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High Court of Fiji |
IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION
CIVIL ACTION NO. HBC0291 OF 1997L
BETWEEN:
DAYDREAM CRUISES LIMITED
1st Plaintiff
AND:
BARRY JAMES SHELTRUM
2nd Plaintiff
AND:
PAUL MYERS
1st Defendant
AND:
DAYDREAM ISLAND (FIJI) LIMITED
2nd Defendant
AND:
THE ATTORNEY GENERAL OF FIJI
3rd Defendant
Counsel for the Plaintiffs: Mr. S. Maharaj
Counsel for the 1st & 2nd Defendants: Mr. C.B. Young with Mr. J. Rabuku
Counsel for the 3rd Defendants: Ms. S. Tabaiwalu
Date of Hearing: 29 November 2004, 30 November 2004,
1 December 2004, 2 December 2004,
3 December 2004 & 6 December 2004
Date of Judgment: 17 February 2005
JUDGMENT
The plaintiffs bring this action against the 1st and 2nd defendants claiming damages arising from a failed tourist venture. It is argued inter alia that the 1st and 2nd defendants breached the contract between the plaintiffs and the defendants and that they have been unjustly enriched. As against the 3rd defendant, the plaintiffs claim damages for the unlawful registration of the business name “Daydream Island” and the unlawful registration of the change of name of the company “Endure Investments Limited” to Daydream Island (Fiji) Limited. The plaintiffs also claim against the 3rd defendant for revocation or cancellation of the registration of the names.
Background
The 2nd plaintiff, Barry James Sheltrum [“Sheltrum”], in 1985 purchased the motor vessel “Adi Litia”. The vessel was mortgaged to Westpac Bank.
Daydream Cruises Limited was formed and on the 1st November 1985 commenced operation of day trips to Malamala Island, which the company for trading purposes called “Daydream Island”. The island was owned by Ratu Timoci Vuki as the traditional owner and a memorandum of understanding was entered between Ratu Timoci Vuki and Daydream Cruises Limited to facilitate the use of the island and to enable the construction on the island of an open sided Fijian bure and toilet facilities. The agreement was for a period of 6 years and provided for monthly payments to be made by the 1st defendant to Ratu Timoci Vuki in accordance with the terms of the agreement.
On the 30th September 1991, the agreement between the 1st plaintiff and Ratu Timoci Vuki was by the entry into a further agreement, extended for a period of 12 years. This agreement provided for a payment of $30,000.00 per annum by monthly installments of $2,500.00. The agreement further provided that the annual rent be calculated on a maximum of 9,600 adult paying tourists and that for all additional paying tourists, the company will pay Ratu Timoci Vuki the sum of $3.00 per head. The agreement also provided for a 5% increase in rent and per head bonus annually.
The operation of the business as described by the 2nd plaintiff was that the “Adi Litia” was used to convey passengers from Wailoaloa Beach at Nadi to the island. Entertainment was provided on it and on arrival snorkelling, swimming and coral viewing, through a glass bottom boat, were all provided for the tourists. A barbecue lunch was provided on the island and sporting activities including volleyball were undertaken during the visit. The island was set up with crockery cutlery and the like to cater for 100 tourists at a time.
In about February 1994, the 2nd plaintiff on the behalf of the 1st plaintiff arranged with Paul Myers, the first defendant [“Myers”], for a loan in the sum of $2,500.00. It would appear that these monies were required to facilitate the mortgage payment due at that time to Westpac Banking Corporation. The business had not been trading terribly well and in fact the insurance premiums due during 1993 with respect to the “Adi Litia” had not been paid to Dominion Insurance. The 2nd plaintiff’s wife was in 1993 and 1994 spending much of her time in Suva undertaking a computer course. The business was therefore being operated by the 2nd plaintiff and the staff that the company employed.
On the night of the 26th March 1994, the 2nd plaintiff was attacked by intruders in his house and on the same night the “Adi Litia” was destroyed when it broke it’s mooring and was beached. The night was apparently a very violent night and there was no resident crew member on board the “Adi Litia” at the time.
On the morning of the 27th March 1994, Myers who was the neighbour of Sheltrum advised him that the “Adi Litia” was beached and was not recoverable. Sheltrum was naturally distraught at the time and sought assistance from Myers as to the continuation of the business, Daydream Cruises. He immediately made arrangements for the charter of an alternate vessel to convey clients to the island.
The “Sereki Mai” was charted from Navini Island Resort Limited for the sum of $660.00 including VAT per day, and conducted 3 trips up to the 31st March 1994 and one further trip on the 5th April 1994.
Meetings took place between Sheltrum and Myers in late March 1994 and Sheltrum in his evidence says that Myers offered to look at his business and to help him to facilitate this, he says he made available all his business records to Myers and as a result of this, Myers advised him that the “Adi Litia” was not insured and that he, Sheltrum and Daydream Cruises Limited faced bankruptcy and liquidation respectively. He advised Sheltrum that he guaranteed the loan from Westpac Bank and that was the reason that he personally would face bankruptcy.
Sheltrum gave evidence that Paul Myers suggested on the 30th March 1994 at a meeting attended by the two of them that there be a three way partnership involving Sheltrum, Myers and William Gock [“Gock”] and that the “Whales Tale”, a schooner owned by the Oceanic Schooner Company Limited, a company controlled by Myers and Gock, be used to convey tourists to the island. At this meeting, it was emphasized that there was a need for everything to be in a name other than the 1st or 2nd plaintiffs due to the impending liquidation and bankruptcy of the plaintiffs.
On the 1st April 1994, the “Whales Tale” commenced to operate 2 days per week. Due to prior commitments it was unable to operate on the 5th April 1994 and the “Sereki Mai” was again hired on that day.
In June 1994, Myers and Gock formed the company Endure Investments Pty Limited. The “Whales Tale”, due to other commitments was unable to continue operating and on the 1st July 1994, arrangements were made with South Sea Cruises for a code share arrangement using the vessel “Ariadne”. The arrangement involved the “Ariadne” dropping the Daydream Island passengers whilst on route to Castaway Island and collecting the passengers on its return journey.
From the 1st July 1994 the 2nd plaintiff, Sheltrum, commenced being paid $1,200.00 per month by Endure Investments Limited and Oceanic Schooner Company Limited. He was employed as the Operations Manager on behalf of the companies. The amount was ultimately to be $2,000.00 per month. It was the view of Myers that no shares or the like could issue in the name of the 2nd plaintiff, Sheltrum due to his impending bankruptcy and it was for that reason that he was in fact employed.
By memorandum dated 17th October 1994 from Paul (Myers) to William (Gock) and Barry (Sheltrum) [Exhibit P-27], it is apparent that it was intended that there be some form of joint venture between the three people, that is, Sheltrum, Myers and Gock. The evidence of Sheltrum is that it was to be an equal partnership between the three of them. Myers in his evidence does not acknowledge this to be so however there is support for the evidence of Sheltrum in the evidence of Myers.
Myers said in his evidence on two occasions that you can’t marry business partners and he said in cross-examination:
“I could not put him and Gock together until I could see how it would work out. I had to see how it would work out before I could give him a one-third interest.”
Whilst there is a paucity of evidence on the point, it is apparent that it in fact did not work out between Gock and Sheltrum and in September 1995 that fact was made known to Sheltrum by Myers and the first of ten draft “Memorandum of Understanding” was produced for the acquisition of the right to use the name Daydream Island and Daydream Cruises by Endure Pty Limited.
Prior to this time and immediately after the destruction of the “Adi Litia”, Myers insisted on all agreements being in the name of Endure Pty Limited. A meeting was arranged by Sheltrum with Ratu Timoci Vuki with the intention of creating a further memorandum of understanding for the use of the island Malamala. This agreement was to be for the benefit of Endure Investments Limited and on the 24th June 1994, an agreement was entered into between Ratu Timoci Vuki and Endure Investments Limited stated to be for a term of 11 years but in effect by virtue of its terms in perpetuity. This agreement was entered into notwithstanding that the existing agreement between Ratu Timoci Vuki and Daydream Cruises Limited had a period of 11 years to run.
The meetings with respect to the negotiation of the 3rd agreement with Ratu Timoci Vuki were organized by the 2nd plaintiff, Sheltrum. This is again confirmed by reference to [Exhibit P-27] where the last sentence reads:
“We owe more to ourselves and the chief whom thru Barry has put his trust in us and next time he or our guests visit the island they should be keen to see a difference if we are the rights teams.”
The agreement was executed on the 24th June 1994 in the presence of the lawyer for Ratu Timoci Vuki, Sakiusa Rabuka in Suva. The meeting to facilitate the execution of the documents was attended by Sheltrum, Gock, Ratu Timoci Vuki and his nephew. After the memorandum of understanding was executed, Gock produced two letters dealing with outstanding monies allegedly owing by Daydream Cruises Limited to Ratu Timoci Vuki. These letters being dated 14th June 1994 and 22nd June 1994 and being [Exhibit P-4]. Clearly the purpose of these letters is to terminate the agreement between Ratu Timoci Vuki and Daydream Cruises Limited. There is conflict as to whether there was in fact any money outstanding. The evidence of Sheltrum is that there was not. This position is perhaps confirmed by the evidence of Myers who in cross-examination said:
“You cannot have 2 agreements...I would not be involved unless the prior agreement was terminated.”
On the 2nd June 1996 without reference to Sheltrum, the name Daydream Island was registered by Endure Pty Limited and on the 28th February 1997 Endure Pty Limited changed its name to Daydream Island (Fiji) Limited. These events occurred notwithstanding that on the 31st May 1985 the 2nd plaintiff had registered the names “Daydream Island Resort”, “Daydream Cruises”, “Daydream Windsurfing” and “Daydream Watersports”.
On the 14th August 1997, a meeting took place between the 2nd plaintiff, Myers and others at which it was made known that the employment of the 2nd plaintiff by Endure Pty Limited was to be terminated at the end of August 1997. The employment in fact terminated on the 20th August 1997 and on the 29th August 1997, these proceedings were commenced and an injunction was granted against the use of the name, Daydream Island.
Between September 1995 and August 1997 six draft agreements were produced, all of which were to enable Endure Investments Limited to use the name Daydream and facilitated the payment of some money to the 2nd plaintiff. The negotiations and agreements 7 to 10 inclusive continued after the proceedings were in fact commenced.
In October 1996 the plaintiffs sought payment from the defendants for the use of the equipment that is the bure, toilets, barbecue facilities, boats and other miscellaneous items utilized by the 2nd defendant in the conduct and operation of Malamala Island.
The Agreement
Whilst the evidence of Sheltrum is categoric, that in March 1994, agreement was reached between he and Myers that there would be a three way partnership which would commence on the 1st July 1994, I think it is most unlikely that there was in fact any meeting of the minds as to the terms of this agreement. The evidence of Myers is that such an agreement might have occurred or perhaps would have occurred in time if Sheltrum and Gock had been able to make it work together and whilst I am of the opinion that Myers led Sheltrum to believe that he had a future in a joint venture of some sort. I find on balance, there was no such agreement as at the 1st July 1994.
The inducement however held out to Sheltrum by Myers enabled Myers to have the agreement with Ratu Timoci Vuki put under his control and away from Sheltrum and also enabled him to have the use of Sheltrum to facilitate the registration of the name Daydream Island and the change of the company name to Daydream Island (Fiji) Limited and thus maximize the benefit to him of the business built up by Sheltrum.
Whilst Sheltrum was ultimately paid the insurance moneys with respect to the “Adi Litia” and he did not go bankrupt and Daydream Cruises Limited did not and has not gone into liquidation. The actions of Myers in ensuring that the agreement with Ratu Timoci Vuki was not in the plaintiffs name and in not issuing shares to the 2nd plaintiff were reasonable at the time.
From the demeanor of the witnesses, it is clear that there is a very great disparity in bargaining power between Sheltrum and Myers and where relevant Gock. Myers gives the appearance whilst giving his evidence of being a very confident successful businessman with business interests in Hawaii. In contrast, Sheltrum whilst giving his evidence gives the appearance of a very sincere genuine somewhat naïve individual pursuing a dream.
Throughout the relevant period the evidence is that Myers was attempting to obtain access to various other islands in the Mamanuca Group. The only relevance of this evidence is to show a desire on his part to establish a day trip operation whereby he could have the exclusive use of an island. He gained this right and this benefit as a result of his dealings with the plaintiffs.
The color of Myers actions changed when in September 1995, he sought to exclude the 2nd plaintiff on the payment of money and acquire the use of the trading name. The subsequent registration of the trading name and change of name of Endure Pty Limited and the ultimate dismissal of the 2nd plaintiff are actions in complete contrast to the initial Good Samaritan persona. It is these actions that see the 1st defendant obtaining a benefit at the detriment of the plaintiffs.
The Claim Against the 3rd Defendant
The plaintiff in May 1985 registered the business names Daydream Island Resort, Daydream Cruises, Daydream Windsurfing and Daydream Watersports. In addition, on the 19th July 1985 Daydream Cruises Limited was registered.
The defendant on the 2nd February 1996 registered the business name “Daydream Island” and consequent upon that registration changed the name of Endure Investments Limited to Daydream Island (Fiji) Limited on the 28th February 1997.
The plaintiffs by letter dated 14th May 1997 [Exhibit P-6A] drew the attention of the Registrar of Business Names to the above matters and asked that the registration of the name Daydream Island be cancelled. Similarly, by letter dated 15 July 1997 [Exhibit P-6B] to the Registrar of Companies, the plaintiffs sought that the name Daydream Island (Fiji) Limited be changed.
By letter dated 11 August 1997 [Exhibit P-5C] the Registrar of Companies said inter alia:
“I confirm that had the existence of business name BN23340 “Daydream Island Resort” being brought to my attention, it is unlikely that approval would have been granted for company 10416 to change its name.
Unfortunately I do not appear to have any statutory power to rectify the error.”
One of the dominant purposes in having a register of business names and company names is to avoid passing off. It must follow therefore that the 3rd defendant owes a duty of care to the plaintiffs. The registration of the business names and change of name of the company is a breach of that duty of care.
The Limitation Issue
The plaintiff amended its statement of claim on the 5th October 2001 when Gates J. made an order by consent enabling that amendment to occur.
Until such time as the 1st and 2nd defendants registered the business names and changed the name of the 2nd defendant and ultimately dismissed the 2nd plaintiff there was no cause of action. It was only then that it became apparent that the 1st and 2nd defendants were unjustly enriching themselves at the expense of the plaintiffs. These events occurred between the 2nd February 1996 and September 1997. The cause of action against the 1st defendant is therefore not statute barred.
Damages
It is not in dispute that the defendant Daydream Island (Fiji) Limited has since the 1st April 1994 used the facilities constructed on Malamala Island and has used the ancillary equipment including cutlery, plates, boats, entertainment equipment and the like. Whilst many of these items have a limited life and have subsequently being replaced such as the snorkelling equipment, all of the equipment enabled Daydream Island (Fiji) Limited to become operational with respect to Malamala Island. It is not in dispute that the use of the island has continued until the date of trial.
Following the granting of an injunction in 1997, the defendant discontinued the use of the name Daydream Island and subsequently commenced use of the name “The Island of Malamala”. The initial use, from 1994 to 1997, clearly enabled the establishment of the day cruise operation by the defendant. [Exhibit P-28] being the records of the Fiji Islands Visitors Bureau show the island being referred to as Daydream up to at least 1999 when the report states:
The Daydream Cruise appears to have reclaimed its position as first choice for overseas visitors in 1999, accounting for 23% of all cruises taken – up 3 percentage points on the 1998 year.”
A benefit has flowed to Daydream Island (Fiji) Limited as a result of its use of the name Daydream Island and Daydream Island Cruises for at least the period 1994 to 1997 when the plaintiffs obtained the injunction restraining the defendants from using the name.
The plaintiffs plead that the 1st and 2nd defendants have been unjustly enriched.
“It is clear that any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep.” – Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbaur LD [1942] UKHL 4; [1943] A.C. 32 at 61 per Lord Wright.
The remedy for unjust enrichment is restitution which is the reversal of an unjust enrichment of the defendant at the expense of the plaintiff. The measure of the plaintiffs recovery in restitution is the benefit or gain of the defendant and not, as in compensatory damages, the loss suffered by the plaintiff. A restitutionary order once made, compels the defendants to disgorge, and the plaintiff to recoup, benefits which have been unjustly obtained and retained by the defendants to the detriment of the plaintiffs.
In Pavey & Mathews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, the High Court of Australia recognized unjust enrichment as a valid basis of liability in a claim for restitution for quantum meruit.
The three elements of a claim for unjust enrichment are - National Bank of New Zealand Ltd v Waitaki International Processing (NI) Ltd [1997] 1 NZLR 724:
(i) Proof of enrichment by receipt of a benefit;
(ii) Enrichment at the expense of the plaintiff; and
(iii) That retention of the benefit is unjust.
The 1st defendant has received the benefit of the use of the plaintiffs’ name, Malamala island and the infrastructure and facilities erected on it by the plaintiff together with the expertise and services of the 2nd plaintiff to facilitate the establishment of a day cruise business by the 2nd defendant. The business was conducted from 1st July 1994 until 29 August 1997 when the plaintiff injuncted the 2nd defendant from continuing to use the name Daydream Island. However, despite this injunction, it is apparent from the documents tendered from the Fiji Islands Visitors Bureau that the market as late as 1999 still recognized the name Daydream Island and Daydream Cruises as being associated with the Island of Malamala. The right to use that island was clearly a significant enrichment of the 2nd defendant.
The plaintiff was possessed of the exclusive right to use the Island of Malamala by virtue of its agreement with Ratu Timoci Vuki. It expended monies to establish the facilities on the island and had created a name for itself in the tourism market place. The use of the island, the infrastructure and the name to create an immediate business was at the expense of the plaintiffs.
Whilst the use of the name ceased in 1997, the benefit had by that time been obtained by the 2nd defendant. The benefit of the use of the Island of Malamala continues and will continue by virtue of the agreement negotiated via the 2nd plaintiff in perpetuity. I find that the retention of that benefit is unjust.
The defendants in their defence do no more than make a mere denial of the plaintiffs’ claims.
I find that there has therefore been an unjust enrichment of the 2nd defendant at the expense of the plaintiffs.
It is submitted on behalf of the defendants that the special damages claimed by the plaintiffs not having been pleaded by way of special damage cannot now be treated as such. For this submission, the defendants rely upon Ilkiw v Samuels & Others [1963] 2 All E.R. 879. This submission would appear to be properly based and accordingly that claim cannot succeed.
The difficulty faced by the court in applying the principles of restitution is to determine an award which appropriately grants rectification for the unjust enrichment that has been received by the defendants. For the unjust enrichment that has been received by the defendants as it is not possible to return to the plaintiffs that which they have lost to the defendants. It is necessary therefore to determine the sum of money which reflects the benefit or gain of the defendants.
Whilst the initial benefit of the enrichment passed to the 2nd defendant, on the evidence before the court, the 1st defendant is a significant shareholder in the 2nd defendant holding almost 50% of the shares. The remaining 50% being held by WG Island Services (Fiji) Limited of which, the 1st defendant owns 49% of the shares. The evidence of the shareholdings of the company was given to the court by the 1st defendant. The 1st defendant has been enriched by his shareholdings.
The draft agreements submitted on behalf of Daydream Island (Fiji) Limited immediately prior to the commencement of these proceedings offer on behalf of Daydream Island (Fiji) Pty Limited the sum of $120,000.00 in return for the use of the name Daydream Island Resort and a restriction on the use of those names by Sheltrum. At this time the plaintiffs were prepared to accept $150,000.00.
Whilst it has been submitted on behalf of the plaintiff that damages should be calculated based upon the payments made to Ratu Timoci Vuki pursuant to the agreement with him and payment made for the hire of the equipment in accordance with the demands previously made by Sheltrum, I find these submissions to be lacking in substance. The accounting records of Endure Investments Limited are also an inadequate basis for the computation of damages. Whilst those accounting records show a profit in some years and a loss in others, it is clear that there have been significant payments made to related entities for the charter of boats, management fees, directors fees and the like. It is not possible to rely upon those figures for the determination of damages. Doing the best that I can, I therefore rely on the assessment by the 2nd defendant, Daydream Island (Fiji) Limited, shortly prior to the commencement of these proceedings and that is, the sum of $120,000.00, to that amount must be added interest.
It is submitted that interest should be calculated at the rate of 13.5% per annum. In support of this interest rate the plaintiffs rely upon Dominion Insurance Limited v Sea Island Paper & Stationery Limited Civil Appeal No. ABU0008/97S. It is noted however in the course of that judgment the Court of Appeal said:
“It is clear from this passage that the appropriate rate of interest is determined by ascertaining the rate of interest and inflation at the relevant time. This is a matter of evidence and not a matter of fixing a conventional figure.”
This quotation was made by reference to the Attorney General of Fiji v Paul Praveen Sharma Civil Appeal No. 41 of 1993.
In the light of this, I find little assistance from the authority to which I have been referred. Clearly it is a commercial transaction and a commercial interest rate should be applied however I am not satisfied that the rate of 13.5% is just in the circumstances as there is no evidence before the court to support such a rate. Taking account of the current rate of inflation and the current interest rates applicable, it would seem that an interest rate of not more than 10% may be appropriate. However there is no evidence before the court in this regard. There is nothing in the 1st and 2nd defendants defence denying the claim for interest at the rate claimed.
Presence of Witness in Court
Throughout the proceedings Gock was present in court. He was the last witness on behalf of the defendants to give evidence. It is submitted on behalf of the plaintiffs that he should not have remained in court or alternatively appropriate
weight should be placed on his evidence as he did in fact remain in court. It should be noted that Gock by virtue of the documents tendered to the court is a director and shareholder of the 2nd defendant and it was on this basis that the defendants argued that he in fact had the right to be present in court.
The court has been referred to Moore v Registrar of Lambeth County Court [1969] 1 All E.R. 782. Here, the Court of Appeal confirmed that is a matter for the discretion of the trial judge as to whether or not a witness might remain in court.
In the circumstances, it is my opinion that it was quite appropriate for Gock to remain in court, as he was a director of the 2nd defendant company.
Conclusion
I find that the 1st and 2nd defendants have been unjustly enriched at the expense of the plaintiffs. The difficulty that arises therefrom is the determination of appropriate damages or alternatively restitution.
Doing the best that I can, I see no better basis for determining the quantum of the unjust enrichment that has flowed as a result of the conduct of the defendant than to accept the amount put forward by the defendant in the last draft memorandum of understanding submitted prior to the commencement of these proceedings.
Whilst the 1st and 2nd defendants obtained benefits from the services of the 1st plaintiff and the obtaining of the right to use Malamala Island and the facilities erected on it and a very significant benefit was the right to use the name
“Daydream Island” which enabled a continuity and facilitated the flow of tourists from day one. This continuity was made possible by the conduct of the defendants towards the plaintiff initially and subsequently by the negligent registration of the business name and later company name by the 3rd defendant.
In the circumstances therefore, I think it appropriate to apportion liability as between the 1st and 2nd defendants on one hand and the 3rd defendant on the other. I find the 1st and 2nd defendants jointly liable as to 80% and the 3rd defendant as to 20%.
Costs
The plaintiffs submit that the defendants should pay costs on a solicitor client basis and have submitted that those costs and disbursements totaled $25,452.00.
I do not consider it the function of the court to attempt to assess costs of that nature in the circumstances of a trial such as this. I am however of the opinion that the defendants should meet the plaintiffs’ costs as agreed or failing agreement as taxed as to 80% to the 1st and 2nd defendants and 20% as to the 3rd defendant.
Orders
3. Interest on the judgment from the 20th August 1997 at the rate of 10% per annum.
4. The defendants to pay the plaintiffs’ costs as agreed or taxed.
JOHN CONNORS
JUDGE
At Lautoka
17 February 2005
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