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Reserve Bank of Fiji v Gallagher [2005] FJCA 86; ABU0030.2005 (17 August 2005)

IN THE COURT OF APPEAL, FIJI ISLANDS
ON APPEAL FROM THE HIGH COURT OF FIJI

CIVIL APPEAL NO. ABU0030/2005
CIVIL APPEAL NO.ABU0031/2005
CIVIL APPEAL NO.ABU0032.2005
(High Court Civil Case No. HBC163/2004L & HBC136/2003L)

ABU0030/05
BETWEEN:

RESERVE BANK OF FIJI
Appellant

AND:

1. TREVOR ROBERT GALLAGHER
2. ALAN CHARLES NEWHAM
Respondents

ABU0031/05
BETWEEN:

ALAN CHARLES NEWHAM
Appellant

AND:

1. TREVOR ROBERT GALLAGHER
2. ALAN CHARLES NEWHAM
Respondents

&

ABU0032/05
BETWEEN:

ALAN CHARLES NEWHAM
Appellant

AND:

NADI CONTRACTORS LIMITED
Respondent

Hearing in Chambers: Wednesday, 3 August 2005
Counsel: V. Mishra for applicants, Newham and Reserve Bank
K.Kumar for respondent, Gallagher
Ruling: Wednesday, 17 August 2005

RULING

The applications and appeals in 30/05 and 31/05 have been consolidated and are related to appeal 32/05. The applicants seek to appeal decisions by Connor J made on 13 May 2005 in two High Court actions; HBC 163/04 relating to the consolidated appeals and HBC 136/03 relating to appeal 32/05.

Appeals 30/05 and 31/05 arise from an application by both the present applicants, Newham and the Reserve Bank, to strike out a claim filed by the present respondent, Gallagher (163/04). The judge dismissed the both summons with costs. H also ordered that Newham “is restrained from” acting on a certificate of validation issued by the Reserve Bank and the Reserve Bank equally “is restrained from” confirming to upholding the same certificate pending the hearing of the action.

Appeal 32/05 arises from a notice of motion by Newham seeking a mandatory injunction to compel the defendant, Nadi Contractors, to transfer shares into his name and other related orders (136/03). The learned Judge related the case to 163/04, dismissed the motion and ordered Newham to pay $750.00 costs. Notice of appeal has been filed in that action.

The present applicants then applied to the High Court for leave to appeal the ruling in 163/04. The two orders restraining action on the certificate of validation were treated by the judge as being in the nature of an injunction and therefore, by section 12(2) (f) of the Court of Appeal Act, did not need leave. However, in his ruling on 27 June 2005, the judge refused leave on the other, interlocutory, grounds, pointing out:

“The proceedings being appealed are the courts refusal to strike out the plaintiff’s action ... The court’s discretion has been exercised to preserve the action for trial. The action has not therefore been put to an end.”

In his ruling the judge had reviewed a number of cases in support of the frequently repeated reluctance of an appellate court to grant leave to appeal interlocutory decisions.

The background to these cases can be taken from the learned judge’s decision in 136/05. He referred to the ruling he had just given in action 163/05 and continued:

“There are further proceeding between the parties being action HBC 0164 of 1999 wherein the plaintiff was Newham, the first defendant Gallagher and the second defendant Nadi Contractors.”

The issue before the court in those proceedings were for all relevant purposes the same as the issues now before the court that is the entitlement of [Newham] to be registered a shareholder and director of [Nadi Contractors].

On 5 May 2000, Madraiwiwi J delivered judgment in which he declared that the deed of trust dated 2 June 1990 [by Gallagher agreeing to assign 10,000 shares in Nadi contractors to Newham] was a valid and legal document and he granted an injunction to maintain the assets of Nadi Contractors until determination of the action. His Lordship refused to grant the relief sought as Newham was no shareholder of Nadi Contractors.

The judgment ... was appealed to the Court of Appeal ... [which] affirmed the declaration that the deed of trust was valid and legal but revoked the injunction.

The decision was appealed to the Supreme Court which ... set aside the declaration made by the Court of Appeal ... and declared the deed of trust ... required the permission of the Minister but was capable of validation under section 20(2) of the Exchange Control Act. All other orders of the Court of Appeal were to stand that is the renovation of the injunction continued.”

He then sets out the orders sought by Gallagher in action 163/04:

“1. That the trust deed is invalid ... because of an incompletely constituted trust;

2. That the deed ... being an incompletely constituted trust is not a settlement under section 31 of the Exchange Control Act;
   
3. That the deed of trust ... not being a settlement under section 31 cannot be validated under section 20(2) of the Exchange Control Act;
   
4. That the Reserve Bank cannot validate an incompletely constituted trust under section 20(2);
   

5. That any purported validation is improper and of no effect;

6. Identifying the terms of the deed of trust as agreed by Gallagher and Newham.”
   

Counsel for the applicants suggests that the issues raised in the action against which his clients moved to strike out was in breach of the rule in Henderson v Henderson [1843] EngR 917; [1843-60] AllER Rep 378 as explained in Yat Yung Investment v Dao Hung Bank[1975] UKPC 6; [1975] AC 581 whereby parties to litigation should bring forward the whole case and the court may shut out attempts later to bring by a fresh action matters which could with reasonable diligence have been raised in the initial action. Action 163/05 is therefore he suggests an abuse of process. If that was found to be the case by this Court it would save the cost of a further hearing.

The second limb of his submission is that whilst he accepts the Court’s reluctance to give leave to appeal interlocutory decisions, as the appeal will be proceeding on the injunctive orders in any event, it is sensible and expedient to include the other issues. They are, he suggests, so closely intertwined that, if leave is refused, this Court will be hampered in its consideration of the injunctive orders.

Counsel for the respondent disputes the interrelationship of the two issues. The Court will be able to determine the appeal against the injunctive orders without needing to venture into the other issues raised regarding the alleged breach of the rule in Henderson v Henderson. The determination of those matters will require the Court to determine issues of fact which the Court of Appeal is ill-equipped to do. He accepts that the injunctive orders do not need leave and will be heard in any event.

At the hearing in the Supreme Court, the appellants, Gallagher and Nadi Contractors, sought to raise for the first time the issue of whether “the settlement is incapable of validation under Section 20 [of the Exchange Control Act] because that section cannot apply to allow validation of a trust that was incompletely constituted” (page 6). The Court declined to determine whether the trust was properly constituted principally because it would raise factual matters of which evidence was not before the Court.

However, the Court dealt with some aspects of that issue and concluded:

“The Act is clear. By providing in section 31(3) for subsequent validation under section 20(2), it clearly was intended that the consequence of making a settlement without Ministerial permission would be invalidity, but subject to validation. It is for the Minister or his delegate, the Reserve Bank of Fiji to determine whether to issue a certificate of validation of a settlement ...

After it was made clear that he could not argue that the trust was incompletely constituted, Mr Patel [for the appellants] accepted that the settlement effected by the declaration of trust would be capable of validation by the Minister under section 20(2). The plainly is the position ...

Mr Silvester [for the respondents] informed the Court that the respondent received a certificate of validation just the day before the hearing. Counsel for the appellant had had no time to consider its effect and we heard no submissions on it. However, consistent with this judgment, a proper certificate under section 20(2) would overcome the invalidity we have found.”

The Court set aside the declaration made in the High Court and upheld in the Court of Appeal and substituted the following declaration:

“Declare that the Declaration of Deed of Trust dated 2 June 1990 constituted a settlement within section 31 of the Exchange Control Act, Cap 211 which required the permission of the Minister but which was capable of validation under section 20(2) of that Act.”

As stated by the Supreme Court, the issue was raised for the first time in the Supreme Court. It would appear to have been a matter which could have been raised in the original proceedings. Why, counsel for the applicants asks, should it not be struck out in accordance with the Privy Council decision in Yat Tung Investment’s case?

In dealing with this aspects of the case, Connors J quoted a passage from the Supreme Court decision:

“... we confine our decision to the issue of the validity of that document under the Exchange Control Act which the public interest plainly requires should be dealt with. We are satisfied it is appropriate also to determine the consequential discrete question of law, whether, on its fact, the settlement is capable of validation under section 20.”

The learned judge then concluded:

“It would appear therefore that if the plaintiff in the current proceedings were successful that would not result in a judgment which conflicts with the earlier judgment of the Supreme Court as the validity of the deed by virtue of its being an incompletely constituted trust has not been considered by the court previously. Similarly, the effect of the deed of trust being an incompletely constituted trust on any validation by the [Reserve Bank] is not a matter which has previously been considered by the court in any action between these parties.”

I do not need to go into it further. This is an application for leave to appeal the orders refusing to strike out the action in the High Court. The Court of Appeal will be considering the order restraining the parties from acting on the validation certificate in any event. It seems to me that the Court’s decision on the validity of the restraint on the use of the certificate is likely to involve the same issues as relate to the refusal to strike out.

I accept that a determination of the constitution of the trust and its effect may be a matter for evidence as suggested by Connors J and would, therefore, need to be tried in the High Court. Had that been the only consideration, leave would have been refused. However, a consideration of the restraining orders is likely to lead the Court into a consideration of whether there is conflict with the judgment of the Supreme Court and also whether this was a matter which could and should have been raised in the initial actions.

If the appellants should succeed on those points, it is likely to put an end to the proceedings. As an appeal is already to be considered, I consider it an appropriate case to allow the other matters to be raised at the same time. I bear in mind that their inclusion will not delay the matter any more than the delay already caused by the appeal against the restraining orders.

The application is allowed. I give leave to appeal the interlocutory orders refusing the appellants’ application to strike out the respondent’s claim.

In both these appeals, application was made to fix security for costs in accordance with rule 17 of the Court of Appeal Rules. The Reserve Bank sought an order dispensing with the need to provide security but counsel for the respondent suggested it was premature and should await the result of the application for leave to appeal. The Deputy Registrar adjourned the fixing of security for costs so it could be heard by a single judge of the Court when deciding the application for leave.

The basis of the Reserve Bank’s application is that, under O23 r4 of the High Court Rules, an order to give security for costs may not be made against the State. The Reserve Bank is a statutory body which is effectively an arm of government and so should have the same protection.

I confess to some uncertainty as to the reason for the provision in O23 r4 as it seems the State is unlikely to fall within the categories of plaintiff set out in O23 r1(1). However, the reasoning may be that, if the State is the plaintiff, a successful defendant is assured of his costs. If that is the case, there is some strength in the Reserve Bank’s submission. Equally the Bank submits that it is not involved in the principal dispute between Gallagher and Newham and was effectively a nominal party.

By Rule 6 of the Court of Appeal Rules, the High Court Rules apply, subject to the provisions of the Court of Appeal Rules. A similar provision refers to the procedures in the Court of Appeal in England.

The High Court Rules give the judge a discretion whether to order security for costs. By Rule 17 of the Appeal Court Rules, the security for costs is to be fixed by the Registrar and the rule does not give any indication that it is discretionary. If that is the case, it will override the High Court rule which, of course, requires security for different reasons from those in this Court.

Rule 30 allows the Court to require additional security but that is a power I am not given as a single judge. However, I note that the rule states that the Court’s order is “in relation to any security which the Registrar has though fit to direct or notwithstanding that the Registrar had dispensed with security, as the case may be” (my emphasis).

On that rather flimsy ground I accept that there is a discretion given to the Registrar to dispense with security for costs. Whilst the power to order additional security under rule 30 is restricted to the full Court, section 20(1)(j) of the Act gives me, sitting as a single judge, power to deal with costs and any other matters incidental to matters in any of the preceding paragraphs of subsection (1) which includes the power to give leave to appeal.

I order that the Reserve Bank shall not be required to lodge security for costs. The other appellant Newham shall deposit $1,000 security for costs within 28 days.

GORDON WARD
President
FIJI COURT OF APPEAL

17 AUGUST, 2004
Solicitors:
V. Mishra, Solicitor, Suva, for the applicant.
K. Kumar, Solicitor, Suva, for the respondent.