Federation Internationale de Football Association v SPIE-EGC Ltd [2003] VUSC 20; Civil Case 160 of 2002 (24 April 2003)

IN THE SUPREME COURT OF
THE REPUBLIC OF VANUATU
(Civil Jurisdiction)

CIVIL CASE No. 160 of 2002

BETWEEN:

FEDERATION INTERNATIONALE DE FOOTBALL ASSOCIATION
Plaintiff

AND:

SPIE-EGC LIMITED
Defendant

Coram: Chief Justice Vincent LUNABEK

Counsels: Mr. Mark Hurley for the plaintiff
Mr. Robert Sugden for the defendant

REASONS FOR JUDGMENT

On 16 December 2002, the Court made Orders to the effect that:

The declaration that the contract between the applicant and the respondent dated 5 February 2002 and described as Dossier de Marché is void and of no effect as a result of SPIE-EGC Limited’s failure to obtain an approval certificate as required by the Foreign Investment Act No. 15 of 1998 (as amended), is granted. The costs are also awarded to the applicant and to be taxed or agreed.

Below are the reasons of the Order.

On 18 September 2002, the plaintiff/applicant filed and served an Originating Summons. The Summons seeks for various Orders and Declarations. Both parties agree that the declaration sought in particular 1 of the relief sought in the Summons, will be dealt with as a preliminary question to be determined by the Court.

At paragraph 1 of the applicant’s Originating Summons, the Applicant seeks the following Orders:

“A declaration that the Contract between the applicant and the respondent dated 5 February 2002 and described as Dossier de Marché is void and of no effect as a result of SPIE-EGC Limited’s failure to obtain an approval certificate as required by the Foreign Investment Act No. 15 of 1998, as amended”.

On 19 September 2002, the Court stated:

“Is there a serious question to be tried?

It is apparent from the material before the Court and the arguments and submissions by counsel before the Court during the hearing of the Summons that there is a serious question to be tried or determined in the substantive action, namely whether the defendant company, SPIE-EGC Limited, a Company incorporated in the Marshall Islands and having its registered office at Trust Company Complex, Majuro, Marshall Islands, is subject to section 5(2) of the Foreign Investment Act No. 15 of 1998 and Foreign Investment (Amendment) Act No. 1 of 1999. The answer is: Yes”.

The following questions are to be determined by the Court:

1. Is SPIE a foreign investor for the purpose of the Act?

2. Has SPIE obtained an approval certificate?

3. Did SPIE “invest” in Vanuatu?

(a) Did SPIE execute the Contract dated 5 February 2002?

(b) Did SPIE make part performance of the Contract?

4. SPIE has not obtained a Business Licence, Is there a need for SPIE to hold a Business Licence?
   

The hearing of the preliminary question proceeds on the basis of material affidavits.

The applicant/plaintiff relied upon the following affidavits:

1. Glenn Turner sworn 19 September 2002

2. Robert M. Bohn sworn 2 October 2002

3. Mark J. Hurley sworn 25 October 2002

4. Mark J. Hurley sworn 13 November 2002

5. Glinda Herrominly sworn 25 October 2002

6. Eric-Ernest Bourdet sworn 28 October 2002

7. Eric-Ernest Bourdet sworn 18 November 2002

8. Ben Dick Dali sworn 13 November 2002

9. Files produced by the Vanuatu Foreign Investment Promotion Authority in response to the Applicant’s Subpoena Duces Tecum dated 10 October 2002 and pursuant to the Orders of the Court dated 17 October 2002.
   

The respondent/defendant relied upon the following affidavits:

1. Guy Benard sworn on 19 September 2002

2. Guy Benard sworn on 2 October 2002

3. Guy Benard sworn on 19 November 2002

4. Yoann Borniche sworn on 17 November 2002

5. François Marchand sworn on 19 November 2002.

The provisions of the relevant Acts are set out for ease of reference:

Foreign Investment Act No. 15 of 1998, as amended (“the Act”)

1. The Foreign Investment Act No. 15 of 1997 has been amended by two subsequent Acts of Parliament, namely:
   

(a) Foreign Investment (Amendment) Act No. 1 of 1998;

(b) Foreign Investment (Amendment) Act No. 5 of 2001.

2. In the Amendment Act No. 5 of 2001, the name of the Act was changed to “Vanuatu Foreign Investment Promotion Act No. 15 of 1998. That Amendment Act also included further definitions for the purpose of the Act, including:
   

(a) “Authority” means the Vanuatu Investment Promotion Authority established under section 14A;

(b) “Board” means the Board of the Vanuatu Investment Promotion Authority established under section 15.

3. The relevant provisions of the Act which applied in February 2002 are as follow:
   

Section 1 – Purpose of Act

The purposes of this Act are:

(a) To promote and facilitate investment in Vanuatu by foreign investors; and
(b) To provide an efficient, effective and transparent system for appraising and approving investment proposals by foreign investors; and
(c) To promote investments by foreign investors that will materially benefit Vanuatu and its people by:

• (i) contributing to sustainable economic growth; and
• (ii) creating employment; and
• (iii) utilizing natural resources and, in particular renewable resources; and
• (iv) increasing the volume and value of exports; and

(d) To facilitate and expedite investments through Ministries, Departments and other Government bodies.

[Amendment Act No. 5 of 2001]

Section 2 - Interpretation

1. In this Act, and unless the context otherwise requires:

“approval certificate” means a certificate issued by the Board under section 8.

“business licence” means a licence issued under section 15 of the Business Licence Act No. 19 of 1998. [Amendment Act No. 1 of 1999].

“foreign investor” means:

(a) a person who is not a citizen of Vanuatu; or
(b) a body corporate:

• (i) that is not wholly controlled by persons who are citizens of Vanuatu; or
• (ii) that has any of its shares (voting or otherwise) beneficially owned or controlled by persons who are not citizens of Vanuatu...
  

“invest” and “investment” means to be engaged in an activity for the principal purpose of gain (pecuniary or otherwise) in conjunction with a business licence, but does not include: [Amendment Act No. 1 of 1999].

(a) maintaining a bank account in Vanuatu;

(ab) acquiring land or any other interest in real property (if not in conjunction with an activity for which a business licence is required).

(b) an isolated transaction, not being one of a number of similar transactions repeated from time to time or from which there will be derived a re-occurring or continuing benefits;
(c) taking security for or collecting any debt or enforcing any rights relating to any security;
(d) the gathering of any information or undertaking a feasibility study in contemplation of an investment proposal;
(e) the supply of services by a company incorporated under the International Companies Act 1992 for the exclusive use by and benefit of persons who are not residents of Vanuatu;
(f) entry into a performance of a contract for the supply of goods or services by a supplier who is not a resident of Vanuatu.

“investor” does not include a citizen of Vanuatu or an enterprise wholly owned and controlled by a citizen of Vanuatu.

Section 5 – Foreign Investment without Approval Certificate Prohibited

(1) A foreign investor must not invest in Vanuatu without first obtaining an approval certificate.

(2) Where a foreign investor invests in Vanuatu without an approval certificate or engages in an investment not authorized by an approval certificate then, every contract and every agreement entered into by that foreign investor and relating to that investment will be void and of no effect.

Section 6 – Application for Approval Certificate

(1) A foreign investor proposing to invest in Vanuatu or an enterprise that proposes to become a foreign investor must apply in the prescribed form to the Authority for an approval certificate. [Amendment Act No. 5 of 2001].

I now answer to the questions as asked:

I. Is SPIE a foreign investor for the purpose of the Act?

1. SPIE-EGC Limited (“SPIE”) is a body corporate registered pursuant to the provisions of the Marshall Islands Business Corporations Act; [see exhibits “GT21” and “GT22”, pp36-42 of the affidavit of Glen Turner sworn 19 September 2002].
   
2. SPIE has at all times been wholly controlled by persons who are not citizens of Vanuatu. Additionally, SPIE has at all times had its shares (voting or otherwise) beneficially owned or controlled by persons who are not citizens of Vanuatu.
   
3. The evidence shows that at all times prior to on or about 10 July 2002, SPIE was wholly controlled by Mr. Gilles Daniel and Mr. Gilles Daniel was the sole shareholder of SPIE. The following evidence are in support and accepted by the Court:
   

(a) (GT6” (p.9), “GT7” (p.10, “GT11” (para. 3 on p. 16), “GT16” (p.29) and paragraphs 35, 36 and 39 of Glenn Turner’s affidavit sworn 19 September 2002;

(b) the following attachments to the affidavit of Robert M. Bohn sworn 2 October 2002:

(i) the statements of account of SPIE-EGC Ltd which shows an address of an association with which Mr. Daniel and his wife are associated, namely, Forum Francophone des Affaires, BP 1188, Port-Vila;

(ii) e-mail exchanges between Mr. Daniel on behalf of SPIE and EBL on 8 February 2002;

(iii) e-mail exchanges between Mr. Daniel and Kely Ihrig of 26 February and 28 February 2002;
(iv) e-mail exchanges between Mr. Daniel and Kely Ihrig of EBL of 12 March and 14 March 2002;
(v) handwritten letter from Mr. Daniel to Kely of 21 March 2002;
(vi) EBL bank cheque receipt dated 22 March 2002 received by Lawrance Daniel (Mr. Daniel’s wife);
(vii) Mr. Daniel’s e-mail to EBL of 13 May 2002;
(viii) Mr. Daniel’s e-mail to EBL of 20 May 2002;
(ix) EBL’s cheque receipt dated 21 May 2002 received by Lawrance Daniel (Mr. Daniel’s wife).

(c) attachment 5 to Exhibit “MJH2” in the affidavit of Mark James Hurley sworn 25 October 2002;

(d) paragraph 9 and Mr. Daniel’s signature on “EEB10” in the affidavit of Eric-Ernest Bourdet sworn 28 October 2002.

4. The evidence also shows that at all times since on ore about 10 July 2002, SPIE has been wholly controlled by Mr. Guy Benard and Mr. Benard has been the sole shareholder of SPIE. The following evidence are in support and accepted by the Court:
   

(a) the following references in the affidavit of Glenn Turner sworn on 19 September 2002:

(i) exhibits “GT7” (p.10), “GT8” (p.11), “GT11” (p.16-18), “GT12” (p.19-22), “GT13” (p.23), “GT14” (p.24-25), “GT15” (p.26-28), “GT18” (p.31-33), “GT23” (p.43), “GT27” (p.49-53), “GT28” (p.51-54), “GT37” (p.67-68) and “GT38” (p.69);

(b) attachments 3 and 5 to Exhibit “MJH2” in the affidavit of Mark James Hurley sworn 25 October 2002;

(c) the following references in the affidavit of Robert M. Bohn sworn 2 October 2002:

(i) letter signed by Mr. Benard to EBL dated 17 July 2002;

(ii) EBL’s letter to Westpac dated 17 July 2002;

(iii) letter signed by Mr. Benard to EBL dated 1 August 2002 (and the endorsement thereon);
(iv) EBL’s letter to Westpac dated 1 August 2002;
(v) Mr. Benard’s signed instructions to EBL dated 20 August 2002 to draw a Vatu 6,000 cheque in favour of the Republic of Vanuatu;
(vi) the letter signed by Mr. Benard to EBL dated 2 September 2002;
(vii) EBL’s letter to Westpac dated 2 September 2002;
(viii) letter signed by Mr. Benard to EBL dated 13 September 2002;
(ix) EBL ‘s letter to Westpac dated 18 September 2002;
(x) letter signed by Mr. Benard to EBL dated 18 September 2002;
(xi) the undated letter signed Mr. Benard to EBL directing an Order de Paiement in favour of Mr. Sugden;
(xii) letter signed by Mr. Benard to EBL dated 18 September 2002 re. PITCO’s fees;
(xiii) the undated letter signed by Mr. Benard to EBL in relation to an Ordre de Virement in favour of Mr. Sugden; and
(xiv) letter from Hudson & Sugden to Mr. Guy Benard, Director of SPIE dated 18 September 2002.

5. Neither Mr. Gilles Daniel nor Mr. Guy Benard is a citizen of Vanuatu; [see the affidavit of Glinda Herrominly sworn 25 October 2002].
   
6. The word “control” as referred to in the definition of “foreign investor”, is not defined in the Act.
   
7. However, in other jurisdictions, the Courts have interpreted the word “control” as that word relates to other statutes.
   
8. For example, the Income Tax Act, 1952 (UK). See Halsbury’s Laws of England (3^rd Ed, Vol.20), para. 201, where the learned authors state:
   

“A company carries on trade in the place where the central management and control are found. Control means the actual control of the business operations, and not, for example, shareholding control. Control is thus not necessarily situated in the country in which the company is registered and under whose laws it is organized. The place where control is exercised is largely a question of fact, and where, as is usual, the control of a company’s business is vested in the directors, the place where the directors meet to do business of the company will usually be the place where the central control and management are found”. [See attachment “A” and the cases referred to in the footnotes].

9. There is overwhelming evidence to show that SPIE is a foreign investor within the meaning of the Act.
   

My answer to the question I is in the affirmative. The defendant concedes that SPIE is a foreign investor within the meaning of the Act.

II. Had SPIE obtained an Approval Certificate?

No approval certificate has been obtained by SPIE as required by the Act. This is shown by the following evidence:

(a) Exhibit “GT17” (p.30) to the affidavit of Glenn Turner sworn 19 September 2002;

(b) Exhibits “MJH3” and “MJH4” to the affidavit of Mark James Hurley;

(c) the files produced by the Vanuatu Foreign Investment Promotion Authority in response to the Applicant’s Subpoena Duces Tecum dated 10 October 2002 and pursuant to the Orders of Lunabek CJ in respect of that subpoena dated 17 October 2002.

SPIE has no Approval Certificate as required by the Act. The defendant concedes to this effect.

III. Did SPIE “invest” in Vanuatu?

1. The words “invest” and “investment” are defined in the Act to mean:
   

“to be engaged in an activity for the principal purpose of gain (pecuniary or otherwise) in conjunction with a business licence...”

2. The applicant submits that the following events engaged in by SPIE were activities within the meaning of “invest” and ‘investment”:
   

(a) the execution of the Contract with the Applicant dated 5 February 2002;

(b) the part performance of the terms and conditions of the Contract dated 5 February 2002.

3. From that definition of “invest” and “investment” a number of exceptions apply. The only exceptions which could possibly be relevant to the preliminary issue, are:
   
   • (c) an isolated transaction, not being one of a number of similar transactions repeated from time to time or from which there will be derived a re-occurring or continuing benefits;
     

(d) entry into and performance of a contract for the supply of goods or services by a supplier who is not a resident of Vanuatu.

4. From an objective reading of the terms and conditions of the Contract and based upon the facts and circumstances of this case, the Applicant submits that none of the exceptions in the Act which relate to the meaning of “invest” and “investment”, apply to SPIE.
   

The evidence shows events that SPIE engaged in activities within the meaning of “invest” and “investment”:

(a) the execution of the Contract with the Applicant dated 5 February 2002;

(b) the part performance of the terms and conditions of the contract dated 5 February 2002.

The defendant concedes that it entered the Contract with FIFA, another foreign investor, for the purpose of SPIE building a Football Academy in Vanuatu for a total price of USD$424,827.00 and it hoped to make a profit from the Contract. However, it denies that it was investing in doing so.

The defendant denies that it partly carried out the Contract.

The Court does not accept the submission of the defendant. The evidence accepted by the Court shows the following:

First, in relation to the Execution by SPIE of the Contract dated 5 February 2002:

1. SPIE executed the Contract in Vanuatu (by its agent, Mr. Michel Jacobe) on 5 February 2002; (“the Contract”). The sole purpose of SPIE signing the Contract was to make money – it was an act of commerce by SPIE. It is clear from the face of the Contract that if SPIE fulfilled all of its obligations under the Contract then it would have received the total sum of USD$ 424,827.00; [see article 2: Prix on p.3 of the Contract and annexure “C” to the Contract – Exhibit “GT4” to the affidavit of Glenn Turner sworn 19 September 2002].
   
2. It is obvious from the many references in the Contract that it was SPIE, as l’entrepreneur, which agreed to carry out the following building works. The relevant references in the Contract include the following:
   

(a) See page 1 “Conference”;

(b) the works as set out in “Article 2: contractant” on p. 2;

(c) “Article 6: Affirmation de sincérité on p.4;

(d) p.5 “Concerne”;

(e) Clause 1.1 “Objet du Marché” on p.6;

(f) Clause 1.2 “Domicile de l’entrepreneur” on p.6;

(g) Clause 1.4 “Maitrise de chantier” on pp.6-7;

(h) See also, Clause 9.2 “Réception” on p.17;

(i) Clause 9.5 “Détails de guarantie”, p.18.

3. Whilst the execution of the Contract was on one view, “an isolated transaction” in that it was a unique event, it was a building contract from which SPIE was to derive, re-occurring or continuing benefits. From the schedule of payments which would have been paid by the applicant to SPIE during the course of the Contract if SPIE had fulfilled all of its obligations, SPIE received the advance payment of USD$ 63,090.13 on 25 February 2002 and the first installment of USD$ 59,475.78 on 17 July 2002; [see “Details of transactions on SPIE-EGC Ltd account with European Bank Limited” which is attached to the affidavit of Robert M. Bohn sworn 2 October 2002].
   

4. At paragraph 13 of his affidavit, Mr. Yoann Borniche states:

“By the 5 February, 2002 when the Contract was signed, FFA as representative of SPIE was ready to proceed and had made initial decisions as to who would be subcontracted to do the work and supply the materials”.

5. Thus, the entry into the Contract satisfies the definition of “invest” and “investment”.
   

Under section 5(2) of the Act, the Contract was void and of not effect.

Secondly, in relation to SPIE’s part performance of the Contract:

1. The evidence in support of the part-performance by SPIE of the terms and conditions of the Contract is shown by the following evidence:
   

(a) the minutes of Project Management Group meetings “PMG” as set out as Exhibits “EEB4” to “EEB8” (pp.23-53), “EEB11” (p.56), (p.57-58) and “EEB15” (pp.61-62) to the affidavit of Eric-Ernest Bourdet sworn 28 October 2002.

2. It is clear from the affidavit of Yoann Borniche that SPIE not only intended to invest, [see para.13 of Mr. Borniche’s affidavit], but SPIE did invest in Vanuatu, by its actions which included its payment to subcontractors; [see paragraphs 18, 20 and 33 of Mr. Borniche’s affidavit].
   
3. It was a term and condition of the Contract that the period for completion of the building works was 32 weeks; [see article 3: Délai, p. 3 of the Contract, Exhibit “GT4”].
   
4. It was also a term and condition of the Contract that SPIE would receive periodic payments as set out under Article 2: Prix (p.3) and Annexe C – Works Schedule. The Works Schedule was subsequently revised at PMG meeting No. 4 on 10 April 2002; (see p.42 in the Affidavit of Eric-Ernest Bourdet sworn 28 October 2002).
   
5. Clearly, the building works which SPIE agreed to carry out pursuant to the terms and conditions of the Contract, were an activity for the purpose of deriving re-occurring and continuing benefits by SPIE, namely, the profits expected to be made.
   
6. The consequence of such part performance of the terms and conditions of the Contract by SPIE satisfies the definition of “invest” and “investment”.
   
7. The consequence of this is that under section 5(2) of the Act, the Contract is void and of no effect.
   

The answer to question III is in the affirmative.

4. Is there a need for SPIE to have a Business Licence?
   

The defendant concedes it has no Business Licence. It denies it needed one.

1. In the preamble to the Business Licence Act No. 19 of 1998 it is stated:
   

“To provide for the licensing of business and for matter connected therewith”.

2. Under the Business Licence Act “business” and “person” are respectively defined in section 1 as:
   

“business” means any lawful form of trade, commerce, profession, craftsmanship, calling or other activity carried on for the purpose of gain, provided that a person shall not be deemed to carry on a business in respect of which his sole gain is by way of salary or wages.

“person” includes any company or association or body of persons corporate or unincorporated.

3. The requirement to hold a business licence is provided for in section 2 of the Business Licence Act. Section 2 provides as follows:
   

“(1) Subject to the exemptions contained in Schedule 2 no person shall carry on a business without a licence issued under this Act.

(2) Any person (other than a person exempted under Schedule 2) who carries on a business without a licence shall be guilty of an offence.

Penalty: fine not exceeding VT500,000 or imprisonment not exceeding one year or both”.

4. Building contractors are not exempted from holding licences under Schedule 2 of the Act. However, relevant to building works, it should be noted that for the purposes of Schedule 2 of the Act, the following occupations are reserved occupations declared under section 9 of the Labour (Work Permits) Act as reserved for citizens:
   

Bricklayer

Earth moving and related machinery operator

Joiner

Mason

Painter

5. On any objective view, when one has regard to the terms and conditions of the Contract, SPIE’s agreement with FIFA under the terms and conditions of the Contract is covered by the definition of “business” as defined in the First Schedule Act.
   
6. By Section 18 of the Business Licence Act the fees payable for a Business Licence are prescribed in the first Schedule to the Act.
   
7. Under Schedule 1 of the Business Licence Act a Class C business licence deals with the category of “Construction Industries and Trade”.
   

8. In the “remarks” columns for Class C business licence it is stated:

“Generally class C:

1. Covers importing of materials and supplies required business.
   
9. In paragraph 12 of Eric-Ernest Bourdet’s affidavit sworn 28 October 2002, it is deposed, in part:
   

“By late May 2002, I was aware that part of the proposed roofing structure, steel bars and ceramic tiles had been imported to Vanuatu”.

10. During the Project Management Group (PMG) No. 4 meeting of 10 April 2002 (Exhibit “EEB6” to Mr. Bourdet’s affidavit) on p.38 under the sub-heading “(c) on site progress to date-construction diary (prepared by SPIE)” it is stated as follows:
    

“The PM [Mr. Bourdet, the Project Manager], commented that all the project materials are ordered from supplies including materials to be imported from Europe. The Development Officer requested the list of all imported materials and the source be included in the SPIE project report to be table at the PMG No.5 meeting”.

11. At the PMG meeting No.5 of 10 May 2002 (Exhibit “EEB7” to Mr. Bourdet’s affidavit) at p.45 under the sub-heading “6. Import Duties Exemption and Tax Concession (VAT) it is stated:
    

“The meeting agreed that the Project master and SPIE would prepare the list of all the materials and calculating their values and presenting the list at the next PMG meeting”.

12. At the PMG meeting No. 6 on 7 June 2002 (Exhibit “EEB8” to Mr. Bourdet’s affidavit) at p.50 in the second paragraph, it is stated:
    

“Imported materials for the buildings foundations had now arrived from Belgium and delivered to the site. Works to fabricate the steel reinforcing for the building foundations had now commenced”.

13. It should also be stressed that by the time of PMG meeting No. 6 of 7 June 2002, Mr. Bourdet had already authorized the first progress payment to SPIE of USD$59,475.78 to SPIE’s account; [see para. 12 of Mr. Bourdet’s affidavit].
    
14. It is inconceivable and contrary to the terms and conditions of the Contract for SPIE to attempt to argue that it did not require a Class C business licence.
    

The answer to question IV is in the affirmative.

On the facts before the Court, the Civil Appeal Case No. 10 of 2002 must be distinguished and has no bearing on this case.

These are the reasons of the Orders made on 16 December 2002.

Dated at Port-Vila this 24^th day of April 2003

BY THE COURT

Vincent LUNABEK

Chief Justice