort at Nawi Island, opposite Savusavu town. The defendant’s head office is in Savusavu.
  4. The plaintiff says that sometimes in 2013, Nawi Island invited tenders for dredging and reclamation of part of Nawi Island for construction of a Marina and a Resort. The plaintiff placed its tender for $3.5 million on 31 May 2013. Thereafter the parties entered into negotiations which resulted in the tender for $3.9m on October 2013.
  5. Sometimes in August or October 2015, the parties entered into a contract for the works the plaintiff had tendered for, the contract document was titled “Contract Document Nawi Island Marina and Resort - Marina Dredging and Reclamation for Nawi Island Ltd- Contract Number: 15 166 in Accordance with NZS3910:2013”.The contract price was $3.9m.
  6. The front page of the contract states August 2015 but the defendant contends that the same was signed on 2 October 2015. This differs from the plaintiff’s version that the contract was entered into in August 2015. The contract itself, surprisingly, does not show a date of execution.
  7. The plaintiff says that the contract did not stipulate the start and completion date of the works and the terms of the performance bond. The plaintiff further contends that the preamble of the contract sets out some conditions but that it is not a term of the contract or forms part of the contract document.
  8. The plaintiff’s position is that the defendant made certain representations at the time of signing the contract which were false. The representations were:

(i). that the defendant had all the necessary permits and consents required by the laws of Fiji to complete the works contracted for;


(ii). that it had all the financing in place to allow the plaintiff to complete the works; and


(iii). that the works would start within a reasonable time after the signing of the contract and the plaintiff contends that two months would be such a reasonable time.


  1. The plaintiff says that relying on such representations; it bought certain expensive earthmoving equipment from New Zealand for $905,000 and had them delivered to Nawi Island in late June 2015.
  2. The defendant does not deny that the machines have been on the island until April 2016 when the plaintiff removed the same through an ex-parte order of the court. This position is confirmed by the court records. An order of the court of 22 April 2016 makes it clear that the plaintiff had managed to remove the machines from Nawi Island.
  3. The defendant says that the plaintiff never communicated to it that it was purchasing earthmoving equipment until around the time the equipment arrived in Fiji. The plaintiff was unable to clear the said equipment through FIRCA and the defendant provided assistance to this effect. At the time the plaintiff purchased the equipment, there was no contract in place and the purchase of the equipment was not a condition of the said contract. It was also not a condition of the contract that the machines be parked on the island.
  4. The defendant says that it was the plaintiff’s decision alone to bring the machines on the island and that it had not requested for the same. The machines were purchased without the defendant being notified. The machinery was parked on the island awaiting commencement of the contract. There was no agreement that the machinery would attract charges for the equipment sitting daily on the island and as such no losses have been incurred by the plaintiff.
  5. The plaintiff avers that the defendant did not have all the necessary permits and/or finances to start the work within 2 months of the contract being signed or at all. Due to this the plaintiff says that it was entitled to rescind the contract and/or treat it as having been repudiated by the defendant. It therefor elected on 18 January 2016 to treat the contract as having been repudiated by the defendant. It made its intention known to the defendant by demanding the return of the machines. The defendant had then threatened to have any employee or servant of the plaintiff arrested for trespass.
  6. The plaintiff says that by not releasing the machines the defendant committed the tort of conversion and is liable to pay damages. I will not go into the details of the damages claimed as it is not necessary in this matter.
  7. The defendant’s position is that the commencement date of the work was not inserted by mutual consent of the parties due to the fact that permits, approvals and financing had still not been obtained as at 2 October 2015. The completion was to occur 26 weeks from the commencement of the said works.
  8. The defendant further says that the preamble is part of the contract. The preamble consists of a condition for payment of the performance bond which the plaintiff was aware of as it had instructed its bank to prepare the same. The plaintiff failed to fulfill the condition of the contract.
  9. The defendant says that as progress was made with regard to the permits, approvals and financing, these were communicated to the plaintiff orally, and through emails and regular consultation meetings between the parties and consultants of the project.
  10. According to the defendant, the parties did not at any time ever agree nor was it a term or condition of the contract that the works would start within a reasonable time or within 2 months of the signing of the contract.
  11. The defendant says that it did not make any representations as alleged and that the plaintiff has repudiated the contract wrongfully. The contract was to commence once all the permits, approvals and financing had been obtained.
  12. The defendant says that on 18 January 2016 the plaintiff threatened to remove its machine and thereafter it responded that a sum of $390,000 had already been paid in good faith and a performance bond was awaited. Instead of tendering a performance bond as agreed, the plaintiff proceeded to remove its machinery and repudiate the contract. The machines were returned to the plaintiff without any loss whatsoever and that it is not liable for any damages claimed by the plaintiff.
  13. The defendant says that the plaintiff has wrongfully repudiated the contract. It further claims that it suffered losses in that it had paid a sum of $390,000 to the plaintiff for which interest and bank fees continue to accrue. It also claims that it had suffered losses as a result of the cancellation of the contract.
  14. The defendant says that after the plaintiff wrongfully repudiated the contract, it had to place another tender for the project and the new contractor is charging an amount which is more than the plaintiff’s contract price. It therefore claims the difference in the contract price and the costs associated with the new borrowings.
  15. The defendant also claims professional costs for engineers, accountants and lawyers, the full details will be provided in the judgment. The defendant also claims interest and costs of this action.
  16. The plaintiff’s position is that the contract pursuant to which the defendant is seeking damages is illegal as the consent of the director of lands as required under s. 13 (1) of the SLA had not been obtained.

Issues, Evidence and Analysis

  1. The principal issues for determination arising from the counter-claim are:
    1. Whether the contract between the parties pursuant to which the action is brought illegal for want of compliance of s. 13 (1) of the State Lands Act?
    2. Has the plaintiff wrongfully repudiated the contract?
    3. If the answer to (2) above is yes, what damages are payable to the defendant?
    1. S.13 (1) of SLA Consent: Is the Contract Illegal?
  2. S. 13(1) of the SLA prohibits any form of dealing with the land which is subject to a protected lease without the written consent of the Director of Lands first had and obtained. The concern that the plaintiff has raised through its pleading was that the defendant did not have the permission to build a Marina and a Resort on the said land and therefore any contract to carry out the works is an illegal contract.
  3. In order to determine whether the defendant has obtained the consent of the Director of Lands for development of the foreshore land which included construction of marina facilities, exhibits 1 and 2 are very important.
  4. Exhibit 1 is the Approval Notice of Lease (“Approval Notice”) through which the defendant had secured the permission for the development of the foreshore area around the Nawi Island. By the Approval Notice, the defendant had the permission to develop the land for hotel and tourism related purposes.
  5. Clause 2 of the conditions attached to the Approval Notice is relevant and I find that the clause complies with s. 13(1) of the SLA. Clause 2 reads:

“The lessee shall develop the demised land for Hotel and Tourism Related purposes, construction of private jetties on the foreshore fronting the three islands (includes Lots 8, 10, 11, 12, 13 and 20 on Nawi island, lot 16 on Nawi LaiLai Island (DP 10023) and Korovesa Island) and on the mainland access point located approximately 150 meters from the Copra Shed Marina in Savusavu Town, reclamation to allow development of the hotel component, construction of the Marina facilities [includes dredging and reclamation to allow Marina Villa component], beach enhancement work, creation of swimming area, coastal protection, preservation of existing mangroves, seabed construction for services of pipeline for water, sewerage and electricity from the mainland on the Savusavu Town foreshore) and further development conditions that may be stipulated by the lessor or other planning authorities on receipt of the detailed development plans”.


  1. The Approval Notice was for a period of 5 years from 1 July 2012. An extension of the said lease was granted on 4 August 2017 for a further period of 5 years as evidenced by exhibit 2. It is therefore clear and certain that the defendant had the consent of the Director of Lands to develop the land in question for which it engaged the plaintiff. The contract between the parties therefore was not illegal for want of compliance of s. 13(1) of the SLA.
    1. Did the Plaintiff Breach the Contract?
  2. The plaintiff contends that the works stipulated in the contract were to start within a reasonable time and 2 months would be a reasonable time to start the work. It contends that when the works did not start within the 2 months’ timeframe, it was entitled to repudiate the contract or treat is as having been repudiated by the defendant. It therefore elected to treat the contract as having been terminated when it made the request for the machines it had parked on the Nawi Islands to be returned on 18 January 2016.
  3. I do not find that the plaintiff’s contention in the pleading is supported by any evidence. It is clear from the Approval Notice and the contract between the parties that a commencement date could not be and was not fixed by the contract. The reason is that the defendant had to comply with the various conditions stipulated in the Approval Notice. The conditions ranged from obtaining of Environmental Impact Assessment Report to approvals from Town and Country planning and complying with conditions of various statutory authorities such as Director of Environment, Maritime Safety, Mineral Resources and Tourism. These are only a few conditions I have mentioned. Exhibit 1 outlines in detail the work that needed to be done.
  4. To add to that, I accept the defendant’s evidence that it had to make financial arrangements. Due to the necessity to obtain approvals and comply with all the conditions, the parties had not agreed to a commencement date. It could only be agreed that the time frame for completion would be 26 weeks.
  5. I find from the evidence of the defendant that the plaintiff was well aware of the progresses made by the defendant and that a commencement date was to be worked out mutually between the parties when other requirements were in order.
  6. If the finances were in place and the approvals were in order, the defendant would definitely have started the works because it was in its interest to do so. It also had acted on the contract by paying to the plaintiff $390,000 being 10% of the deposit of the contract price. This showed commitment on the part of the defendant.
  7. The Managing Director of Nawi Island had also had indicated in one of his emails dated 1 November 2015 that if a time frame was to be placed then it was going to be at least 18 months from January 2016 which means that the works were not expected to start until July 2017. The email was tendered as Exhibit 10.
  8. The plaintiff was required to provide the performance bond in the sum of $200,000. It started promising that it would provide the bond and did not end up doing so. I do find that the plaintiff did not ever have the intention to forward the performance bond as agreed by the parties because it always intended to repudiate the contract so that it can enjoy the sum of $390,000 without having to account for it.
  9. I find that the plaintiff moved the machines to Nawi Island to be able to extract the part of the mobilization costs which the defendant paid in good faith before the contract was executed. Having got the deposit, the plaintiff then tried to find a way to get out of its obligations under the contract and the best way was to ask for the removal of the machines for which the relationship soured between the parties as the plaintiff started threatening legal action on the defendant.
  10. The defendant was concerned as it had paid the money and that no performance bond was being deposited as promised by the plaintiff. It asked for a refund of the monies but to no avail and the only way to secure the return was to keep the machines on the islands until the court ordered it to be removed.
  11. From the Approval Notice, the contract and the email of 1 November 2015 from the Managing Director of the defendant company, I find that there was no set time frame for the works to start and the plaintiff knew about this and the reasons why the start date could not be fixed. It breached the contract on 18 January 2016 when it elected to treat the contract as having ended at the instance of the defendant.
    1. Extent/Nature of Damages

(i). Refund of Deposit with related bank charges and interest


  1. The first head of damages is special damages that the defendant claims from the plaintiff. The sum claimed is $449,919.18 which is made up as follows:

Exhibit 21 clarifies how the charges are made up of and how the interest is calculated. The exhibit was prepared by the Fiji Development Bank, Manager Relationships and Sales, Suva Branch.

  1. It is very clear from the defendant’s evidence that the sum of $390,000 was advanced by the Fiji Development Bank to the plaintiff on 24 September 2015. The payments were made through a bank cheque, a copy of which was tendered in evidence as exhibit 8. The plaintiff issued a receipt for the payment on 3 October 2015, a day after it signed the contract. The receipt was tendered in evidence as exhibit 9. The plaintiff does not deny having been paid this sum. This is very clear from the pleadings.
  2. I find that the plaintiff breached the contract to obtain unjust enrichment of the $390,000 monies that it had used to pay for the debt for the machines it brought from New Zealand. After having used the monies, it decided to indicate to the defendant that it will remove its machines from the island. It ought to have then refunded the monies to the defendant as it was no longer going to undertake the task under the contract.
  3. The plaintiff cannot use its machines lying on the island as an excuse not to refund the monies as the defendant has made it clear in its evidence which I accept that it did not require the machines to be brought to the island. The plaintiff had decided that unilaterally and since there was no commencement date of the contract, the plaintiff was not entitled to move the machines on the island. Any loss that the plaintiff has sustained is through its own actions and cannot be laid at the defendant’s door.
  4. The plaintiff was fully aware that the defendant had borrowed the money from the bank to pay it and that the defendant was also paying interest and bank charges for the loan. Due to the continued retention of the monies, the defendant suffered loss of that money and had to pay interest on the same as well as the bank charges.
  5. I find that the interest and the bank charges should be recoverable as damages against the plaintiff for breach of contract. The plaintiff is a businessman and knows that on most borrowings in Fiji interest is compounded. It is within the natural contemplation of parties that such borrowings include interest and when the plaintiff did not pay the monies to the defendant, it was within its knowledge that the defendant was exposed to further costs and interests from the bank.
  6. In Wadsworth v. Lydall [1981] 1 W.L.R. 598, CA compound interest was awarded as damages for breach of an obligation to pay the money. The decision was approved by the House of Lords in The President of India v. La Pintada Compania Navigacion [1985] A. C. 104.
  7. Another important case that I think should be highlighted is Hartle V. Laceys [1991] Lloyd’s rep. P. N. 315, CA. In this case the claim for damage was pleaded as special damage; compound interest was recovered in that case. In this case, a solicitor’s negligence had caused his client to lose the opportunity of a profitable resale of property in the purchase and the sale of which the client had instructed the solicitor. The solicitor well knew that his client had borrowed heavily from his bank and that the anticipated resale proceeds were to be used to bring down his borrowing. In these circumstances, and with the appropriate pleading, the Court of Appeal held that the client was entitled to recover in respect of his loan the interest compounded monthly and the bank charges for servicing the loan.
  8. Another case which effectively allowed compound interest is an old case of Bushwall Properties v. Vortex Properties [1975] 1. W.L.R. 1649 (Reversed on a ground unrelated to interest). The special feature of this case was that the only damages claimed were in respect of interest on moneys which the claimant had been compelled to pay the defendant sooner than he was contractually required to. This interest he claimed as damages and wished to claim interest under the statute on these damages in addition. He was entitled to do so.
  9. The facts of Bushwall (supra) are that the defendant’s in this case had sold the land to the claimants with purchase price payable in stages but then refused to proceed with the contract unless the claimants paid the full purchase price immediately. The claimants, instead of attempting to buy elsewhere, accepted this offer in mitigation of their loss. The claimants had to then borrow money in order to find the full purchase price, and claimed damages representing interest which they had accrued on the moneys borrowed. It was held that to award, in addition, interest on these damages would not offend the statutory provisions to only award simple interest.
  10. Oliver J. considered the statutory provision prohibiting award of interest on interest and said that it was clearly aimed at suits for interest bearing debts where no interest should be awarded on that part of the sum claimed as represented contractual interest. Oliver, J stated that:

“although what is claimed here is simply a replacement of a sum of money, the quantum of which is calculated by reference to interest which the plaintiffs have had to pay, the sum so claimed is not in any relevant sense interest itself; it is the sum payable by way of damages for breach of contract”.


  1. I find that the entire sum of $390,000 and the related bank charges and interest can be claimed as special damages. I award that in favour of the defendant. The question that now remains is the interest that is payable on this sum. I must say that the interest on the loan continues to accrue at the rate 7.5 per cent as evidenced by exhibit 21. I find that on the sum of $449,919.18, the plaintiff should pay interest from 15 April 2016 being the date of the writ to 14 August 2017 being the date of the trial at the rate of 3%.
  2. The period of interest therefore is for one year four months and the calculation comes to $17,996.76 which is made up as follows:
  3. It is the discretion of the court whether or not interest should be awarded on damages and the rate of such interest. I exercise my discretion in favour of the award at the rate of 3 %. I do not find that an award of interest breaches any legal provision for giving interest on interest as the earlier bank charges and interest are awarded as damages for the breach of the contract.

(ii). Difference in the Contract Price, Related Bank Charges and Interest

  1. The second limb of the damages is for the difference in the contract price, related bank charges and interests. The defendant’s witness testified that after it realized from the pleadings that the plaintiff has repudiated the contract, it decided to then call for another tender so that a contractor can be found to do the work.
  2. The testimony of the witness is that the lowest tender is that of Hall Contracting Limited for a sum of $12,644, 149.67. The defendant says that it now has to borrow another sum of $4,368,965.00 to finance the new contractor. The balance of the monies is to be paid by the equity shareholders equally.
  3. Specifically, the defendant says that the plaintiff has to pay in damages the difference in the contract price which is the sum of $8,744,149.67 being the difference between the tender by Hall Contracting and the plaintiff’s contract price. It also asks for additional bank charges of $9,527,182.85 for borrowing a sum of $4,368,965.00. In evidence the witness tendered a letter from bank to show how the charges are made up of. The statement was marked as exhibit 25.
  4. I do not find that damages in this case being the difference in the contract price are recoverable for many reasons. The first is that when the parties had contracted in October 2015, it was not within their contemplation that any breach would result in such damages. I do not find that the plaintiff and the parties generally contemplated that in 8 months of signing the contract, the price will change three fold and that the plaintiff would be liable for the difference by such an enormous increase. If that were so, the term of the contract should have catered for such a situation but it did not. The contract only contemplated late completion of work and damages arising as a result of that to be in the sum of $500 per day for late completion.
  5. The defendant has not established to my satisfaction that the loss is of a kind which the plaintiff, when he signed the contract, ought to have realized was not unlikely to result from the breach.
  6. In Czarnikow v. Koufos [1969] 1 A.C. 350, Lord Reid states what types of losses are recoverable. In his opinion, the proper test is whether the loss in question is:

“of a kind which the defendant, when he made the contract, ought to have realized was not unlikely to result from the breach...the words ‘not unlikely’...denoting a degree of probability considerably less than an even chance but nevertheless not very unusual and easily foreseeable”.


  1. The difference in the tender price or the contract price for such an exorbitant amount is not the natural consequence of such a breach. I refuse to make any award for the difference in the contract price and the related charges.
  2. Secondly, there is so much uncertainty as to the loss that the defendant is going to suffer. The defendant has tendered a summary of the tenders it has received but did not provide in evidence the actual tender by Hall Contracting Limited. There is also no explanation by Hall Contracting Limited or any qualified engineer as to how and why the costs have gone so high in a matter of 8 months. It is appreciated that there is inflation but an increase by about $8.5 m in a matter of 8 months has to be established and is inconceivable by any standards.
  3. I cannot accept that costs of the same scope of work that the plaintiff tendered for has increased so much or should increase to that degree. I am not satisfied that the defendant’s loss in that regard has been established with certainty.
  4. I turn to the third reason why I refuse such damages as proper to be awarded. For that, I turn my mind to two exhibits which is the contract between the parties being exhibit 7 and summary of all tenders received which was tendered as exhibit 24. Both the documents outline the scope of works to be carried out.
  5. The defendant’s evidence was that the scope of work was similar but the witness did not actually and specifically deal with each scope of work and showed how it correlated, apart from making a general statement to that effect. I have gone through the scope of work outlined in both the documents. I find that the scope of work that Hall Contracting is expected to carry out is far greater than what the parties had contracted for. For example, the plaintiff only charged the defendant for mobilization, clearing mangrove, rock revetment and excavation works. The amount came to $3.9m. Hall Contracting is charging for additional matters such as disestablishment fee, Insurance bonds and permits and other administration charges such as quality assurance, health and safety and admin fees.
  6. In terms of the actual scope of works, Hall Contracting is going to carry out more works for example construction surveying which work is not included in the contract between the parties.
  7. Another example is the marina dewatering method. Exhibit 24 shows that Hall Contracting is required to supply, deliver and install an Aqua Dam and a Sandbag Wall for which alone the price is more than $1.5 million. I have gone through the contract and in the contract the plaintiff is also to carry out marina dewatering but it is not required to carry out such extensive tasks such as to supply and install a dam. There is mention of dewatering pumps and silt ponds in the plaintiff’s contract which is not the same as an Aqua Dam and a Sandbag wall. If it were then there was no need to mention these terms separately in exhibit 24.
  8. I find from the exhibits that the amount of work that Hall Contracting has been contracted to carry out is not the same as what the plaintiff was to carry out. I find that for reasons of increased work and uncertainty as to why the charges are so high, the damages are not recoverable.

(iii). Professional and Related Costs


  1. The defendants third set of claims is for additional costs incurred to hire the professionals for a new tender and court proceedings such as engineers, accountants and lawyers. The amount claimed for professional costs are identified in exhibit 26.
  2. Exhibit 26 was prepared by the witness and not substantiated in evidence with any bill of costs from the accountants, engineers and lawyers. These are costs which can be proved in reference to the bill of costs which itemizes how the charges have been made up of but there was no concrete evidence to establish these charges. The charges are not for small sums of money and are made up as follows:
  3. All the expenses and claims could have been proved in reference to receipts, bills and payment vouchers and explanations as to how costs were made up of. Instead of proving these, the defendant just prepared its own statement of what it paid and did not prove any payment and costs. I do not find that it has been established that such costs have been incurred and paid as a result of which I refuse the claim for the amount above. I would also have refused the claim on the basis of Lord Reid’s opinion on what losses are recoverable. I will not repeat my earlier findings.
  4. In terms of the costs of this action, I find that summary assessment of the costs is justified. A witness had to travel from Suva to give evidence. The trial took less than half a day. I find that a sum of $5,000 is justified as costs to the defendant.

Final Orders

  1. In the final analysis, I find that the plaintiff has breached the contract between the parties for which it is liable to pay the defendant a sum of $467,915.94 inclusive of special damages and interest.
  2. In addition to the above sum, I order the plaintiff to pay to the defendant a sum of $5,000 in costs.

Anjala Wati

Judge

26. 09.2018

____________________

To:

  1. Sherani and Company for the plaintiff (new solicitors on record post trial).
  2. R. Patel Lawyers for the Defendant.
  3. File: Labasa HBC 13 of 2016.


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