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McManaway v Owners of the Motor Vessel - Mariner [2015] FJHC 722; Admiralty Action 4.2009 (30 September 2015)

IN THE HIGH COURT OF FIJI
AT SUVA
ADMIRALTY JURISDICTION

Admiralty Action No. 4 of 2009

BETWEEN:

NOEL MCMANAWAY AND RAY WHITTAKER
PLAINTIFFS

AND:

OWNERS OF THE MOTOR VESSEL "MARINER"
DEFENDANT

BEFORE : Hon. Justice Kamal Kumar

COUNSEL : Mr G. O'Driscoll for the Plaintiffs/Respondent
: Mr P. Sharma and Ms N. Chan for the Defendant/Applicant

DATE OF HEARING : 4 September 2013
DATE OF RULING : 30 September 2015

RULING
(Application to Strike Out Plaintiff's Claim)

1.0 Introduction
1.1 On 21 December 2013, Defendant filed Application by way of Summons dated 25 March 2013 to strike out Plaintiffs claim against the Defendant on the ground that it is an abuse of the process of the court pursuant to Order 18 Rule 18 of High Court Rules and the inherent jurisdiction to the Court ("the Striking Out Application").

1.2 Prior to filing of the Striking Out Application Plaintiff on 21 December 2012, filed an Application to determine two preliminary issues ("Preliminary Issue Application").

1.3 At the time of filing of the Striking Out Application the Preliminary Issue Application had not been fully dealt with by the Court.

1.4 Even though returnable date of the Striking Out Application is noted as 12 June 2013, it appears that the Striking Out Application was dealt with on 6 May 2013 by his Lordship Justice Balapatabendi (as he then was) when parties were directed to file Affidavits in respect to both the Applications and both applications were adjourned to 19 June 2013 for mention.

1.5 However, both applications were called before his Lordship on 12 June 2013.

1.6 On 12 June 2013, his Lordship Justice Balapatabendi adjourned both Applications to 4 September 2013, for hearing.

1.7 The file was subsequently referred to the Court.

1.8 On 4 September 2014, the Striking Out Application was adjourned for Ruling on Notice.

1.9 Only Affidavit filed in respect to the Striking Out Application is that of Ross Brodie sworn on 25 March 2013, filed in Support of this Applications ("Ross's Affidavit").

1.10 In Ross's Affidavit he also refers to Affidavits sworn by him on 30 June 2012, 15 March 2012 and 29 June 2012 and Affidavit of Noel McManaway sworn on 19 December 2012, in respect to prior application.

1.11 No Affidavit in Opposition has been filed by the Respondent to the Striking Out Application.

2.0 Application to Strike Out

2.1 It is well established that jurisdiction to strike out claim or pleadings should be used very sparingly and only in exceptional case Timber Resources Management Limited v. Minister for Information and Others [2001] FJHC 219; HBC 212/2000 (25 July 2001).

2.2 In National MBF Finance (Fiji) Ltd v. Buli Civil Appeal No. 57 of 1998 (6 July 2000) the Court stated as follows:-

"The Law with regard to striking out pleadings is not in dispute. Apart from truly exceptional cases the approach to such applications is to assume that the factual basis on which the allegations contained in the pleadings are raised will be proved. If a legal issue can be raised on the facts as pleaded then the Courts will not strike out a pleading and will certainly not do so on a contention that the facts cannot be proved unless the situation is so strong that judicial notice can be taken of the falsity of a factual contention. It follows that an application of this kind must be determined on the pleadings as they appear before the Court...."

2.3 Plaintiff's Counsel submitted that the Striking Out Application does not state under which Rule the Applications is made.

2.4 I note that the grounds for the applications is stated as claim is an "abuse of process of court" and that it is made under Order 18 Rule 18 of the High Court Rules and inherent jurisdiction of this Court.

2.5 Whilst it is prudent and appropriate to state the sub-rule under Order 18 Rule 18 pursuant to which striking application is made I find that in this instance the ground was clearly stated as abuse of court process which is provided for in Order 18 Rule 18(1)(d). Also as stated earlier this Court has an inherent jurisdiction to deal with application to Strike Out Claim/Pleadings on the ground that it is an abuse of court process.

2.6 At paragraph 18/19/17 of Supreme Court Practice 1993 Vol 1 (White Book) it is stated:-

"This term connotes process of the Court must be used bona fide and properly and must not be abused. The Court will prevent the use 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...."

2.7 At the same paragraph it is also stated as follows:-

"The issue of a writ making a claim which is groundless and unfounded in the sense that the Plaintiff does not know of any facts to support it is an abuse of the process of the Court and will be struck. (Steamship Mutual Association Ltd v. Trollope and Colls (City) Ltd. (1986) 33 Build. LR 77 C.A.)"

2.8 Plaintiff in their Amended Statement of Claim filed on 18 April 2012, seeks following relief:-

"(i) The arrest of the MV Mariner;

(ii) A Declaration that they are owners of the MV Mariner by way of a constructive trust;

(iii) Alternatively damages to be assessed concerning the MV Mariner and related matters;

(iv) Costs of this action;

(v) Such further and other relief and orders as are deemed just in the circumstances."

2.9 The Defendant in his Counter-claim seeks following relief:-

"(a) A Declaration that the Defendant is the owner of the vessel MV Mariner;

(b) That the Defendant pays the Plaintiffs the sum of $40,000.00 and that the Defendant retain ownership and possession of the vessel the MV Mariner;

(c) The Plaintiffs pay the Defendant the sums of F$841,011.52; F$129,884.72 and F$45,427.14;

(d) Damages;

(e) Costs; and

(f) Such further or other relief as this Honourable Court may deem fit and just."

2.10 The subject action is in relation to vessel named "Wellbeing" ("the vessel") which was transferred in the name of Seamech Limited ("Seamech")by Wellbeing Enterprises Limited ("Wellbeing") a company incorporated in Fiji with principal of company residing in Kiribati.

2.11 The consideration sum being $40,000.00 for transfer of the vessel to Seamech was paid by Plaintiffs to Wellbeing's nominee.

2.12 The parties at some point in time (either prior to transfer of the vessel or after it was transferred to Seamech Ltd) agreed to form a company named Barging Limited with Plaintiff and Defendants as shareholders/director.

2.13 It is Plaintiffs contention that once Barging was incorporated the vessel was to be transferred to that company.

2.14 However, Defendant's contention is that Barging was incorporated to enter into contract for services to be provided by Seamech.

2.15 It is not disputed by Defendant that the consideration sum for the vessel was paid by Plaintiffs and Defendant also acknowledges that Plaintiff has contributed a sum of $191,999.40 as stated at paragraph 22 of Ross Brodie's Affidavit sworn on 30 June 2010, towards maintenance costs of the vessel.

2.16 Defendant submits that the Plaintiff's claim should be struck out for breach of Sections 4, 6 and 16 of Foreign Investment Act and Section 3(1) and 7 of Exchange Control Act.

2.17 Section 4(1) of the Foreign Investment Act 1999 ("FIA") provides as follows:-

"4.(1) A foreign investor must not carry on business in a relevant activity in the Fiji Islands unless the Chief Executive has granted the foreign investor a Foreign Investment Certificate under this Part and the certificate remains in force."

2.18 "Relevant Activity" is defined as "an activity set out in the publication entitled Fiji Standard Industrial Classification based on the United Nations International Standard Industrial Classification of All Economic Activities (ISIC) as amended from time to time." (section 3)

2.19 It is obvious that the business which the parties were going to be engaged in is a relevant activity for the purposes of Foreign Investment Act.

2.20 Before I proceed further I note that Counsel for the Defendant has quoted section 4(3) of the FIA 1999. This section has since been repealed by Foreign Investment (Amendment) Act 2004 which came into effect on 5 August 2005 and replaced with following:-

"(3) The grant of a certificate to a foreign investor does not entitle the investor as of right to any licence or assistance for which the investor may be qualified."

2.21 Amendment Act also adds subsection (4) which is not relevant for the purpose of the application before this Court.

2.22 From the Affidavit evidence it is apparent that Plaintiffs did not hold Foreign Investment Certificate to carry on business in Fiji as required.

2.23 There is also unchallenged evidence that at least the First named Plaintiff had has been in carrying on business as director of Barging Limited.

2.24 In this regard I quote paragraphs 8.10 to 8.17 of Donald Ross Brodie's Affidavit sworn on 24 March 2010:-

"8.10 Through the non-existent Barging Limited, the Plaintiff Noel Mc Manaway contracted the Defendant and entered into employment contracts governed by Fiji law with several employees of the Defendant to man the MV Mariner for an international tow under a towage agreement and the Plaintiff Noel McManaway signed said legal documents as "Director" of "Barging Limited" as follows:-

(a) a towage agreement between "Barging Ltd of Fiji Islands" as "Tug Owner" and Endel Suez of New Caledonia as "Vustomer" on the 26th of September 2008 in the amount of USD$210,000.00 (Two Hundred and Ten Thousand United States Dollars) plus applicable taxes for the towage by the MV Mariner of a vessel from Noumea to Brisbane (the "Towage Agreement"). The Plaintiff Noel McManaway signed the Towage Agreement, in his capacity as "the Tug Owner". Annexed hereto and marked "B" is a true copy of the Towage Agreement;

(b) Annexed hereto and marked "C" is a true copy of an employment contract between Barging Limited and Derik Rawlinson, signed by Noel McManaway and dated November 14, 2008;

(c) Annexed hereto and marked "D" is a true copy of an employment contract between Barging Limited and David Morrell, signed by Mr Noel McManaway as "Director" and dated February 4, 2009;

(d) Annexed hereto and marked "E" is a true copy of an employment contract between Barging Limited and Jona Baleilekutu, signed by Mr Noel McManaway and dated February 4, 2009;

8.11 The Plaintiff also entered into a contract between Barging Limited, Fiji Islands and Pacific Building Systems dated 19/12/08 in respect of the "Lauthala [sic] Runway Saw cutting" in the amount of F$150,839.50 (One Hundred and Fifty Thousand, Eight Hundred and Thirty-Nine Fiji Dollars and Fiji Cents), signed by Plaintiff Noel McManaway as "Director". Annexed hereto and marked "F" is a true copy of the contract, which is also marked "Please make cheque payable to Seamech" (the "PBS Agreement");

8.12 The Plaintiff entered into a contract between Barging Limited, Fiji Islands and Solander Pacific on or about 12 December 2008 in respect of the construction of a jetty for F$89,500.00 (Eighty-Nine Thousand and Five Hundred Fijian Dollars) (the "Solander Agreement"). Annexed hereto and marked "G" is a true copy of a quote in respect of the "Solander Agreement";

8.13 Neither the Defendant nor any of its directors entered into or executed any documentation as a shareholder, director or owner of Barging Limited;

8.14 A company by the name of "Barging Limited" was in fact incorporated on the 15th of April 2009 by persons other than the Plaintiffs after the Plaintiffs failed to renew their reservation of the name "Barging Limited" with the Companies Office in Fiji.

8.15 None of the contracts or agreements that the Plaintiff Noel McManaway entered into in the name of Barging Limited, Fiji Islands disclose to the contracting parties that Barging Limited was yet to be formed and registered in Fiji.

8.16 The Plaintiffs were aware that they had not registered the name "Barging Limited" and that they had not incorporated a company of such name. Further, they did not extend the reservation of the name with the Companies Office once their previous registration lapsed in April 2009. Nevertheless, the Plaintiffs used a logo and a letterhead in the name of "Barging Limited, Fiji Islands" and represented themselves to be a company already in existence;

8.17 Following the conclusion and performance of the Towage Agreement, Mr. McManaway provided a legal opinion from O'Driscoll & Co to the Defendant stating that by signing the contracts on behalf of Barging Limited prior to its incorporation, Mr McManaway was personally liable for the contracts and was therefore also entitled to any benefits under the same contracts. Annexed hereto and marked "H" is a true copy of the email containing O'Driscoll &Co's legal opinion dated 6th of May 2009 and forwarded by Mr McManaway to the Defendant's accountant, Mr Uhbesh Maharaj (the "Legal Opinion")."

Section 16(1)(a) of FIA as amended also prohibits foreign investor from carrying on business in Fiji without a Foreign Investment Certificate which offence carries a penalty of $50,000.00.

2.25 Section 3(1) of Exchange Control Act provides:-

"3(1) Except with the permission of the Minister, no person other than an authorized dealer, shall, in Fiji, and no person resident in Fiji other than an authorized dealer shall, outside Fiji, buy or borrow any gold or foreign currency from, or sell or lend any gold or foreign currency to any person other than an authorised dealer."

2.26 This provision applies to those resident in Fiji and prohibit residents of Fiji from borrowing or selling foreign currency to any person unless they are authorized dealers.

2.27 There is no evidence that Plaintiffs as residents of Fiji borrowed any money from any person or sold to any person any foreign currency in breach of this section.

2.28 Section 7 of the Exchange Control Act provides:-

"7. Except with the permission of the Minister, no person shall do any of the following things in Fiji, that is to say:-

(a) make any payment to or for the credit of a person resident outside Fiji; or

(b) make any payment to or for the credit of a person resident in Fiji by order or on behalf of a person resident outside Fiji or

(c) place any sum to the credit of any person resident outside Fiji:

Provided that, where a person resident outside Fiji has paid a sum in or towards the satisfaction of a debt due from him, paragraph (c) of this section shall not prohibit the acknowledgment or recording of the payment."

2.29 The effect and rationale for this provision was stated by Fiji Court of Appeal in Ruggiero v. Bianco [1998] FJCA 58; Abu0061.97 (7 October 1998) as follows:-

"When reduced to its essentials the section says that, except with the permission of the Minister, no person shall in Fiji make any payment to a person resident in Fiji either by order of a person resident outside Fiji or on behalf of a person resident outside Fiji. The purpose of s.7 appears to be that of controlling the outflow of money from Fiji without the consent of the appropriate authorities in Fiji - a necessary part, no doubt, of the machinery to maintain economic stability in Fiji. The control is extended in s.7(b) to money paid "by order or on behalf" of a non-resident to a Fiji resident, but these words are not apt to cover a payment made in Fiji directly by a non-resident. Section 7 is not directed at what was done here, which was a transaction within Fiji involving money already in Fiji and which was not going to leave Fiji or create obligations outside Fiji."

2.30 In this instance there is no allegation or evidence that Plaintiffs took money out of Fiji. The consideration sum for the vessel was paid by Plaintiff from Australia to the then owner of the vessel in Kiribati and Plaintiffs sent money to Fiji towards cost of maintenance of the vessel.

2.31 Whether Plaintiffs did breach s.7 of Exchange Control Act cannot be decided by way of Affidavit evidence but by oral evidence.

2.32 As stated earlier it is not disputed that Plaintiffs paid consideration sum for the vessel and contributed towards maintenance cost of the vessel.

2.33 Plaintiff even though not claiming specifically for judgment for consideration sum and returns of the monies paid towards maintenance costs they have claimed for general damages which includes claim for consideration sum and maintenance costs.

2.34 Plaintiffs claim is inadequate in respect to alternative relief sought in the Statement of Claim.

2.35 Plaintiff needs to particularise each of alternative remedies or relief sought and break in into special and general damages.

2.36 Only because Plaintiffs claim is inadequate does not mean the claim is an abuse of court process.

2.37 After analyzing all the Affidavit evidence and Submissions of the parties I hold that Plaintiffs claim is not an abuse of court process and needs to be tried fully by oral evidence.

2.38 I therefore have no alternative but to dismiss Defendants Striking Out Application.

3.0 Application to Determine Preliminary Issue
3.1 In view of my comments in respect to Striking Out Application and the facts that same witnesses will be called to prove ownership of the vessel and claim for damages and as such there is no need to determine these two matters separately.

3.2 Even though there is some evidence which suggests that Plaintiffs breached provision of FIA there is a need to determine the issue as to ownership of the vessel and circumstances under which Seamech Ltd became the registered owner of the vessel by oral evidence.

3.3 I therefore have no alternative but to strike out Application to determine present issue as well.

3.4 As such for both applications I am of the view in the nature of applications it is prudent to reserve costs and that costs be in the cause.

4.0 Order

4.1 I make following Orders:-

(i) Defendants Application to Strike Out the Amended Statement of Claim by Summons dated 25 March 2013, be dismissed and struck out;

(ii) Plaintiffs Application to determine preliminary issue by way of Summons dated 19 December 2012, be dismissed and struck out;

(iii) Costs of both applications be costs on the cause.

K. Kumar
Judge

At Suva
30 September 2015

O'Driscoll & Co. for the Plaintiffs
R. Patel Lawyers for the Defendants