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Dominion Finance Co Ltd v Carpenters Fiji Ltd [2008] FJHC 365; HBC39.2007 (3 October 2008)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

Civil Action No. HBC 39 of 2007

Between:

DOMINION FINANCE CO LIMITED
Plaintiff

And:

CARPENTERS FIJI LIMITED
Defendant

Before: Master Udit

Counsel: Mr. D. Sharma & Mr N. Lajendra for the Plaintiff
Mr. S. Sharma with MrR. Singh for the Defendant

Date of Decision: 3rd October, 2008

DECISION
(Summary Judgment)

Introduction

[1] On 15th March, 2007 the Plaintiff, Dominion Finance Company Limited filed a summons under O. 14 rule 1 of the High Court Rules 1988 seeking summary judgment against the defendant, Carpenters Fiji Ltd trading as "Morris Hedstrom" in the following terms:-

"(a) The final judgment be entered against the Defendant for the sum of $43,500-00;

(b) That the Defendant be ordered to pay interest on the said sum of $43,500-00 at the rate of 22.5% per annum calculated from 22nd March, 2006 till the date of payment.

[2] The application is opposed by the defendant.

Documents

[3] The Plaintiff relies on the following documents:-

(a) Writ of Summons with attached Statement of Claim filed on 6th February, 2007.

(b) Summons filed on 15th March, 2007.

(c) Affidavit in Support of the Summons of Karl Smith, General Manager of the Plaintiff sworn and filed on 15th March, 2008.

(d) Supplementary Affidavit, of Karl Smith sworn and filed on 22nd May 2007.

(e) Written submissions filed on 10th August, 2007.

[4] The defendant relies on the following documents:-

(a) Acknowledgement of Service filed on 23rd February, 2007.

(b) Statement of defence filed on 7th March, 2007.

(c) Answering Affidavit of Naushad Ali, Financial Controller of the defendant sworn and filed on 1st January, 2007.

(d) Written submissions filed on 22nd August, 2007.

Facts

[5] The Plaintiff issued a writ of summons seeking a judgment against the Defendant in the sum of $43,500-00 together with interest at a rate of 22.5%. The Plaintiff is a limited liability company engaged in the business of providing financial services. The Defendant is a large company operating all over the Country. It operates a number of retail and wholesale outlets. In this instance one of its outlets "Morris Hedstrom" is involved. It is a trading name duly registered under S. 3 of the Registration of Business Names Act (Cap 249). The Certificate of Registration Number is 46613. It was duly registered on 28th May, 1997. Carpenters Fiji Limited, a limited liability company, is the proprietor of the said business name. A limited liability company is permitted to register a trading name if it operates the business other than the incorporated name under S. 3(d) of the Act.

[6] On 13th April, 2006 the Plaintiff agreed to advance a loan to Farmcare (Fiji) Ltd ("Farmcare") to purchase fertiliser. Farmcare was to sell the fertiliser to Morris Hedstrom. The total revolving facility was for $240,000-00 subject to total drawings of $80,000-00 at any one time. All other terms and conditions of the loan are contained in the offer letter of 13th April, 2006 (offer letter) which was duly accepted and executed by Farmcare on the said day. The executed agreement is annexed to the Supplementary Affidavit of Karl Smith marked as Annexure "A".

[7] The agreement has nothing to do with the defendant in a direct way. It was a contract exclusively between the Plaintiff and Farmcare. The alleged Involvement of the Defendant arises pursuant to a purported Deed of Assignment dated the 22nd March, 2006. The reason I have referred to the Deed as "purported", is because it is argued by the defendant that the Deed was not duly executed by it or its authorised agent. The Deed states:-

"Deed of Assignment

BETWEEN: FARMCARE (FIJI) LIMITED (FFL)

DOMINION FINANCE COMPANY LIMITED (DFCL) and MORRIS HEDSTROM

WHERE AS:

DFCL has agreed to advance financial accommodation to FARMCARE (FIJI) LTD at their request and whereas FARMCARE (FIJI) LTD. Has agreed to supply MORRIS HEDSTROM fertilizer as specifically detailed in the MORRIS HEDSTROM Local Purchase Orders Nos. 175349 dated 20.03.2006, 175537 dated 20.03.2006, 175607 dated 20.03.2006.

IN CONSIDERATION OF DFCL agreeing to provide FARMCARE (FIJI) LTD the said financial accommodation FARMCARE (FIJI) LTD. Hereby irrevocably authorises MORRIS HEDSTROM to release all monies due and payable to FARMCARE (FIJI) LTD in settlement of the abovementioned Local Purchase Orders direct to DFCL.

MORRIS HEDSTROM hereby undertakes not to advance or release any money to FARMCARE (FIJI) LTD in relation to the above Local Purchase Orders and to release all monies which will become due and payable to FARMCARE (FIJI) LTD in settlement of the said Local Purchase Orders to DFCL, subject to any statutory or penalty deductions.

This Deed of Assignment is irrevocable and can only be cancelled in writing by DFCL.

Executed by the parties as a deed

The Common Seal of Farmcare (Fiji) Ltd.Was hereto affixed in accordance with its Articles of Association in our presence and we certify that we are the proper officers by whom and in whose presence the said seal is to be affixed to documents executed by the said company.

Director Director

Dominion Finance Company Limited

(by its Authorised Signatory)

Karl Smith

General Manager

sgd: Morris Hedstrom

(by its Authorised Signatory)

Dated this 22nd day of March, 2006."

[8] Essentially, the Deed was used as a collateral security for the repayment of the monies advanced by Plaintiff. There were other securities taken by the Plaintiff to secure repayment. What the Deed anticipated was that payment of the fertiliser supplied to Morris Hedstrom was to be paid to the Plaintiff instead of Farmcare by the Defendant. There is reference to certain local purchase orders in the Deed, the details of which respectively were:-

[9] The Plaintiff claims that Morris Hedstrom breached its undertaking by paying-out the money directly to Farmcare; (see paragraphs 5 and 6 of the Supporting Affidavit).

[10] There is no evidence of any sale, delivery or payment of the money to Farmcare. However, in paragraph 4 of the statement of defence, the Defendant admits the contents of paragraph 5 of the Statement of Claim which reads:-

"5 – Pursuant to the following Local Purchase Orders ("LPO") issued by the Defendant to Farmcare, Farmcare sold and delivered fertilizer to the Defendant as per the terms and conditions stated therein:

(a) LPO No. 175349 dated 20th March, 2006 for the sum of $14,500-00

(b) LPO No. 175537dated 20th March, 2006 for the sum of $14,500-00

(c) LPO No. 175607 dated 20th March, 2006 for the sum of $14,500-00

[11] However, the defendant denies that it is bound by Deed on the basis that it is not duly executed by the defendant or its authorised agent.

Consideration

[12] The purpose of O. 14 applications is to obtain a quick judgment where there is plainly no defence to the claim. In Express Newspaper Pty -v- News (UK) Ltd and others [1990] 3 ALLER 376, Browne Wilkingson V-C at page 379 said:-

"Summary judgment under Order 14 is a judgment given in the clearest cases before an ordinary trial has taken place. Summary judgment is only given where it is clear that there is no arguable defence to the claim. If there is an arguable issue to be tried, in particular where there are matters of fact to be resolved which can only be resolved at trial, the court gives leave to defend and the case goes to trial to be heard out. Summary judgment is a means of short-circuiting that system in the clear case where it is show that, even if it went to trial, the defence could not succeed."

[13] The general principles governing the determination of a summary judgment application is summarised in Carpenters Fiji Ltd –v- Joes Farm Produce Ltd Civil Appeal Number ABU 0019/2006. At pages 9 and 10 of the judgment the Court of Appeal stated the principles as follows:-

"Here it is timely to state some of the well established principles relating to the entry of summary judgment:

(a) The purposes of 0.14 is to enable a plaintiff to obtain summary judgment without trial if he can prove his claim clearly and if the defendant is unable to set up, a bona fide defence or raise an issue against the claim which ought to be tried.

(b) The defendant may show cause against a plaintiff’s claim on the merits e.g. that he has a good defence to the claim on the merits or there is a dispute as to the facts which ought to be tried or there is a difficult point of law involved.

(c) It is generally incumbent on a defendant resisting summary judgment, to file an affidavit which deals specifically with the plaintiff’s claim and affidavit and states clearly and precisely what the defence is and what facts are relied on to support it.

(d) Set off, which is a monetary cross claim for a debt due from plaintiff, is a defence. A defendant is entitled to unconditional leave to defend up to the amount of the set of claimed. If there is a set off at all, each claim goes against the other and either extinguishes or reduces it Hanak v. Green (1958) 2 QB 9 at page 29 per Sellers LJ.

(e) Like wise where a defendant sets up a bona fide counterclaim arising out of the same subject matter of the action, and connect with the grounds of defence, the order should not be for judgment on the claim subject to a stay of execution pending the trial of the counter claim but should be fore unconditional leave to defend, even if the defendant admits whole or part of the claim; Morgan and Son Ltd v. S. Martin Johnson Co (1949) 1 KB 107(CA).

[14] The burden of proof lies with the claimant to satisfy the court that the Respondent has no defence which has any realistic prospect of success. Once a claimant prima-facie establishes the claim the evidential and persuasive burden shifts to the respondent. Thomas J in Hibiscus Shopping Town Pty Ltd -v- Woolworths Ltd [1993] FLR 106 at 109, concisely described the burden of proof as follows:-

"The legal burden of proof is borne by this plaintiff throughout the application, however when he has established a prima facie right to an order, a persuasive or a evidential burden shifts to the defendant to satisfy the court that judgment should not be given against him".

(emphasis added)

No Authority

[15] The defendant submitted that Ronald Ram who allegedly executed the agreement lacked any actual or ostensible authority. There is a signature on the Deed which does not have the name of the signatory. Next to the name is affixed a seal of Morris Hedstrom. However in the affidavit there is reference to "Ronald Ram" who supposedly is to be signatory.

[16] On behalf of the plaintiff it was argued that it is not the Plaintiff’s role to inquire into the authority of the signatory; Royal British Bank v Turquand [1856] EngR 470; [1856] 119 ER 886. He submitted that a contracting party can rely on the Latin phrase of omnia praesumuntur solemniter esse acta, (All things are presumed to have been done right). However, it is a rebuttable presumption; Crabtree Vickers Pty v Australian Direct Mail Advertising Co. Pty Ltd [1975] HCA 49; [1976] 50 ALJR 203. If I understood the submissions correctly, Mr D. Sharma’s proposition would connote that any employee of the company may sign a contract to bind the company. That really is relegating the purpose of a signature to its insignificant level. Further it makes the aforementioned rebuttable presumption of law redundant. What if a stranger signs next to the seal of a limited liability company? Will that be binding? What if an employee defrauds? Certainly his submission lacks any merit. At least a company should be given an opportunity to negate the authority or authenticity of any such signature.

[17] In rebuttal Mr. S. Sharma submitted that the said Ronald Ram had no actual or ostensible authority. In other words Ronal Ram is not one of the ‘directing mind and will’ of the Company; Tesco Supermarkets Ltd v Nattras [1971] UKHL 1; [1972] A.C. 153. To that, Mr. D. Sharma responded by saying that the assertion lacks any condescending particulars. In resisting a summary judgment, the defendant must oppose it on some material facts with condescending particulars; Magan Lal Brothers Ltd. –v- L. B. Masters Civil Appeal No: 31/84. Obviously, Mr D. Sharma overlooked to read paragraph 6(iii) of the Affidavit of Nausad Ali in which the deponent categorically adverts to the legitimate authority being vested to him. The paragraph reads:-

"That the Plaintiff knew or to have known that Mr Ronal Ram did not have actual or ostensible authority to bind Carpenters Fiji Ltd and that the proper authority lay with the deponent as the Financial Controller with whom Farmcare Ltd and the Plaintiff had previously communicated with."

(emphasis added)

As can be seen from the above, the plaintiff was communicating with the deponent in respect of the transaction. However, it appears no concluded agreement was reached. In this summary application, it leaves an air of uncertainty as to the reason for the execution of the Deed by Ronal Ram.

[18] Mr D. Sharma emphasised at length that signature of Ronal Ram binds the Defendant. Who is Ronald Ram? What is his position? Is he an employee of the Company? What are the general powers given to the officers of the company of his rank? Are these officers authorised to enter into contract without the knowledge of the Directors of the Company? These are fundamental questions pertaining to the determination of the crucial issue of the "authority." There is want of sufficient and credible evidence to impute any such actual or ostensible authority of Ronal Ram.

[19] In addition S. 40 of the Companies Act provides for the authentication of documents by a company as follows:-

"40. A document or proceeding requiring authentication by a company may be signed by a director, secretary or other authorized officer of the company, and need not be under its common seal. "

[20] S. 36 of the Companies Act provides for the manner by which a company enters into a contract. It reads:-

Form of contracts

36.-(1) Contract on behalf of a company may be made as follows:

(a) a contract which, if made between private persons, would be, by law, required to be in writing, signed by the parties to be charged therewith, may be made on behalf of the company in writing signed by any person acting under its authority, express or implied;

(b) A contract which, if made between private persons, would, by law, be valid although made by parol only, and not reduced into writing, may be made by parol on behalf of the company by any person acting under its authority, express or implied.

(2) A contract made according to this section shall be effectual in law, and shall bind the company and its successors and all other parties thereto.

(3) A contract made according to this section may be varied or discharged in the same manner in which it is authorized by this section to be made

(emphasis added)

[21] It is mandatory for the signatory to be a person acting under the authority either "express or implied" of the Company. Thus authority of signatory is an essential matter which undoubtedly goes to the root of the validity of the Deed or its enforceability.

[22] Further, ordinarily a company executes any document by a Seal. Once the Seal is affixed it shall be signed by a Director and countersigned by the Secretary or a Second Director or some person appointed by Directors for that particular purpose. This is a mandatory provision which should be included in the Articles of Association of a company on its incorporation. It must strictly be practiced. There is no evidence that the said Ronal Ram is a Director, Secretary or an authorised signatory of the company in accordance with the Act.

[23] In view of there being an outright denial of any authority given to Ronal Ram, together with the supporting evidence of the person authorised to execute a contract on behalf of the company, at this preliminary stage with limited evidence it is inappropriate for the Court to infer any such implied or ostensible authority. This in my opinion is enough to dispose-off this application.

Business Name

[24] The issue of the trading name, "Morris Hedstrom" relates directly to the issue of the legal validity of the Deed. Briefly, the registration of business name itself does not create any legal entity. A "business name" means the name and style under which any business is carried on whether in partnership or otherwise."; S. 2 of Registration of Business Licencses Act. But the question is does a business name alone is sufficient to bind the proprietors of that name? Can the proprietor of the business name enter a contract only under the name? What will be the effect of it? The Act is silent on these fundamental questions. At least by virtue of S. 10 of the Act, where the proprietor of the business name fails to register the details prescribed by the Act, a Court proceeding can be brought only in the business name. S. 10 reads:

"If any firm or person required to register as provided in this Act fails to register accordingly, all proceedings in any Court of competent jurisdiction may be taken and prosecuted against such firm or person in the name under which such firm or person is carrying on business and such name shall, for the purposes for such proceedings, be a sufficient designation of such firm or persons in all writs, summonses and other legal documents and the instruments."

However, this case does not fitwithin the category stipulated under S. 10. Firstly, the Defendant has complied with the requirements of the Act when registering the business name. Secondly, the irregularity complained of is not pertaining to a Court proceeding but to a contractual instrument and its legal validity. Naming of a party in a court proceeding is a procedural matter capable of being cured under O. 2, rule 2. This also includes the power (O. 20, rule 5(1)) to correct the name of a party; Mitchell -v- Harris Engineering Co. Ltd. [1967] 2QB 703. In such cases amendment to a party is allowed even after the expiry of limitation period. In that case S. 10 offers no assistance to the Plaintiff in this application.

[25] Further, another elementary issue is that the signatory signed as an authorised agent of the business name; Morris Hedstrom. Whoever signed the Deed did not sign it on behalf of Carpenters Fiji Ltd.

[26] In addition to this the defendant challenges the Deed of Assignment. It is argued that Carpenters Fiji Limited is not a party to the Deed, although it is allegedly executed by a seal of "Morris Hedstrom"; the business name. The plaintiff submits otherwise.

[27] Mr D. Sharma referred to this court a decision of His Lordship Mr Justice Scott in D. Gokal and Company Limited -v- Dribkant Lala and Joyce Lala, Suva High Court Civil Action No. HBC 33/2001S (26/10/2001). He submitted that based on this authority the registered owner of a Business Name cannot avoid liability. In my view the facts in that case is distinguishable. There the subject business name was "Lala’s Shopping Centre". It was only one shop owned by an individual, namely Joyce Lala. There was unchallenged evidence of business dealings between the Plaintiff and Drib Kant Lala (First Defendant) for several years. In this case Carpenters has a chain of stores all over Fiji. It is a corporate entity and any authorisation to execute contract would have been given in writing to meet the requirement of S. 30 of the Companies Act (Cap 247). The First Defendant in Gokals was actively involved in the business management. In this case the Court is not abreast with the identity of Ronal Ram. Further in Gokals the owner of the business name, Joyce Lala did not resist the claim. She conceded to the supply of the goods. To the contrary, in the case before me the proprietor of the business name vehemently challenges the validity of the Deed in question.

[28] Next authority cited was Carpenters Fiji Limited –v- Abdul Munaf Lautoka High Court Civil Action HBC No. 74/97. Mr Sharma relies on this authority to support the contention that the business name of "Morris Hedstroms" was held to be sufficient to bind Carpenters Fiji Ltd as a party. His Lordship Mr Justice Connors in the judgment did not deal with the precise issue before me. To the contrary Carpenters lost the case on a "no case to answer" due to paucity of evidence. Only reference to "MH was in relation to a document evidencing the customer number. Further evidence was called to explain the initials "MH"; which is "MORRIS HEDSTROM." Thus that decision does not assist the Plaintiff.

[29] The correctness or otherwise of the issue of authority can not be decided on the affidavits. It needs oral evidence which should rigorously be tested by cross examination. Bingham LJ in Bhogal -v- Punjab National Bank [1988] 2 ALLER 296 at 303 very aptly said:-

"But the correctness of factual assertions such as these cannot be decided on an application for summary judgment unless the assertions are shown to be manifestly false either because of their inherent implausibility or because of their inconsistency with the contemporary documents or other compelling evidence."

[30] It is trite law that order 14 application is not to be decided by weighing two conflicting affidavits; Banque de Paris et des Pay-Bas (Suisse) S. A. –v- Costa de Naray [1984] 1 Lloyds Rep. 21 at 23. The Plaintiff is asking this Court to do exactly what is forbidden by these principles of law. Without the oral evidence tested by cross-examination the issue of authority, actual or ostensible, and/or the veracity of the conflicting affidavit cannot be resolved. In Bilbie Dymock Corporations –v- Patel [1987] NZCA 193; [1987] 1 PRNZ 84 at 85 NZ Court of Appeal aptly said:

"But the need for judicial caution has to be balanced, when considering a summary judgment application, with the appropriateness of a robust and realistic judicial attitude when that is called for by the particular facts of the case."

I will take this robust and realistic approach in view of the particular facts of this case.

Conclusion

[31] Having considered the circumstances of the case, I find the plaintiff has failed to discharge the burden of proof on balance of probabilities to entitle it to summary judgment.

Accordingly the Summons is dismissed with costs summarily assessed at $550-00.

J. J. Udit
Master