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Ghim Li Fashion (Fiji) Ltd v Challenge Engineering [2011] FJHC 238; Civil Action 258 of 2008 (29 April 2011)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

Civil Action No. 258 of 2008
BETWEEN

GHIM LI FASHION (FIJI) LIMITED
a limited liability company having its registered office at Lautoka in Fiji.
Plaintiff

AND:

CHALLENGE ENGINEERING
a limited liability company having its registered office at Lautoka in Fiji.
Defendant

Before : Master Anare Tuilevuka
Counsel : Fa & Company for the Plaintiff
: R. Patel Lawyers for the Defendant

Date of Ruling on Submissions : 29th April 2011.

RULING

BACKGROUND

[1]. There are two applications before me. The first is an application for security for costs filed by the defendant on 9th December 2008. The second, is an application for summary judgment filed by the plaintiff on the 9th of February 2009.

[2]. I will only deal with the application for summary judgment in this ruling. My ruling on security for costs I will circulate on Friday 06th of May 2011.

[3]. According to the statement of claim, the plaintiff and the defendant entered into a sale and purchase agreement on 12th October 2006. The subject matter of this agreement is Crown Lease No. 5088 on DP 4379 which the plaintiff owns. The agreed price was $1,900,000.00.

[4]. Pursuant to the agreement, the defendant made an initial deposit payment of $85,120.00 to the plaintiff’s solicitors, Fa & Company, on 12th October 2006. The balance of the purchase price (i.e. $1,814,880.00) was to be paid on the date of settlement. However, on 23rd July 2007, the defendant vide a letter from its solicitors, R. Patel & Co, indicated to Fa & Co that it did not intend to proceed with the purchase.

[5]. The plaintiff however refused to accept the defendant’s purported termination of the agreement. By letter dated 27th July 2007, the plaintiff demanded compliance of the defendant. On 30th July 2007, R. Patel & Co wrote to Fa & Co indicating that its client no longer wished to be bound by the agreement. On 02nd August 2007 and on 07th September 2007, the plaintiff gave notice if its intention to invoke clause 11 of the agreement. Clause 11 sets out the options available to the plaintiff as vendor should the defendant default as purchaser. The defendant denied liability. Thereafter – acting pursuant to clause 11 – the plaintiff re-sold the property to a third party (P. Meghji & Co. Ltd) for the sum of $1,550,000.00.

[6]. The plaintiff is claiming liquidated damages in the sum of $370,000-00 which comprises of the following:

• (i) $350,000 being the difference between $1,900,00 (the agreed price between the plaintiff and the defendant) and $1,550,00 (the amount paid by P. Meghji & Co. Ltd).
  
• (ii) $10,000 being the solicitors costs for the sale and purchase to P. Meghji & Co. Ltd.
  
• (iii) $10,000 being additional costs.
  

[7]. The affidavit of Vidya Ben Patel sworn on 4th March 2009 is filed herein opposition to the summary judgement application. Paragraphs 21 to 29 of Patel’s affidavit appear to flesh out the sketchy scenario that is painted by the statement of claim.

[8]. Patel highlights in paragraph 20(a) of her affidavit that there were actually four(4) properties that were the subject matter of the agreement - namely CT 15458, CL 13444, NL 14739 and CL 5088. It appears from her affidavit that there were actually four separate sale and purchase agreements with respect to the 4 lots named above. In paragraphs 20(b) and (c), Patel confirms that the purchase price for CL5088 was $1,900,000. Patel also highlights that settlement for the sale and purchase of all properties were to take place within 120 days of the signing of the agreement on 12th October 2006 i.e. sometime around mid February 2007. I get the impression that each sale and purchase agreement was signed on 12th October 2006.

[9]. However, settlement did not happen as planned because of the political events which began on 6th December 2006. These events sparked an immediate change of attitude amongst Fiji banks towards lending. It caused them to review all pending loan applications. Amongst these – was the defendant’s application.

[10]. As it turned out, the defendant ended up having to re-submit a fresh loan application. And so, on 25th January 2007, R. Patel & Company wrote to Fa & Company to seek a further 60 days (i.e. sometime in late March 2007) to arrange finance. Fa & Co replied instantly on the same day accepting the request for a further extension of 60 days from 25th of January 2007.

[11]. Patel deposes that Fa & Co’s concession to that extension effectively meant that the agreement was conditional upon finance being obtained. This is Patel’s own reading of the situation. There is no direct and clear evidence that Fa & Co’s concession was intended to attract the interpretation that Patel give to it.

[12]. In any event, Patel goes on to depose at paragraph 20(j)(ii) that the defendant’s bankers however declined to finance the purchase because – as she puts it - the “property in NL 14739 had burnt down”. Again, there is no direct evidence in her affidavit on this point.

[13]. On 19th March 2007, R. Patel & Co wrote to Fa & Co to advise that the defendant has decided not to purchase CL5088 and seeking the plaintiff’s cooperation for the termination of the agreement by mutual consent.

[14]. Fa & Co replied on 21st March 2007 to advise that they were seeking instructions on the matter. Then on 26th March 2007, R. Patel & Co wrote to Fa & Co advising that the defendant was ready to settle on the sale and purchase of CL 14548 and CL13444 once the director’s consent is obtained. The defendant also requested a meeting with the plaintiff which Patel says was for the purpose of discussing CL5088 – although the letter exhibited does not state that that was the intended purpose of the meeting.

[15]. On 26th March 2007, Fa & Co wrote to R. Patel & Co to advise that the plaintiff’s owners from Singapore would negotiate directly with the defendant and its solicitors on the sale of CL5088. A meeting then took place between the defendant and the plaintiff’s Singaporean owners on 27th March 2007. At the meeting – according to Patel, it was clarified that the defendant was keen on completing the settlement for the sale and purchase of the other properties except for CL5088 because of the defendant banker’s reluctance to provide finance.

[16]. Patel deposes that the plaintiff then asked the defendant to put up a revised offer which the defendant’s bank would support. And so, on 28th March 2007, the defendant wrote directly to the plaintiff offering to purchase CL5088 for $1,200,000.

[17]. According to Patel, nothing further happened on that offer and the defendant assumed that the plaintiff had accepted the termination of the sale and purchase agreement of CL5088. On 08th May 2007 and 05th June 2007, Fa & Co wrote to R. Patel & Co to inquire about the delay in settlement of CT15458, CL13444 and NL14739. There was no query about CL5088.

[18]. R. Patel & Co again wrote to Fa & Co to advise that the delay in settlement was due to the delay in the director of lands’ consent. On 20th June 2007, Fa & Co wrote to R. Patel & co seeking settlement for CT15458, CL13444 and NL14739.

[19]. On 23rd July 2007, R. Patel & Co wrote to Fa & Co to request that the $85,120.00 deposit paid towards CL5088 be credited towards settlement for the above three properties since there would be no sale and purchase of CL5088.

[20]. All the above is reiterated in a proposed defence that the defendant wishes to file and in a proposed counter-claim which essentially seeks a refund of the $85,120.00 deposit with regards to CL5088.

[21]. Obviously – where and how the balance will tip in this case rests ultimately on the issue of whether or not the sale and purchase agreement regarding the sale and purchase of CL5088 was validly terminated.

[22]. I will not recite here what Order 14 Rule 1(1) says. Suffice it to say that the Order 14 summary judgment procedure is available to any plaintiff who desires a quick judgment on his or her claim where there is no defence to a claim, or, if a defence is raised, it either fails to set up a bona fide defence or discloses no triable issues and will merely have the effect of delaying a judgement in favour of the plaintiff. The Court’s task is to determine whether there ought to be a trial.

[23]. In Carpenters Fiji Ltd –v- Joes Farm Produce Ltd Civil Appeal Number ABU 0019/2006, the Court of Appeal at pages 9 and 10 of the judgment stated the summary judgement p/b> principles as follows:-

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

(a) The purpose of 0.14 is to enable a plaintlaintiff 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 plaintiffs 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 plaintiffs 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) Likewise 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).

[24]. The plaintiff must prove each claim clearly and to satisfy the Court that the defendant has no defence which has any realistic prospect of success.

[25]. Once a claim is established, the evidential and persuasive burden shifts to the defendant (see Thomas J in Hibiscus Shopping Town Pty Ltd -v- Woolworths Ltd [1993] FLR 106 at 109) who must adduce affidavit evidence dealing specifically with the plaintiffs claim and affidavit and also state clearly and precisely what the defence is and what facts he relies on to resist the entry of summary judgment: Magan Lal Brothers Ltd. –v- L. B. Masters & Company Civil Appeal No: 31/84.

[26]. If the defendant has not filed an affidavit but a defence, the court must then direct its mind to the issues raised in the defence to see whether it has merits and is not just a sham defence to delay judgment or avoid the necessity of showing cause by affidavit (see the Fiji Court of Appeal in Magan Lal Brothers Ltd –v- L.B. Masters (supra); see also Halsbury's Laws of England (4th Edition) volume 37 para 413 – 415, notes 4).

[27]. In am satisfied that Patel's affidavit meets the threshold of Carpenters Fiji Ltd –v- Joes Farm Produce Ltd (see above). Not only does it show cause against the plaintiff's claim on the merits, it also highlights the point of law involved (i.e. whether or not the agreement was validly terminated) which is somewhat difficult to determine from the material in the affidavits filed.

[28]. If one takes the basic rule in contract law that what has been created by agreement may be extinguished by agreement – it is difficult to determine whether the agreement was validly extinguished – if at all.

[29]. Certainly – there is no clear evidence that the plaintiff ever agreed to the termination of the agreement. This is a conclusion that the defendant itself – it appears – had presupposed from the exchange of letters between the parties.

[30]. Furthermore, there is no clear evidence either of what the defendant banker's position really was. Considering that the proposed defence appears to be hinged on an allegation that the bank had recanted on financing the sale and purchase of CL5088 at the original agreed price of $1,900,000 – one wonders why the defendant would not even bother to annex a letter from the Bank concerned (as I am sure there would have been letters written on this point).

[31]. Nevertheless - I think it would be better judgment to give the defendant a chance to bridge this evidential gap at trial rather than to enter summary judgment on what appears to me to be a mere oversight.

[32]. Accordingly, I will dismiss the application for summary judgement. Costs in the cause. The defendant is to file and serve its statement of defence in 7 days. This case id adjourned to 06th of May 2011 to see if the defence is filed and served and for ruling on the security for costs application.

........................................
Anare Tuilevuka
Master

At Lautoka
29th April 2011