Pacific Realtors (Fiji) Ltd v Khan [1977] FijiLawRp 6; [1977] 23 FLR 103 (25 March 1977)

[1977] 23 FLR103

COURT OF APPEAL

Civil Jurisdiction

PACIFIC REALTORS (FIJI) LIMITED

v.

MOHAMMED KHAIRULLAH KHAN & OTHERS

Gould V. P., Marsack J. A.

21st, 25th March 1977

Damages—mortgagees advertised notice of sale when no legal right so to do existed—mortgagors in process of negotiating sale to third party—offer to purchase withdrawn—whether damages too remote—assessment of damages.

The respondents purported to take preliminary steps in the exercise of their power of sale as mortgagees by advertising the property for sale when no legal right existed so to do. The appellant company had, in fact, already found a purchaser and was negotiating the sale at a profit of $50,000. The prospective purchaser withdrew when the mortgagees' notice appeared.

Held 1: The unjustified action of the respondents had eliminated any possibility of the sale being concluded on the agreed terms.

2. The loss suffered by the appellant company was reasonably foreseeable and a serious possibility and therefore not too remote.

3. The appellant company was entitled to $2,000.00 damages for loss of chance.

Cases referred to:
Hadley v. Baxendale (1854) 9 Exch. 341; [1843-60] All ER Rep. 461.
Aruna Mills Ltd v. Dhanrajmal Gobindram [1968] 1 All ER 113; [1968] 2 WLR 101.
Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd [1949] 1 All ER 997; [1949] 2 KB 528.
Chaplin v. Hicks [1911] 2 KB 786.

Appeal against the decision of the Supreme Court dismissing the appellant's claim for damages for breach of the contractual provisions of its mortgage.
K. C. Ramrakha for the appellant company.
B. C. Patel for the respondents.

The following judgments were read: [25 March 1977]

Henry J. A.:

By mortgage No. 132841 dated April 1 1974, appellant covenanted to pay respondents the sum of $32,000 on demand provided that six months' notice in writing was given. Interest was payable at the rate of 10% per annum. In the Supreme Court it was held that, at the material time, no such demand had been made. This finding is not challenged. Respondents purported to take steps preliminary to the exercise of its powers of sale, which of course, were not exercisable in the circumstances. Appellant obtained an interim injunction which halted any steps after the stage when the property had already been advertised for sale. Appellant was actually in the course of negotiating a sale of the property when the advertisement appeared. The prospective purchaser terminated negotiations by saying in a letter from its solicitor that the offer to acquire the property was withdrawn in view of the said advertisement. Appellant then brought the present action claiming damages in the sum of $50,000 for the loss of a prospective sale. The Supreme Court dismissed the claim with costs. The sole question on appeal is whether or not appellant has proved damage which is not too remote in law.

Some confusion appears to have arisen through the way in which the case for appellant was conducted in the court below. Counsel for appellant did not appear in the lower court. The statement of claim made it clear that appellant did not have a concluded contract but that a sale was in the stage of negotiation. It was not clear in the statement of claim whether the cause of action was in contract or in tort and some reference was made to this in the judgment. Moreover, on at least two occasions, counsel was noted as saying appellant's claim was for the loss of a sale. This was referred to by the learned judge and seemed to be one factor which played a part in the resultant dismissal of the claim. Indeed a ground of appeal was based on a claim that the learned judge erred in not holding that an enforceable contract of sale had been proved. The issues have now become clear. The basis of appellant's claim is now accepted as being for breach of the contractual provisions of the said mortgage in that steps were taken to exercise the power of sale when such power was not legally exercisable. The learned judge held that the breach had been proved. This finding has not been challenged. The sole question is what damage, if any, has appellant proved to be recoverable as a result of such breach.

The price at which the appellant and its prospective purchaser were negotiating was $125,000. Appellant had purchased the property for $75,000 so the claim was for the difference. It is not now contended by counsel for appellant that it can recover that amount in full. It was conceded by counsel for appellant, and properly conceded in my view, that the sale depended upon a chance or contingency that, if the advertisement had not appeared, the sale would have eventuated. I shall deal with the facts before adverting to the relevant principles of law.

The prospective purchaser was an Australian limited liability company called Rampac Proprietary Limited which I shall call "Rampac". It was represented through-out by a Mr Steele who was formerly in practice in Sydney as a solicitor but had not renewed his practising certificate seemingly to devote himself to commercial pursuits. He was a nominee shareholder and director of Rampac. There was one other director who acted in consultation with Mr Steele. Mr Steele was familiar with the land. Negotiations were conducted with Mr Vijay Kumar on behalf of appellant. Mr Steele wrote to appellant on January 6, 1975 confirming that he had Rampac as a definite purchaser for the property. The price offered was $125,000 Fijian currency on a deposit of 10% upon exchange of contracts. The balance was to be paid in cash upon completion within 30 days. The letter then contained the following paragraphs, namely:

"Upon completion vacant possession is to he handed to the purchaser and the property is to be free from all encumbrances but subject to any easements.
I would rely upon you to organise on my client's behalf all necessary applications to the Department of Lands, Central Monetary Authority and any other governmental or other authorities for consent to the transaction. The contract would be subject to such consents being obtained.
I am unable to come to Fiji before the end of February, and if the property can be held open for my client until that time, I would prefer to exchange contracts whilst in Fiji after I have had the opportunity of conducting my own searches.
Meanwhile kindly ensure that contracts and all necessary applications are ready for me on my arrival. One of the directors of my clients company will be with me in Fiji so all business can he transacted on the spot. I shall need an application form from the Central Monetary Authority to enable me to have the deposit transmitted to Fiji."