CIVIL APPEAL NO. CBV0 CBV0007 OF 1998S
(Court of Appeal, Fiji, Civil Action No. ABU0017/96S)
BETWEEN:
:
WASAWASA FISHERIES LIMITED
Appellant
AND:
FRESH FISH EXPORTERS (FIJI) LIMITED
Respondent
Coram: The The Rt. Hon. Lord Cooke of Thorndon
The Hon. Sir Anthony Mason
The Hon. Sir Gerard Brennan
Hearing: Wednesday, 3 March 1999
Date of Judgment: WednesdayMarch 1999
Counsel: Mr. S. Tilmouth Q.C. with Dr. Sah. Sahu Khan for the Appellant
Mr. R.A. Smith for the Respondent
JUDGMENT OF THE COURT
The History
This appeal arises out of proceedings relating to an agreement dated 25 August 1989 ("the purchase agreement") between the
appellant ("Wasawasa") and the respondent ("Fresh Fish") for the sale of the ship "Sunbird" , certain
equipment and the vendor’s goodwill on the terms and conditions set out in the agreement. The purchase price provided for consisted
of:
a) $115,000 for the ship and equipments; and
b) $267,342 for the goodwill, know-how etc.
The total of these amounts ($382,342) was to be paid:
a) by payment of $235,000 to the vendor on the date of the agreement; and
b) by payment of $147,342 to the Fiji Development Bank ("the Bank") to discharge a mortgage over the ship to the Bank and
to reimburse any payments made to the Bank on account of such mortgage since 1 February 1989 to the date of the agreement "on
or before 60 days following the date of this agreement". (cl. 3.2).
Clause 5.1 provided that right, title and interest in the ship and its equipment would pass to the purchaser on the date of the agreement.
Clause 7 which was headed ‘CURRENCY" provided:
"All payments to be made under this agreement are to be made in Fijian dollars and all references to Fijian dollars"
Clause 5.2 provided for the delivery of duly executed transfers and other documents on the " Completion Date". That expression
was defined by cl. 1.1 to mean the date on which Fresh Fish paid the sum of $147,342.
It seems that the purchase agreement of 25 August 1989 recorded, in some respects at least, a pre-existing oral agreement made between
the parties in March 1989 on which they had acted.
The difficulties which arose between the parties under the purchase agreement were to a large extent attributable to an employment
agreement also made on 25 August 1989 between Wasawasa, Fresh Fish and Mr Graham Bruce Southwick ("Southwick"). By this
agreement Fresh Fish employed Wasawasa as manager of Fresh Fish’s business and Wasawasa was to employ Southwick as its manager,
the appointments to extend for 10 years, on terms set out in the agreement, subject to provisions for termination. Southwick signed
the agreement not only as a party but also as a director of each of the companies. Thereafter, he conducted the business and affairs
of both companies, thereby contributing to the difficulties which ensued.
The ship was operated by Wasawasa on behalf of Fresh Fish, following the making of the two agreements. In March 1992, Wasawasa seized
the ship and its equipment, claiming that Fresh Fish had defaulted in its obligation under cl. 3.2 of the purchase agreement to pay
the sum of $147,342. Wasawasa claimed that Fresh Fish discontinued making payments in satisfaction of that liability in February
1992. Although Fresh Fish was obliged by cl. 3.2 to make the payment within 60 days of the date of the purchase agreement, it had
been paying monthly instalments, evidently with the acquiescence of Wasawasa.
The High Court proceedings
The seizure of the ship led to the institution of proceedings by Fresh Fish. By its amended statement of claim Fresh Fish alleged
the making of the purchase agreement under which property passed on 25 August 1989, delivery of the ship by Wasawasa, performance
by Fresh Fish of the obligations under the agreement and wrongful seizure of the ship with consequential loss or damage. The statement
of claim sought a declaration that Fresh Fish was the owner of the ship and equipment, an order for possession, damages for detention, an order for execution and delivery of a transfer of the ship and, in the alternative, relief against forfeiture.
By its second amended statement of defence Wasawasa pleaded that a variation to the purchase agreement had been agreed upon by the
parties. The substance of the variation was that, by reason of cash flow difficulties experienced by Fresh Fish, Wasawasa agreed
to forego the requirements for timely payment of the amounts of $235,000 and $147,342 in return for Fresh Fish paying a lease fee
for the ship of $5,000 per month to Wasawasa, which lease fee Wasawasa assigned to the Bank. Wasawasa further pleaded that, by the
variation, property in the ship would not pass until the payments contracted for were made by Fresh Fish and this event had not come
to pass, contrary to the allegation of performance in the amended statement of claim.
Wasawasa also denied that it had delivered the ship into the possession of Fresh Fish. Instead, it pleaded that it had leased the
ship to Fresh Fish in March 1989 under an interim arrangement pending a final agreement and that Fresh Fish operated the ship under
the lease arrangement and retained all the revenue resulting during that time, without making any payment to Wasawasa other than
the lease fee.
Wasawasa therefore claimed that it had lawful control and management of the ship and that the purchase agreement was terminated about
March 1992. By its counterclaim Wasawasa sought, inter alia, judgment for the sum of $382,342 and interest and, in the alternative,
damages.
At the trial of the action in the High Court, Pathik J. found that the terms of the purchase agreement had not been fully performed
by Fresh Fish. He found that the payment of $235,000 had not been made but accepted that $147,342 had been paid by the payments of
$5,000 per month. He also found that possession of the ship was given to Fresh Fish upon execution of the agreement and that Fresh
Fish had possession of the ship until the seizure in March 1992. Pathik J. held that Wasawasa was required to execute a transfer
of the ship to Fresh Fish because Fresh Fish had paid the sum of $147,342 and cl. 1.1 of the purchase agreement defined "Completion
Date" as the date upon which that payment was made.
His Lordship rejected Wasawasa’s claim that there was a variation of the purchase agreement. He concluded that the variation
was an afterthought on the part of Southwick whose evidence did not impress him. Southwick was the only witness called by Wasawasa.
The rejection of the variation, Wasawasa’s acquiescence in the carrying on of the business for two and half years by Fresh Fish
and the payment of the $147,342 led to the conclusion that the purchase agreement had not been lawfully terminated and that the seizure
was unlawful.
The counter-claim was dismissed and relief was granted in the action as follows:
"(a) That upon payment by the Plaintiff (Fresh Fish) to the defendant (Wasawasa) within six weeks from this judgment the sum of $235,000 which was required to be paid by the Plaintiff under item 3.2(a)
of the Agreement dated 25 August 1989 the possession of the vessel "Sunbird" and its immediate transfer in the name of
the Plaintiff is ordered AND if default is made in the said payment the agreement shall be deemed to have been rescinded and the defendant shall do what it likes
with the vessel.
(b) That upon payment of the said sum of $235,000 the Defendant do give credit to the Plaintiff for the sum of $5,000 per month paid
to Fiji Development Bank for 30 months or whatever sum has been paid in this manner towards the purchase price of the said vessel
to fulfil the requirements of item 3.2(b) of the said agreement.
(c) That the Plaintiff is not entitled to damages for the alleged unlawful detention as the Plaintiff had itself failed to comply
with the payment of $235,000 under item 3.2(a) of the agreement whilst it made full use of the vessel by doing business with it and
of accounting to the defendant or anyone else for the proceeds from the said business.
(d) The defendants are ordered to pay the costs of this action which is to be taxed if not agreed."
The Court of Appeal
Fresh Fish, though it succeeded substantially in the action, appealed to the Court of Appeal on two grounds. The first ground was
that the trial judge should have found that the sum of $235,000 had been paid; the second ground was that the trial judge should
have awarded damages for wrongful detention of the ship. There was no cross-appeal by Wasawasa.
The Court of Appeal upheld the two grounds of appeal, holding that the amount of $235,000 had been paid by Fresh Fish and that it
was entitled to an award of damages. In concluding that the payment had been made, the Court endorsed the trial judge’s rejection
of Wasawasa’s case that there was a variation to the purchase agreement. The Court allowed the appeal, declared that Fresh Fish
is the owner of the ship and ordered that within 14 days Wasawasa deliver the ship to Fresh Fish and execute all documents necessary
to effect the transfer. The Court remitted the issue of damages for unlawful detention to the High Court for determination in accordance
with the judgment. The appellant was awarded costs in the sum of $600, disbursements to be fixed by the Registrar.
The appeal to this Court
In Wasawasa’s appeal to this Court, Mr. Tilmouth Q.C. argued two grounds, namely that the Court of Appeal was in error in holding
that the $235,000 had been paid and in rejecting the variation claim. It is convenient to deal with the second ground first.
(i) The variation claim
The Court of Appeal had relatively little to say about the variation claim, no doubt because the central issue concerned payment of
the $235,000. The Court of Appeal did, however, recount the trial judge’s consideration of the variation question and is to
be taken as agreeing with it.
The appellant’s case in this Court on this point encounters the considerable difficulty that it rests to a large extent on the
oral evidence of Southwick which was rejected by the trial judge. In reaching his conclusion, the trial judge took into account Southwick’s
capacity to manipulate matters as he wished and considered it significant that Southwick had not communicated the variation to Fresh
Fish and had failed in his duty, if there was a variation, to reduce it to writing or to rectify the purchase agreement.
In our view, his Lordship was entitled to reject the variation as an "after thought." One would have expected the variation
to be in writing. The matters relied upon to support a variation were entries in the accounts and records of Wasawasa, not Fresh
Fish, acknowledging payments of a lease fee. Those entries were no doubt made on information supplied by Southwick to Wasawasa but
not to Fresh Fish. In these circumstances his Lordship was entitled to prefer the evidence of Mr. Boyle, who deposed to lack of any
knowledge on the part of Fresh Fish of the variation, to that of Southwick.
True it is that the monthly payments are not directly referable to the particular provisions of the purchase agreement. They were
either made in discharge of the obligation to pay $147,342 with the acquiescence of Wasawasa or they were referable to some other
arrangement made by the parties, such as the variation. Having regard to the matters to which we have referred, we are not persuaded
that there was any error on the part of the trial judge in holding that, on the evidence, Wasawasa failed to establish a variation.
(ii) The payment of $235,000
Fresh Fish maintained in the courts below that its obligation to pay $235,000 pursuant to cl. 3.2(a) of the purchase agreement was
satisfied by the issue of 235,000 shares to Wasawasa in the Fresh Fish on 31 March 1989. The curious feature of this claim was that
the issue of shares took place before the date of the purchase agreement which created the obligation to pay. It appears, however,
that the issue took place in consequence of the pre-existing oral agreement and that the subsequent written agreement failed to record
what had happened.
The trial judge rejected the claim of payment because he considered that of the purchase agreement required payment in cash. We agree
with the Court of Appeal that the agreement did not require payment in cash. Clause 7 of the agreement, on which Mr Tilmouth Q.C.
for Wasawasa relied, does not, in our view, have such an effect. It is, as its heading suggest, simply a currency provision identifying
dollar references as references to the currency of Fiji. We consider that the agreement should be understood as requiring, in accordance
with commercial practice, payment in cash or by such other means as the parties agree. Having regard to the matters to which we have
referred, we are not persuaded that there was any error or the part of the trial judge in holding that, on the evidence, Wasawasa
failed to establish that these was a variation.
The trial judge, in concluding that payment could only be made in cash, also had regard to the conditions of the Reserve Bank’s
approval under the Exchange Control Act to the issues of shares in Fresh Fish. The relevant condition was "confirmation of receipt of funds of F$745,000 originating
from off shore." The approval related to an issue of shares which included shares to be issued to two Australian companies (for
which approval was required) as well as the shares to be issued to Fresh Fish (for which approval was not required as it was a Fiji
company). The total amount of the share consideration on the issue was $745,000. One reason why the issue of shares to the Australian
company required approval was that the issue would have given them control of Fresh Fish. That reason had no application to the issue
of the 235,000 shares to Wasawasa.
Whatever may be the legal effect of the condition of the Reserve Bank’s approval, we do not consider that it is a consideration
which is capable of influencing the interpretation of the purchase agreement. Had illegality been pleaded and raised as an issue,
the effect of the approval and the condition may have become material. Illegality does not arise on the pleadings.
That leaves for consideration the issue of actual payment. The evidence that the shares were issued and accepted as a satisfaction
of the obligation to pay created by the purchase agreement is compelling. Two share certificates for 235,000 $1 shares in Fresh Fish
in the name of Wasawasa as shareholder bear the date 31 March 1989. In the accounts of Wasawasa for the years 1989,1990 and 1999,
each balance sheet shows an entry under the heading "Investment" of $235,000. The notes to the accounts show that the investment
consists of 235,000 shares in Fresh Fish. Correspondingly, the accounts do not show a debt of $235,000 owing by Fresh Fish to Wasawasa.
In addition, there was an affidavit sworn by Southwick on behalf of Wasawasa on 19 June 1992 in the High Court proceedings, when Wasawasa
was seeking to set up a case of non-performance by Fresh Fish of its obligations under the purchase agreement. The only non-performance
by Fresh Fish deposed to by Southwick was non-payment of the sum of $147,342. No mention was made in the affidavit of non-payment
of the amount of $235,000. It is not without significance that the variation was only asserted by Wasawasa at a later date, namely
in the further amended defence which was filed on 3 September, 1993.
There was some evidence that the consideration for the issue of the shares was to be paid by way of an exchange of cheques between
Wasawasa and Fresh Fish. In April 1989 a cheque for $235,000 was drawn in favour of Fresh Fish on Wasawasa’s account with Westpac
Bank in Suva. That cheque was not been presented or cleared. In any event, for whatever reason, the exchange of cheques was not proceeded
with.
In these circumstances, the evidence justifies the conclusion that the parties accepted that the shares were issued in satisfaction
of Fresh Fish’s obligation to pay $235,000 under the purchase agreement and the Court of Appeal was right in so finding.
The appeal must therefore be dismissed.
Orders: Appeal dismissed.
Appellant to pay the respondent’s costs of the appeal.
Lord Cooke of Thorndon
Sir Anthony Mason
Sir Gerard Brennan
Solicitors:
Messrs. Sahu Khan and Sahu Khan, Ba for the Appellant
Messrs. Munro Leys and Company, Suva for the Respondent
CBV0007U.98S
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