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Sea Joy Enterprises Group Ltd v Fantasy Company Ltd [2011] FJHC 681; HBC92.2011L (1 November 2011)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

Civil Action No: HBC 92 of 2011L

BETWEEN:

SEA JOY ENTERPRISES GROUP LIMITED
Plaintiff

AND:

THE FANTASY COMPANY LIMITED
Defendant

JUDGMENT ON STAY PENDING APPEAL

Judgment of: Inoke J.

Counsel Appearing: Mr G O'Driscoll (Plaintiff)
Mr S Maharaj (Defendant)

Solicitors: O'Driscoll & Co (Plaintiff)
Suresh Maharaj & Assocs (Defendant)

Dates of Hearing: 31 October 2011
Date of Judgment: 1 November 2011

INTRODUCTION

[1] On 5 August 2011 I extended a Mareva injunction against the defendant until further order. The defendant has now lodged an appeal against my judgment and now applies for a stay of my orders.

[2] The defendant filed two applications, one for stay pending appeal and one for variation of my orders of 5 August 2011. After hearing counsel I directed that the stay application should be heard first. The plaintiff also filed an application for summary judgment which under the circumstances should be left to be heard on another date.

[3] This is my judgment on the stay pending appeal application.

THE BACKGROUND

[4] For completeness, I reproduce what I wrote in my earlier judgment. The plaintiff's Writ and Statement of Claim were filed on 15 June 2011. The ex-parte application and affidavit in support were filed on the same day also. The defendant filed an affidavit in reply and the plaintiff also filed a further affidavit in response to that affidavit. All affidavits were sworn by the directors of the companies.

[5] The background of the case from those documents is as follows. The defendant agreed to sell to the plaintiff land for development as a hotel and resort project (the "Project"). Because the plaintiff is a non resident company (incorporated in Hong Kong) and the land being purchased is more than an acre, the prior consent of the Minister for Lands was required for the agreement to be binding. So the parties entered into a preliminary agreement (the "Land Sales Act Agreement") which they signed on 27 September 2010 and which provided that within 14 days of the Minister giving his consent, the parties shall sign an agreement of the type and form attached to the Land Sales Act Agreement. The plaintiff's solicitors sent the application for the Minister's consent under cover of their letter dated 21 October 2010.

[6] The Minister granted consent on 25 November 2010 which was subject to certain conditions including completion of the transfer of the property within 3 months from the date of consent and completion of the proposed development within two years from the date of transfer. The consent was given to last for 3 months only which could be renewed for a further 6 months on application. There was no subsequent renewal after the initial three months.

[7] The parties have not produced a copy of the final agreement that was supposed to be signed after the grant of Ministerial consent despite defendant counsel's assurance that it had been signed. No copy has been produced by the time this judgment was written so I can safely assume that none was signed. I shall refer to this agreement, which, as I have said, was attached to the Land Sales Act Agreement, as the "Contract".

[8] The Contract provided under clause 3.2 payment of two lots of deposits of 10% as follows:

The Purchaser shall pay to the Vendor the sum of FJD$8,775,000 ... inclusive of Value Added Tax in the following manner:-

(a) A deposit and part payment of FJD$877,500 ... shall be paid within 7 days of the execution of this Agreement and shall be deemed part payment towards the purchase price payable by the Purchaser and shall be paid into the Trust Account of the Vendor's solicitors Messrs Suresh Maharaj & Associates, who shall hold it as stakeholders until it is released to the Vendor for use by the Vendor to complete the works required to be done by it pursuant to this Agreement and for no other purpose.

(b) A further sum of FJD$877,500 ... shall be paid into the Vendor's solicitors Messrs Suresh Maharaj & Associates Trust Account within 14 days of receipt of the Certificate from the civil engineers stating that 50% of the works specified in clause 27.6 of the Agreement have been completed. The said monies are to be utilised by the Vendor to discharge any mortgage or encumbrances on the said Lease and in the completion of the works.

(c) The balance sum of FJD$7,020,00 ... inclusive of VAT shall be payable by way of a Bank Cheque within 14 days of a certificate being issued by the civil engineers stating that all works are satisfactorily completed (the date of settlement) which monies are to be paid to the Trust Account of Messrs Suresh Maharaj & Associates upon the Vendor simultaneously handing over to the Purchaser's solicitors Messrs Sherani & Co, a registered 99 year State Lease together with a stamped registrable transfer of the said property in the name of the Purchaser or its nominee. Settlement shall take place at the Titles Office in Suva, Fiji.

[9] Clause 27.6 of the Contract provides that the agreement was conditional and subject to the vendor carrying out and completing within 8 months of the date of execution of the agreement to the satisfaction of the civil engineers the works designed by the consultants Wood & Jepsen. The clause then lists the various works to be done.

[10] The civil engineers to certify the works are the engineers appointed by the plaintiff.

[11] The first deposit, paid on 8 December 2010, according to the defendant's managing director, Mr Abbas Ali, was used to fund the works as provided for under the clause and which he notified the plaintiff's representative in February 2011 to be 50% complete. A series of emails and letters passed between Mr Abbas Ali, and the plaintiff's representative in China with regards to completion of 50% of the works and the release of the second deposit. The plaintiff's representative wanted drawings and other information to enable them to ascertain whether the works had been completed but Mr Ali considered them unnecessary and only a delaying tactic and in the end Mr Ali terminated the Contract for the defendant's failure to pay the second deposit, effective from 23 March 2011. He then informed the plaintiff's representative that the matter would be handled by his solicitors from then on. The plaintiff's representative wrote back on 1 April 2011 saying that they were in the process of appointing engineers to certify and were awaiting the engineering information and did not agree that they were in breach. On 8 April 2011, the plaintiff's engineer wrote to Mr Abbas Ali saying that judging from the photographs that were emailed on 1 April 2011, he did not believe that the works were 50% complete and reiterated their earlier requests for engineering information because without them the engineer could not certify. On 13 April 2011, Mr Abbas Ali wrote to the Ministry of Lands requesting that consent for the Project be withdrawn as the plaintiff had not complied with the terms of the Contract.

[12] On 14 April 2011 the defendant's solicitors send to the plaintiff's local solicitors, Sherani & Co, notice of default pursuant to clause 13 of the Contract for failing to pay the second deposit despite demands being served on their solicitors on 8 February, 23 February and 15 March 2011. The notice also stated that the plaintiff was given 21 days to comply with clause 3.2(b) failing which the Contract would be regarded as rescinded pursuant to clause 13.1(b) and the first deposit of $877,500 forfeited as liquidated damages. The plaintiff responded by letter dated 4 May 2011 refuting the defendant's allegations in the notice and requested the defendant to provide certain information pursuant to clauses 11 and 16 of the Contract failing which the defendant would be in breach. On 12 May 2011, the plaintiff's current solicitors wrote to the defendant's solicitors stating that the defendant, by its conduct, had evinced an intention not to be bound by the Contract amounting to repudiation which the plaintiff accepted and demanded return of the deposit.

[13] On 15 June 2011, the plaintiff filed these proceedings. The orders sought by the plaintiff are declarations that the defendant had repudiated the Contract, or, alternatively, that the Contract was illegal and void for lack of prior Ministerial consent, an order for repayment of the deposit and damages for breach of contract. In support of its application for interim Mareva injunctions, the plaintiff says Mr Abbas Ali had said that: "If you go to court to get the deposit back, I can tell you that I have no money. The deposit has been used to carry out works according to the contract". The plaintiff also alleged that Mr Ali had also said that his company was selling the Project to another Chinese investor.

[14] Mr Abbas Ali makes no specific denial of the allegations. He insists that his company had completed the works as required under the Contract and that it was the plaintiff's fault for not appointing an engineer to certify the works and therefore in breach which entitled his company to forfeit the deposit which it now has.

[15] According to him, the land is mortgaged to Merchant Finance Limited to secure a loan to the company of $870,977.30 which was restructured on 15 December 2010 and to lapse on 31 December 2011.

THE STAY APPLICATION

[16] This is an application for stay of an interlocutory judgment. That being the case, the applicant/defendant must show special circumstances and I apply the law as stated in Reddy's Enterprises Ltd v Governor of the Reserve Bank of Fiji [1991] FJCA 4; Abu0067d.90s (9 August 1991):

In requiring the Applicant to establish special circumstances in this case I am not to be taken to hold that in all applications for a stay it shall be incumbent on the Applicant to show special circumstances in the traditional sense. I subscribe to the view that adherence to an inflexible rigid test to all types of stay or injunction cases without considering their nature is not to be favoured. The strict test rule can negate the wide discretion vested in Courts and could even lead to denial of justice in particular cases.

Balance of convenience

The test here is a determination of which of the two parties will suffer greater harm from granting or refusal of an interim stay pending a determination of the appeal on merits. A balancing of conflicting considerations is required, between the underlying principle that a litigant is entitled to the fruits of his judgment forthwith and the obvious injustice in refusing a stay where such a refusal will render the appeal nugatory or substantially nugatory.

[17] One of the special circumstances which Counsel for the defendant submitted that justified a stay was that I had misread the facts and, although he did not disagree with the law which I applied, its application to the wrong facts led to the wrong result. I am not persuaded by the submission, but his second submission has some force. It was that damages were an adequate remedy in this case.

[18] In this case, counsel for the plaintiff concedes that the plaintiff's claim is for damages only and not for specific performance. The issue therefore becomes a question of whether the plaintiff should be given special protection over and above that which is afforded to an ordinary plaintiff in a claim for money in the event that it succeeds at trial.

[19] The plaintiff says that the defendant is unable to pay damages because the land is currently mortgaged and if the defendant is allowed to proceed with the development the mortgagee would have first bite of the cherry and nothing would be left to satisfy the plaintiff's judgment. In this regard the plaintiff is in no worse position than any plaintiff in a similar claim.

[20] On the other hand, the defendant says that if it is not freed to deal with its assets and to execute further debentures and mortgages, it will not only be unable to pay the money into court, but is likely to face financial ruin and the project will be lost. It further says that the plaintiff company is a foreign company with no real assets here in Fiji other than what it had already expended on the project so far.

[21] I note that my orders of 5 August 2011 were:

• (a) The interim injunctions granted on 15 June 2011 shall continue until further order or the defendant pays into Court the sum of FJD$877,500, which sum shall be held in Court until further order.
  
• (b) The defendant shall pay the plaintiff's costs of $1,500 within 28 days.
  

[22] The defendant seeks an unconditional stay of all these orders. After careful consideration of the parties' positions I think the justice of this case requires that there be an unconditional stay of those orders pending appeal. The end result is that the defendant is no longer restrained by those orders and is free to deal with its assets. The costs order however remains.

COSTS

[23] I order that the costs of this application be costs in the cause.

ORDERS

[24] I therefore order as follows:

• (a) The interim injunctions granted on 5 August 2011 are lifted.
  
• (b) The order for costs made on 5 August 2011 is stayed pending appeal.
  
• (c) The costs of this application will be costs in the cause.
  

Sosefo Inoke
Judge