IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC0163 OF 2004L

BETWEEN:

TREVOR ROBERT GALLAGHER
Plaintiff

AND:

ALLAN CHARLES NEWHAM
1st Defendant

AND:

RESERVE BANK OF FIJI
2nd Defendant

Counsel for the Plaintiff: Mr. B.C. Patel
Counsel for the 1st Defendant: Mr. B. Singh
Counsel for the 2nd Defendant: Mr. M.J. Scott

Date of Hearing: 12 April 2005
Date of Ruling: 13 May 2005

RULING

The 1st and 2nd defendants have both applied pursuant to Order 18 Rule 18(1) to strike out the plaintiff’s statement of claim. The grounds for both applications rely upon Rule 18(1) (a) – (d).

Background

By Originating Summons filed on the 14th May 1999 in the High Court, Lautoka and numbered 164 of 1999, the defendant sought declarations and orders. Madraiwiwi J. gave judgment on the 5th May 2000. In that judgment, His Lordship recited the facts as being:

“The plaintiff seeks to enforce the Deed of Trust dated 2 June 1990. Be provided that the defendant was to hold $10,000.00 ordinary shares of $1.00 fully paid in the 2nd defendant on trust for the plaintiff. They were purchased from monies provided by him. This issue is not disputed by the parties. The 1st defendant for his part alleges that the Deed of Trust was drawn up with the understanding that there would be a like recognition of his interest in Nuffield Engineering Proprietary Limited. This is an existing company in which the plaintiff and/or his family trust are shareholders. This contention is denied by the letter which states that the 1st defendant is only entitled to half the net profits of that company.”

His Lordship subsequently found the deed of trust dated the 2nd June 1990, was a valid and legal document and made a declaration accordingly. The court at that time also directed the plaintiff to seek authorization of the original transfer of shares pursuant to section 20(2) of the Exchange Control Act (Cap. 211). The proceedings then went on appeal to the Fiji Court of Appeal and were numbered ABU 0030 of 2005. On the 15th November 2002, the Fiji Court of Appeal gave judgment and affirmed the declaration that the Deed of Trust of the 2nd June 1990 was valid and legal.

The proceedings were then appealed to the Supreme Court of Fiji Islands and were numbered CBV 0003 of 2003. The Supreme Court gave judgment on Friday, 21 May 2004 and said:

“At the centre of the case is the issue of the validity of a deed of trust executed by the first appellant Mr. Gallagher by which he purported to declare a trust in favour of the respondent Mr. Newham in respect of 10,000 shares in the second appellant company Nadi Contractors Limited (the company).”

The court declared that the deed of trust dated the 2nd 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. The court said at paragraph 22 of the judgment:

“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.”

And further at paragraph 24 said:

“For the reasons given, now that section 31 has been invoked, the declaration made in the High Court and upheld in the Court of Appeal cannot stand and is set aside. The declaration of trust and the deed dated 2 June 1990 constituted a settlement within section 31 which required the permission of the Minister. Without that, the settlement was invalid but capable of validation under section 20 (2) and we allow the appeal and substitute a declaration to that effect.”

At the outset of the hearing before the Supreme Court, the appellant, that is the plaintiff in the current proceedings, sought to raise new points not previously raised. The Supreme Court said at paragraph 13 of its judgment:

“The parties sought to present to this Court a quite different case from that determined below. There are difficulties with new points being raised on appeal, particularly on a second appeal. These include matters of fairness to the opposing party in knowing the case to be met, and costs. There is also the important factor that the Court is without the benefit of the views of the lower courts on the new points. Where only questions of law are involved, so long as the parties have the opportunity to present full argument, a new point may be allowed to avoid the costs and delay of further proceedings. But when it is clear that, had the new points been raised at the outset, further evidence might have been led, the new points will not be entertained.”

At paragraph 15 of the judgment, the Court further said:

“In the argument in this Court the appellants wished to contend further, that the settlement is incapable of validation under section 20 because that section cannot apply to allow validation of a trust that was incompletely constituted. This trust, it was said, was incompletely constituted because there was no trust property on the date it was executed. Two points were made. The first, was that at that date the shares were not owned by Mr. Gallagher. The appellants wanted to contend that Mr. Gallagher did not acquire his shares in the company until after the date of the deed. The second point was that the shares were an unallocated portion of a larger parcel of shares and so could not be identified as having been appropriated to the trust – a fact assumed by not addressed in the evidence.”

At paragraph 18 of the judgment, the Court further said:

“In this Court the appellant did not persist with the argument of failure of consideration for the deed of 2 June 1990 and 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 face, the settlement is capable of validation under section 20.”

As is apparent from the above, the court then went on to determine that the settlement was capable of validation.

In the proceedings before this Court, the plaintiff seeks a series of declarations with respect to the validity of the deed of trust dated 2nd July 1990 including a declaration that it is invalid because it is an incompletely constituted trust and declarations that it is a settlement not capable of validation under section 20(2) of the Exchange Control Act being an incompletely constituted trust.

Shortly prior to the hearing before the Supreme Court the validation of the deed of trust dated the 2nd June 1990 by the 2nd defendant pursuant to the Exchange Control Act issued and the plaintiff also seeks a declaration that that validation was improper and of no effect together with the declaration identifying the terms of the deed of trust as agreed by the plaintiff and 1st defendant.

The Issue

The parties place in issue all of the grounds in Order 18 Rule 18 (1) (a) – (d):

(a)	That the plaintiff’s claim discloses no reasonable cause of action against the defendants.

(b)	That the plaintiff’s claim is scandalous, frivolous or vexatious.

(c)	That the plaintiff’s claim is may prejudice, embarrass or delay the fair trial of this action.

(d)	That the plaintiff’s claim is otherwise an abuse of process of this court.

The Law

It would appear that the starting point for a consideration of the issues before the court are the words of Sir James Wigram V-C in Henderson v Henderson [1843-1860] All E.R. or Rep 378 at 381 – 382 where he said:

“In trying this question, I believe I state the rule of the court correctly, when I say, that where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special case, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation and which the parties, exercising reasonable diligence, might have brought forward at the time.”

The Privy Council when considering Henderson v Henderson in Yat Tung Investment Co. Ltd v Dao Heng Bank Ltd & Anr [1975] A.C. 581 (an appeal from the Full Court of the Supreme Court of Hong Kong) said at 590:

“The shutting out of a “subject of litigation” – a power which no court should exercise but after a scrupulous examination of all the circumstances – is limited to cases where reasonable diligence would have caused a matter to be earlier raised; moreover, although negligence, inadvertence or even accident will not suffice to excuse, nevertheless “special circumstances” are reserved in case justice should be found to require the non-application of the rule.”

The House of Lords in Johnson v Gore Wood & Co. [2001] 1 All E.R. 481 held after considering inter alia the above authorities:

“Although the bringing of a claim or the raising of the defence in later proceedings might, without more, amount to an abuse if the court was satisfied that the claim or defence should have been raised in earlier proceedings, it was wrong to hold that a matter should have been raised in such proceedings merely because it could have been. A conclusion to the contrary would involve the adoption of too dogmatic an approach to what should be a broad merits-based judgment which took account of the public and private interests involved and the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party was misusing or abusing the process of the court by seeking to raise before it an issue which could have been raised before. It was not possible to formulate any hard and fast rule to determine whether, on given facts, abuse was to be found or not.”

The High Court of Australia in Port of Melbourne Authority v Anshun Pty Ltd [1981] 147 C.L.R 589 at 601 said:

“However in Yat Tung the adoption of the principle in Henderson v Henderson was taken too far. Lord Kilbrandon spoke of it becoming “an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings” ([1975] A.C. at p.590). As we have seen, this statement is not supported by authority. And if we are to discard the traditional statement of principle because it was linked to the rules of common law pleading, there is no reason for rejecting the powerful arguments based on considerations of convenience and justice which were associated with it.

Lord Kilbrandon’s remarks go further than the statement of Somervell L.J. in Greenhalgh v Mallard [1947] 2 All E.R. 255 at p. 257 which was recently approved by Lord Wilberforce in Brisbane City Council [1979] A.C. p. 45 Somervell L.J. had said: “…res judicata for this purpose is not confined to the issues which the court is actually asked to decide, but …it covers issues or facts which are so clearly part of the subject-matter of the litigation and so clearly could have been raised that it would be an abuse of the process of the court to allow a new proceeding to be started in respect of them.” Yet, Greenhalgh v Mallard and Brisbane City Council, unlike Yat Tung, were not cases in which the alleged estoppel arose from a defendant’s failure to plead a defence. They were cases in which it was argued that a plaintiff was estopped from bringing a new proceeding by reason of dismissal of an earlier action.

In these cases in applying the Henderson v Henderson principle to a plaintiff said to be estopped from bringing a new action by reason of the dismissal of an earlier action Somervell L.J. and Lord Wilberforce insisted that the issue in question was so clearly part of the subject matter of the initial litigation and so clearly could have been raised that it would be an abuse of process to allow a new proceeding. Even then the abuse of process test is not one of great utility.”

At page 603 the court said further:

“It has generally been accepted that a party will be estopped from bringing an action which, if it succeeds, will result in a judgment which conflicts with an earlier judgment.”

The New Zealand Court of Appeal in Reid v New Zealand Trotting Conference [1984] 1 NZLR 8 at 9 said:

“Misuse of the judicial process tends to produce unfairness and to undermine confidence in administration of justice. In a number of cases in recent years this Court has had occasion to consider the inherent jurisdiction of the High Court, and on appeal this Court, to take such steps as are considered necessary in a particular case to protect the processes of the Court from abuse… In exercising that jurisdiction the Court is protecting its ability to function as a Court of law in the future as in the case before it. The public interest in the due administration of justice necessarily extends to ensuring that the Courts’ processes are fairly used and that they do not lend themselves to oppression and injustice. The justification for the extreme step of staying a prosecution or striking out a statement of claim is that the Court is obliged to do so in order to prevent the abuse of its processes.”

Lord Diplock in Hunter v Chief Constable of the West Midlands Police [1982] A.C. 529 characterized the exercise of the power in appropriate cases as a duty rather than a discretion.

The Supreme Court of Fiji Islands in Appeal No. CBV 0003 of 2003S between the parties hereto and Nadi Contractors Limited said at paragraph 18:

“In this Court the appellants did not persist with the argument of failure of consideration for the deed of 2 June 1990 and 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 face, the settlement is capable of validation under section 20.”

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 it 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 2nd defendant is not a matter which has previously being considered by the court in any action between these parties.

Whilst the words of the Court of Appeal of New Zealand in Reid v New Zealand Trotting Conference are very relevant, the words of Lindley MR in Hubbuck v Wilkinson [1899] 1 Q.B. 86 where he said:

“It is only in plain and obvious cases that a recourse should be hard to the summary process under this rule”; 

when speaking of a rule analogues to Order 18 Rule 18, must at all times be borne in mind.

Further caution is urged by Megarry V.C. in Gleeson v J. Wippell & Co. Ltd [1977] 1 WLR 510 at 518 where he said:

“First, there is the well-settled requirement that the jurisdiction to strike out an endorsement or pleading, whether under the rules or under the inherent jurisdiction, should be exercised with great caution, and only in plain and obvious cases that are clear beyond doubt. Second, Zeiss No. 3 [1970] Ch. 506 established that, as had previously been assumed, the jurisdiction under the rule is discretionary; even if the matter is or may be res judicata, it may be better not to strike out the pleadings but to leave the matter to be resolved at the trial.”

A reasonable cause of action means a cause of action with some chance of success when only the allegations and pleadings are considered - Drummond-Jackson v British Medical Association [1970] WLR 688.

Frivolous and vexatious are said to mean cases which are obviously frivolous, or vexatious or obviously unsustainable – Attorney General of Duchy of Lancaster v L. & N. W. Ry [1892] 3 Ch. 274.

Abuse of process “connotes that the process of the court must be used bona fide and properly and must not be abused. The court will prevent the improper use of its machinery, and will, in a proper case, summarily prevent its machinery from being used as a means of vexation and oppression in the process of litigation” – Castro v Murray [1875] 10 Ex. 213.

Conclusion

Taking into considerations the submissions by the parties, the authorities to which the Court has been referred and those referred to above, I am of the opinion that whilst the existence of these proceedings may be a severe annoyance to the defendants, they are not such as to warrant the intervention of the Court by striking them out or permanently staying them pursuant to the provisions of Order 18 Rule 18.

Having reached this conclusion, it is also appropriate to make orders in terms of the plaintiff’s summons of 24 August 2004.

Orders of the Court

1.	The 1st defendant’s Summons filed on the 13th August 2004 is dismissed.

2.	The 2nd defendant’s Summons filed on the 2nd July 2004 is dismissed.

3.	The 1st defendant is restrained from acting on the Reserve Bank of Fiji’s certificate of validation dated 18 May 2004.

4.	The 2nd defendant is restrained from confirming or upholding its certificate of validation dated 18 May 2004 pending final determination of this action.

5.	The defendants are to pay the plaintiff’s costs of the summonses filed on the 13th August 2004 and 2nd July 2004.

6.	The costs of the plaintiff’s summons of the 25th August 2004 are to be costs in the cause.

JOHN CONNORS
JUDGE
At Lautoka
13 May 2005