| Fiji Islands - Mitchell Ltd v Young - Pacific Law Materials |
IN THE FIJI COURT OF APPEAL
CIVIL JURISDICTION
CIVIL APPEAL NO.ABU0032/94S
(High Court Civil Action No. 309 of 1990)
BETWEEN:
MITCHELL LIMITED
APPELLANT
v
ROBERT YOUNG AND ALFRED YOUNG
RESPONDENTS
Mr V. Mishra and Mr S. K. Ram for the Appellant
Mr A. Patel for the Respondents
Date and Place of Hearing : 22 August, 1995, Suva
Date of Delivery of Judgment : 25 August, 1995
JUDGMENT OF THE COURT
This is an appeal against the Judgment given in the High Court by Sadal J. on 8th July 1994 when the action brought by the Appellant
was dismissed with costs awarded in favour of the Respondents.
The Appellant in these proceedings entered into a "tenancy agreement" with the Respondents to rent commercial premises at
Lautoka which comprised a factory and office together with residential flats. The rental for the first three months of the proposed
six year tenancy, totalling - $13,200, was paid by the Appellant in advance. The tenancy was to commence on 1st December 1990.
The urgency accorded this arrangement can best be gauged by the following chronology:-
1. 15th November 1990 - tenancy agreement signed.
2. 21st November 1990 - Respondents faxed the Appellant advising that existing tenants had not vacated but that their re-location
premises would be available by 29th November 1990.
3. 27th November 1990 - Messrs Young and Associates Solicitors for the Appellant applied to the Housing Authority requesting formal
consent as required by the agreement.
4. 1st December 1990 - Vacant possession was not available.
5. 11th December 1990 - Appellant gave notice to the Respondents of rescission of the agreement.
6. 19th December 1990 - Appellant filed a writ in the High Court. The claim was ultimately quantified at $385,060.80 plus interest
at 12% for two years.
There was therefore, less than 5 weeks between the parties signing the "tenancy agreement" and the Appellant filing proceedings
in the High Court - a degree of alacrity, it may be said, that is not usually associated with modern day litigation?
THE NOTICE OF RESCISSION
On 11th December 1990 the solicitors acting for the Appellant gave notice rescinding the tenancy agreement relying on -
"1. Failure to provide vacant possession;
2. Failure to obtain the consent of the Housing Authority."
That notice required the return of the $13,200.00 rental that had already been paid in advance. It is acknowledged that the Respondents
refunded that sum. The Respondents also acknowledge they and the Appellant were not able to conclude the re-location arrangements
with the existing tenants and so there is no dispute that vacant possession was not available on 1st December 1990.
In addition, the notice of rescission purported to "reserve the right to take legal action for recovery of damages incurred by
our client as a result of your breaches."
In the result these present proceedings followed:
The Appellant sought a Declaration that it was justified in rescinding the tenancy agreement with the consequential entitlement to
claim damages under several headings.
There are 7 grounds set out in the Notice of Appeal - 3 grounds related specifically to the necessity or otherwise of obtaining the
consent of the Housing Authority; 3 grounds refer to the evidence of witnesses called by the parties; and the remaining ground refers
to the relevance of non payment of stamp duty on the agreement.
Basically the Appeal is a contention that the trial Judge erred in not holding the Respondents liable for damages for alleged breaches
of contract.
Mr Mishra presented both comprehensive written and eloquent oral submissions in support of the Appellant's appeal. These in the main
referred to the findings of the learned trial Judge relative to Clause 8 of the tenancy agreement viz.
"8. This agreement is subject to the consent of the Housing Authority as Head Lessor."
Mr Mishra's contention was that the Housing Authority consent was not in fact a condition precedent; that in any case such a consent
was the responsibility of the Respondents; that the Respondents were estopped from relying on Clause 8 of the agreement; and that
the learned judge had erred in not taking into account the totality of the evidence in arriving at his determination of findings
of fact upon which he based his judgment.
Although the grounds of the appeal challenge the totality of the evidence presented by the witnesses in the High Court, Mr Mishra
submitted that this Court could not consider that evidence but instead must rely on the executed tenancy agreement. He put it this
way. The tenancy agreement was executed and the first 3 months rent paid by the Appellant to the Respondents. This Court as a matter
of law, he said, is required to interpret the signed agreement and cannot go to the evidence of the witnesses to interpret it. For
that preposition he relied on O'Connor v. Hume (1954) 2 A.E.R. 301 at page 306 and the statement of Romer L.J. when he said -
"I am satisfied that the Court has no right to resort to correspondence and oral evidence for the purpose of striking out, for
that is what it amounts to, an important provision which the parties agreed on and expressed in the agreement."
But that case bears no relationship to the circumstances of the present appeal. In the O'Connor case the tenant had been in possession
pursuant to a tenancy agreement for more than a year as the head note disclosed-
"there being nothing illegal in an agreement between landlord and tenant that premises should be let at a reduced rent so as
to avoid the application of the Rent Acts, extrinsic evidence was not admissible to contradict the terms of the written agreement
by showing that the real agreement between the parties was for a tenancy of only one year and that, after the end of that year, the
tenant remained in occupation as a statutory tenant."
Mr Mishra also relied on the Privy Council case of Aberfoyle Plantations v Cheng (1959) 3 A.E.R. 910 which dealt with the interpretation of an agreement which included a condition precedent requiring the vendor to secure the renewal
of the Leases involved in the transaction. When these renewals were not completed within the time provided, the purchaser claimed
to recover the substantial deposits paid because of the non performance of the renewal arrangements. The Privy Council agreed that
the purchaser was entitled to a full refund of the deposits paid.
Those findings apply in the present case. The Appellant was entitled to rescind the agreement if vacant possession was not available
and the consent of the Housing Authority was not forthcoming. As Mr Mitchell a Director of the Appellant Company said under cross-examination,
"There is no consent - no agreement."
Put another way if those two obligations are conditions precedent to the efficacy of the agreement then it is correct that the Appellant
was entitled to rescind the agreement and demand the return of his 3 months rent in advance.
But does the Appellants entitlement to rescind the agreement by itself provide a foundation for a claim for general and special damages?
That issue requires further consideration..
FAILURE TO PROVIDE VACANT POSSESSION
The catalyst for these present proceedings was the notice of rescission dated 11th December 1990. The first breach relied upon is
stated as follows:-
"That you have breached the said tenancy agreement by having earlier entered into a similar agreement with Garments Workshops
Limited who are already in occupation of the premises thus disabling our client from occupying the said premises and enjoying the
fruits of the said tenancy agreement rental for the first three (3) months of which commencing on the 1st of December 1990 you have
already received and acknowledged."
It will be seen that the breach alleged was that the Respondents had: "...earlier entered into a similar agreement with Garments
Workshops Limited who are already in occupation of the premises..." That statement from the formal notice, implies that the
Appellant was not aware of those prior arrangements that had been made with Garments Workshops Limited.
However, the evidence of Mr Mitchell representing the Appellant suggests otherwise. His evidence on this point is as follows:
"When I came to Fiji I was in desperate situation. I was looking for building. Garment Workers were in defendants premises. I
did not know if they were to get out before 1/12/90. Solicitor said he would move them out."
"Work was done while Garment Workers were still occupying the defendants premises."
The Appellant's Solicitor Mr Chen Bunn Young also acknowledged in evidence that both he and Mr Mitchell knew the premises were occupied
by Garments Workshops; and that Mr Robert Young one of the Respondents had disclosed the existence of the tenants in the course of
the preliminary negotiations. Accordingly Mr Robert Young and Mr Mitchell and Mr Chen Bunn Young the Solicitor were all aware that
the premises were tenanted by Garments Workshops Limited.
The next question which immediately arises is that with both parties having knowledge of the existing tenancy position of Garments
Workshops, who of the parties accepted responsibility to obtain vacant possession of the premises by 1st December 1990? There is
no doubt that the Appellant was anxious to secure possession so as to install its machinery and commence operations. In fact it started
preparatory work on the premises prior to 1st December 1990 and work was still being done there on 3rd December 1990.
However, this work was carried out by the Appellant "at its discretion" as provided for by Clause 5 (g) of the tenancy agreement.
In other words with full knowledge of the existence of the tenants who were still occupying the premises, the Appellant elected to
undertake, prior to 1st December 1990, certain alterations and installations.
It appears from the evidence that the Respondents were just as anxious as the Appellant to obtain vacant possession on 1st December
1990, because the rental they would then receive would be almost double that being received from Garments Workshops - a very strong
incentive.
While this evidence establishes that both the Appellant and the Respondents were most anxious to obtain vacant possession of the premises
on 1st December 1990 the question of who accepted responsibility to secure vacant possession still remains unanswered.
It is clear that the Respondents took steps to obtain alternative premises for Garments Workshops in Hanif's building. Mr Mitchell
was told that those alternative premises would be available on 29th November 1990 so that Garments Workshops could shift. According
to the evidence of Mr Robert Young, one of the Respondents, Mr Mitchell knew of these up dated proposals. These arrangements by the
Respondents appear to be the extent of their efforts to provide alternative premises for Garments Workshops and so secure vacant
possession for the Appellant.
The steps taken by the Appellant are not so clear - in fact there is no evidence of what action, if any, was taken to remove the tenants.
However, one may ask with justification how the Appellant could take action against the Respondents tenants. The answer to this question
would solve the original question posed viz. who accepted responsibility to obtain vacant possession?
Mr Mitchell a Director of the Appellant Company expressed his understanding of his Company's responsibility - in so far as Garments
Workshops were concerned when he said:-
"Garment Workers were in Defendants premises. I did not know if they were to get out before 1.12.90 . Solicitor said he would
move them out."
While Mr Mitchells' understanding was that his Solicitor said he would move them out, there is no evidence of what action if any Messrs
Young and Associates took to try to achieve that result.
Mr Robert Young one of the Respondents gave his understanding of his responsibility towards Garments Workshops in the following extracts
of his evidence:-
"Agreement was subject to tenant moving out and consent of Housing Authority. I had no other Solicitor acting for me. I was relying
on Young's advice." (In this context, "Young" was the solicitor for the Appellant).
In summary, the evidence of both Mr Mitchell and Mr Robert Young indicates that they were both relying on Mr Young the Appellant's
Solicitor to take the steps necessary to remove Garments Workshops and secure vacant possession by 1st December 1990. But Mr Young
the Solicitor, claims to have acted for the Appellant only and denies acting for both parties contrary to what both Mr Mitchell and
Mr Robert Young believed to be the position. In this context Mr Young stated that while it was the landlord's responsibility i.e.
the Respondents, in a normal situation to get the consent of the Housing Authority nevertheless the Appellant undertook to obtain
that consent. Perhaps the answer to this conflicting understanding of the respective responsibilities is due to Mr Robert Young's
acknowledgement that there was no other firm acting for the Respondents. That is, Mr Chen Bunn Young was the only Solicitor involved
in the period between signing the agreement on 15th November 1990 and the date when the tenancy was due to commence on 1st December
1990. He was paid for his services through out by the Appellant. He witnessed the execution of the tenancy agreement by both the
Appellant and the Respondents; he arranged for Mr Robert Young to sign a formal application for the Housing Authority consent on
15th November 1990 at the same time as the tenancy agreement was signed; he forwarded the application for Housing Authority consent
on 27th November 1990; and (according to the Housing Authority) he apparently forwarded to them a further application on 29th December
1990. That legal work was undertaken by Mr Young in the knowledge that it was customarily the Respondents' responsibility to obtain
the consent of the Housing Authority. He confirmed that in evidence. He was certainly acting for the Respondents on that aspect of
the transaction. However, Mr Young not only took responsibility to obtain Housing Authority consent for the Respondents, because
according to Mr Mitchell's evidence, Mr Young "said he would move them out" - that is the tenants Garments Workers.
The learned trial Judge based his decision only on the failure to obtain the consent of the Housing Authority. He put it this way-
"I find as fact that the responsibility of obtaining the consent from the Housing Authority was undertaken by the firm of Young
and Associates and not by the defendants."
He made no findings as to whose responsibility it was to obtain vacant possession. Clearly, in so far as Mr Mitchell was concerned
his Solicitor was to move the tenants out because he acknowledged in evidence that he "did not know if they were to get out
before 1/12/90."
We are mindful that normally it is the responsibility of Sub-Lessors (in this case the Respondents) to obtain the consent of the Housing
Authority - again we are aware that the application for consent form to that Authority also requires the signature of the sub-tenant
(in this instance the Appellant). However the evidence establishes in our view that responsibility was undertaken by the firm of
Young and Associates not only to obtain the consent of the Housing Authority but also to secure vacant possession in accordance with
the directions of its client the Appellant. Having made that finding it must be said however that the two weeks between signing the
tenancy agreement and 1st December 1990 was a very short period for the Solicitors to have complied with the two conditions precedent
to the operation of the tenancy agreement - unless "other" arrangements, not the normal work of a Solicitor, were involved
and of this there was no evidence.
The only agreement which can form the basis for this claim, must be the oral discussions had between the Appellant its Solicitor and
the Respondents whereby all were agreed to enter into a binding formal written tenancy agreement - A formal document was in fact
drawn up by the Appellants Solicitor and was signed by the parties. All parties were further agreed that the consent of the Housing
Authority was a prerequisite before the formal Tenancy Agreement should have any force and effect. Further, there being a tenant
from the Respondents in occupation of the property in question, it was prerequisite for the Agreement to commence that the property
be vacated on or before 30th November 1990 for occupation by the Appellant on 1st December 1990.
In the events that occurred, no consent was obtained as aforesaid nor was vacant possession achieved as required. The Appellant by
notice from his Solicitors to the Respondents' dated 11th December 1990 gave notice of the rescission of the agreement, partly oral
and partly written, alleging failure by the Respondents (pursuant to all the terms of the agreement), to obtain the necessary consent
and the necessary vacating of the premises.
The Appellant can only succeed if it can show that the Respondents breached obligations which it assumed to be its responsibility,
or which may be inferred in the ordinary course from such agreements, to do all things possible and necessary on its behalf, to obtain
such consent and such vacating.
On the evidence both oral and written, we are of the opinion that the Appellant could not rely on the consequences that resulted from
its Solicitors failure to obtain vacant possession and Housing Authority consent. For those reasons the breaches set out in the notice
of rescission cannot justify the damages claimed against the Respondents.
The order of the Court therefore is that the appeal is dismissed. However as to costs there are certain features in this case that
compel us to the view that each party should bear its own costs of the appeal. We order accordingly.
Sir Moti Tikaram
President, Court of Appeal
Sir Edward Williams
Judge of Appeal
Mr Justice J D Dillon
Judge of Appeal
Abu0032u.94s
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