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Turner Resorts International Company Ltd v NBF Asset Management Bank [2003] FJHC 1; Hbc0341j.2002s (11 April 2003)

IN THE HIGH COURT OF FIJI
(AT SUVA)

CIVIL ACTION NO. HBC 341 OF 2002S

Between:

TURNER RESORTS INTERNATIONAL COMPANY LIMITED
Plaintiff

and

NBF ASSET MANAGEMENT BANK
Defendants

I. Fa for the Plaintiff
W. Clarke for the Defendants

JUDGMENT

The Plaintiff seeks summary Judgment under the provisions of RHC O 14.

The following affidavits were filed:

1. Daryl Turner, in support, 26 January 2002;
2. John Grey, in support, 4 October 2002;
3. Ambika Prasad, in opposition, 16 January 2003;
4. Ambika Prasad, in further opposition, 5 February 2003; and
5. John Grey, in reply, 14 March 2003.
   

A helpful written submission was also filed by Mr. Clarke on the day of the hearing.

The facts are substantially undisputed.

On 1 June 2001 the Defendant agreed to sell and the Plaintiff agreed to buy certain assigned property namely debts owed to the Defendant by Offshore Resorts Limited together with associated securities over Native Lease 20436 over Native Land known as Vomo and Vomo Lailai Islands in the province of Ba. A deed embodying the agreement is Exhibit A to the first affidavit.

Under paragraph 1.1 of the agreement the purchase price of the property was F$7,250,000.00. Payment of this sum was to be made by two instalments. The first installment of F$500,000.00 was to be paid (and was paid) by 25 June 2001. The balance was to be paid by 1 August 2001.

Under paragraph 6 of the deed entitled “Conditions Precedent” the deed was specified to be conditional upon:

“a) the receipt by the purchaser of the Fiji Trade and Investment Board and the Reserve Bank of Fiji approvals to complete these transactions;

2. the receipt by the purchaser of a copy of the consent of the Native Land Trust Board to the transfer by the vendor to the purchaser of the mortgages described in Schedule 1 and the purchaser agreeing to an acceptable position with the Native Land Trust Board in respect of the terms contained in Native Lease 20436;

100. the receipt by the purchaser of the permission of the Minister of Finance to the transfer by the vendor to the purchaser of the mortgages and the debentures described in Schedule 1;

4. (not relevant)”.
   

On 27 August 2001 solicitors for the Defendant wrote to the solicitors for the Plaintiff. A copy of the letter is exhibit D to the second affidavit. Part of the letter reads as follows:

“We have ... not been furnished with satisfactory evidence indicating an expeditious pursuit of required statutory approvals regarding our contract.

Please be advised that if settlement does not occur by Wednesday 29 August 2001 our client will treat the contract as being at an end. As agreed your client will forfeit its deposit as compensation for loss of opportunity for the duration of the contract to termination.”

On 29 August solicitors for the Plaintiff replied. Paragraphs 2, 3, 4 and 5 of the letter (Exhibit E to the second affidavit) read as follows:

“2. At this stage ... it is evident from the correspondences identified above that the conditions precedent component of the deed is yet to be completed and/or duly complied. It is clear that upon NLTB granting their approval other approvals would take place in a short time.

3. Please note our client is making every effort to have the NLTB and FTIB approval consent obtained as required under the conditions precedent clause of the deed.
   
4. We must emphasise the fact that our client is genuine towards complying with the deed. More importantly, the vary fact that our client has committed a deposit of $.5million to your client and expended about a further $.5million towards negotiations, consultants and other preliminary relevant requirements is constructive evidence of our clients integrity in sincerity.
   
5. In conclusion, we trust that your client will adhere to the conditions precedent clause of the Deed and therefore await full and proper compliance prior to taking any further or alternative considerations to detriment of our client.”
   

Although it is not absolutely clear what happened next, on 12 September 2001 the Defendant’s solicitors wrote to the Plaintiff’s solicitors (Exhibit AP 2 to the third affidavit). In the fifth paragraph of the letter the author wrote:

“As we have already stated, we have terminated the contract owing to your clients failure to obtain approvals in a reasonable time.”

In the penultimate paragraph of the letter it is stated that:

“Your client is well aware of the negotiations our client has had with the prospective purchaser after your client defaulted and was unable to settle on the revised date (29 August 2001). In light of these actions our client will retain your client’s instalment payment to compensate it for the loss of opportunity and costs it has incurred because of your client’s delay and the litigation you have improperly commenced. There is a very real possibility now that the prospective purchaser will pull out of negotiations with our client and that it will be left without any party to whom to sell the debt and securities. It is going to have to start again.”

According to paragraph 4 of the final affidavit the property was in fact eventually sold by the Defendant for just under $9.5 million, that is $23 million more than the price agreed with the Plaintiffs. It is the retention by the Defendant of the $2 million paid by the Plaintiff on 25 June 2001 which is the subject matter of this action. The “litigation ... improperly commenced” referred to in the letter of 12 September was a successful application by the Plaintiff herein for an interim injunction restraining the Defendant from selling the property to a third party. That injunction (HBC 374/01) apparently lapsed and is of no further relevance.

Mr. Fa’s submissions were straightforward. He first suggested that the whole agreement was subject to conditions precedent and therefore with the failure of those conditions it lapsed. Since the agreement lapsed the $2 million paid under the agreement should be returned to the payer, the Plaintiff.

Mr. Fa’s second argument was that the whole agreement was void by virtue of Section 12 (1) of the Native Land Trust Act (Cap 134) (and see Chalmers v. Pardoe [1963] 3 All ER 552) in that it very clearly amounted to a dealing in native land without the consent of the NLTB “first had and obtained”.

Mr. Fa’s final submission relied on the law of penalties. Since the property was eventually sold for a higher sum than the sum agreed with the Plaintiff the Defendants suffered no loss. Retention by them of the very large sum of $2 million really amounted, Mr. Fa submitted, to no more than unjust enrichment.

Mr. Clarke’s clear and concise submissions are set out in his written submission. Essentially, Mr. Clarke suggested that the Defendant was contractually entitled to retain the deposit and that the Plaintiff was not entitled to equitable relief since it was through its own fault that the conditions precedent were not satisfied.

Unfortunately, as is not infrequently the case in Fiji, the deed was not very well drafted. Clause 6.3 “Failure of Conditions” appears to provide for the return of “the deposit” in the event that a condition precedent is not satisfied. Clause 2, the definition section, does not define “the deposit”. The figure of $2 million is defined to be part of the “purchase price”. Clause 6.5 commits the parties to endeavour to ensure that the conditions precedent are “satisfied within the conditional period”. The term “conditional period” is not defined. Clause 10.8 appears to conflict with clause 6.3 since it appears to envisage “payments” already made being retained by the vendor in the event that the other party fails to comply with the terms and conditions of the agreement. Since Clauses 6.1 (a), (b) and (c) do not seem to impose any duty upon the purchaser to do anything to obtain the consents, approvals and permissions referred to it is difficult to see which conditions it was being envisaged might be breached.

Unfortunately I was not told exactly what statutory consents, approvals and permissions were involved in clause 6.1 of the agreement. While the consent of the Director of Lands was not required (this being native land) and therefore the Hunter v. Apgar [1989] 35 FLR 180 situation (and see also Mohammed Akhtar v. Gonzales ABU 54/98S) did not arise it may well be that the requirements for Reserve Bank and FTIB approval might have had a similar result. But despite these gaps in what I was told I am satisfied that Mr. Fa’s first argument must succeed. In my view this was clearly a dealing in native land and therefore, in the absence of consent “first had and obtained” it was unlawful and null and void.

I am also satisfied that it must follow that the $2 million paid by the Plaintiff to the Defendant must be returned. “When money has been paid ... under an unlawful agreement but there has been no further performance of it the party paying the money ... may repudiate the transaction and recover back his money ...” (Taylor v. Bowers [1876] UKLawRpKQB 29; (1876) 1 QBD 291, 295). I do not think a Defendant can take advantage of his own repudiation to retain what would otherwise be recoverable by a repudiating Plaintiff.

Secondly, as already pointed out, Clause 6.3 of the agreement specifically allowed for the return of “the deposit” following failure of a condition precedent. In paragraph 4.6 of Mr. Clarke’s written submission it was conceded that the $2 million was a deposit. Applying the contra preferentem principle I construe this agreement to allow a deposit to be returned upon failure of clauses 6.1 (a), (b) and (c) whether or not the failure was caused or contributed to by the Plaintiff.

Finally although the law of penalties does not strictly apply to this agreement (see generally Chitty on Contracts 24^th edition paragraph 1602 et seq) it is difficult to see how the Defendant could reasonably advance loss given that the failure of the agreement enabled it to sell the property, albeit the following year, for a substantially higher amount.

On the material before me I am satisfied that there is no Defence to this action and accordingly there will be judgment against the Defendant in the sum of $500,000.00 as sought. I will hear counsel as to the other reliefs set out in the prayer.

M.D. Scott
Judge

11 April 2003.