Home | Databases | WorldLII | Search | Feedback Vanuatu Law Reports

Ellis v Attorney General [1985] VULawRp 8; [1980-1994] Van LR 190 (12 December 1985)

[1980-1994] Van LR 190

IN THE SUPREME COURT OF
THE REPUBLIC OF VANUATU

CIVIL JURISDICTION

Civil Case No. 22 of 1983

BETWEEN:

GEORGE ARTHUR ELLIS
of Victoria, Australia
First Plaintiff

GEOFFREY JOHN McINNES
of Victoria, Australia
Second Plaintiff

PHILIP STEPHEN McINNES
of Victoria, Australia
Third Plaintiff

STEVEN HAROLD DOBIN
of Victoria, Australia
Fourth Plaintiff

BERNARD CHARLES ALFORD
of Victoria, Australia
Fifth Plaintiff

GORDON GILL
of Victoria, Australia
Sixth Plaintiff

AND:

THE ATTORNEY GENERAL
representing the Government of Vanuatu
Defendant

Coram: Chief Justice Cooke

Counsel: Mr W. McKeague for plaintiff
Mr Kattan for defendant

JUDGMENT

[CONTRACT - FISHERIES - Sovereign immunity - Government]

On the 16th February 1983, a Writ of Summons was filed in the Supreme Court by the Plaintiffs alleging that the Government of Vanuatu was in breach of contract with them.

On the 23rd February 1983, the Attorney General, on behalf of the Government, filed a Memorandum of Appearance.

On the 10th March 1983, a Summons was filed in the Supreme Court by Mr Silas Hakwa, now the Attorney General, for an order that the Plaintiffs' Statement of Claim be struck out under the Rules of the Supreme Court, and under the inherent jurisdiction of the Court, on the grounds that it discloses no reasonable cause of action against the Defendant, and that the Plaintiffs' action against the Defendant be dismissed.

Mr Hakwa submitted that the Statement of Claim was vague and it was difficult to understand what was the basis of the claim. In a judgment given on the 28th March 1983, I was of the opinion that the alleged contract could be more clearly stated and the consideration set out, thus making it clear to the Defendant the claim he had to meet.

I dismissed the application of Mr Hakwa but ordered that the Plaintiffs amend their Statement of Claim and set out more clearly what the alleged contract was and the consideration therefor.

On the 26th April 1983, an ex parte Motion was filed in the Supreme Court by the Plaintiffs applying that James Crossland, the then Director of Fisheries of Vanuatu, be joined as a Second Defendant in this action and that the Writ of Summons be amended accordingly. This application was heard by me in chambers on the same date and I allowed the application to join Mr Crossland as a Co-Defendant.

On the 3rd May 1983, a Writ of Summons with Mr James Crossland as Second Defendant was filed in the Supreme Court.

On the 18th May 1983, an appearance for James Crossland was entered.

On the 7th June 1983, Mr Crossland wrote to the Court stating that he would not be filing a Defence because of the immunity conferred on him by the Diplomatic Privileges and Immunities Order No. 24 of 1983, which appeared in the Gazette No. 18 dated 6th June 1983. In view of such, he asked the Court to strike out his name as a Defendant in this action.

On the 8th June 1983, Mr Hakwa filed a Defence on behalf of the Government of Vanuatu.

On the 19th January 1984, Mr McKeague who was now briefed on behalf of the Plaintiffs, applied to the Court for an order that interlocutory judgment be entered against the Second Defendant in that he has failed to enter a Defence to the Statement of Claim.

On the 13th February 1984, this application was heard by me. Mr Silas Hakwa (Amicus Curiae), for James Crossland, stated that the said James Crossland claimed immunity, being assigned to the Vanuatu Government by the Food and Agricultural Organisation of the United Nations (F.A.O) and by virtue of the Diplomatic Privileges and Immunities Act No. 9 of 1982 which came into force on the 24th May 1982. After hearing Mr Hakwa and Mr McKeague, I dismissed the application as I considered Mr Crossland was protected by virtue of his assignment and under the Diplomatic Privileges and Immunities Act No. 9 of 1982. Accordingly, I struck out Mr Crossland from the case.

On the 9th August 1985, the matter came before me in chambers by way of a Summons for Directions. Mr Kattan, Solicitor General, with Mr Julia Ala, Legal Officer, appeared on behalf of the Attorney General.

Mr Kattan submitted there were certain matters which should be dealt with by way of preliminary objection. That the evidence of James Crossland should be accepted by a sworn Affidavit, as he now resides in New Zealand. That no amended statement of Claim had ever been filed as ordered in my judgment of the 28th March 1983. Mr McKeague stated he wanted Mr Crossland for cross examination. In view of the request for the presence of Mr Crossland, Mr Kattan asked for the increase of the bond to cover security for costs to be increased from 100,000VT to 200,000VT. I allowed this application and set the matter down for further hearing, regarding issues, to the 17th September 1985.

On the 17th September 1985, Mr Kattan with Mr Ala appeared for the Attorney General and Mr Gee, an associate of Mr McKeague, appeared for him.

An undertaking was given by Mr Kattan that the draft Affidavit of Mr Crossland would be sent to him in New Zealand and when it was returned, it would be passed to the Plaintiffs to ascertain whether the would require Mr Crossland for cross examination. The Statement of Claim was filed on the 16th September 1985 and the amended Defence was filed on the 17th September 1985.

Mr Kattan then submitted that subsequent to draft issues being agreed and following on amended pleadings, there were preliminary issues on law which he submitted should be dealt with before the hearing. That if the preliminary objection is accepted by the Court, it could dispose of the action. This may save costs and does not require witnesses.

After hearing both Mr Kattan and Mr Gee, I adjourned the matter to the 10th October 1985 for submissions on the issues:-

1. Do the facts as pleaded disclose an enforceable contract between the parties? and
2. Do paragraphs 21 to 27 of the Statement of Claim (as amended) disclose a cause of action against the Defendant in misrepresentation?

On the 10th October 1985, Mr Kattan appeared for the Attorney General and Mr McKeague appeared for the Plaintiffs.

Mr Kattan requested an amendment that the Defendants should be more accurately described as the Attorney General representing the Minister for Fisheries. I allowed the amendment.

Mr Kattan outlined the facts as stated aforesaid. He submitted that after the Plaintiffs amended their Statement of Claim, the allegation of the existence of a contract is still vague and consideration not clearly established. He submitted it was not possible to establish with any precision the subject of the contract and the consideration therefor.

Mr Kattan referred to paragraphs 10, 11, 12, 14 and 15 of the Statement of Claim filed on the 16th September 1985:-

10. In or about April 1981, the First Plaintiff gave to the Director a Project Proposal for the exploitation of deep water shrimp in Vanuatu. At this time, and at the request of the Government, the First Plaintiff also gave the Director a proposed fishing plan.
11. At or about the same time referred to in paragraph 10, the Director advised the First Plaintiff that the Government was in agreement with and approved of the proposals received from the First Plaintiff and that the Minister of Fisheries would formally approve the proposals and the Plaintiffs would be permitted to commence their enterprise in Vanuatu.
12. As a result of the written proposals and verbal discussions between the Plaintiffs and the Director, the Plaintiffs were, in a letter from the Director dated 17th August 1981, given authority to carry out trial fishing around South Efate for a period of 6 months subject to various conditions as set out in that letter.
14. The proposals for prawn fishing accepted by the Director on behalf of the Government of Vanuatu, together with the conditions of approval set out in the letter of Approval from the Government dated the 17th day of August 1981, constitute contractual terms of agreement between the Plaintiffs and the Defendants and constitute the terms and conditions upon which and in consideration for which the Government of Vanuatu gave approval to the Plaintiffs to carry out prawn fishing.
15. In consideration for such approval, the Plaintiffs expressly or impliedly undertook to conduct their operations in the manner set out in their proposals and subject to the conditions of approval, such consideration being of direct and indirect benefit to the people of Vanuatu in whose interests and in whose behalf the Government is deemed to have been acting.

Those paragraphs purport to set out the agreement and the consideration. The consideration is alleged to be the facts stated in paragraph 15. That it would appear that reference to benefits of the people of Vanuatu are benefits stated in paragraphs 6, 7 and 8 of the Statement Claim:-

6. The prawns available for harvesting within the territorial waters of Vanuatu constitute a natural resource, the harvesting, processing and sale of which both for internal consumption and for export, constitute a means of creating employment opportunities and business opportunities for the people of Vanuatu and a source of direct and indirect income for the Government of Vanuatu.
7. It is in the interests of the Government acting on behalf of the people of Vanuatu to promote and enable the harvesting, processing and sale of prawns.
8. It is in the interests of the Government (such interests deemed also to be the interests of the people of Vanuatu) to allow the Plaintiffs to undertake prawn fishing subject to terms and conditions which would ensure or lead to the creating of employment opportunities, business opportunities and collection of revenue for the Government of Vanuatu.
"It is my submission", said Mr Kattan, "such consideration is illusory and speculative and has no basis in law or fact." He submitted this was never contemplated by the parties at the time of the agreement and was only put in after the Court requested the first Statement of Claim to be amended.

He submitted that what the Plaintiffs were seeking in 1981 was that the Government exercises executive authority to grant to the Plaintiffs an approval for them to enter the country and carry out a fishing project. That it was clear from the pleadings that such was granted for them to enter the country and carry out a fishing project but that the Plaintiffs were no different from any other overseas investor who sought the approval of the Government to invest in Vanuatu. He submitted that an approval by Government can never be the subject of a contract.

Mr Kattan's submissions can be summarised as follows:-

(a) That the Government could not have contemplated it was entering into contractual relations with every person who wanted to invest in the Republic.
(b) That the Government, in granting such approval, is exercising its constitutional duties of governing the Republic and in so doing it is required to regulate investors and their activities for the benefit of the general public.
(c) That, at best, he submitted such an approval represents an informal undertaking that it will act or not act in a certain manner in respect of a person seeking its approval.
(d) That the grant of such approval is not guaranteed that the Government would not take a course of action in the public interest which would be detrimental to the persons to whom approval is given.
(e) That if reference is made to the language in paragraphs 5, 11, 12, 14, 15, 17, 19 and 20 of the amended Statement of Claim, words such as "approval" and "permission" appear over and over again and that finally in paragraphs 19 and 20, the Director ordered the operations of the Plaintiffs to cease immediately. These, Mr Kattan submitted, are words more consistent with executive approval than with contractual relationship.

Mr Kattan then submitted that the facts of the case would be totally different if the Plaintiffs had come to Vanuatu after 8th August 1983 when the Fisheries Act No. 37 of 1982 came into force. That under section 8 of the Act, a person who is not a citizen of Vanuatu and wishes to make investment has to take out a licence. That under section 16 of the Act, the Minister may suspend or cancel a fishing licence and further that the long title to the Act states that the Act is to provide for the control, development and management of fisheries and matters incidental thereto.

He submitted that the Plaintiffs' application for approval, the grant of approval and subsequent revocation of approval is not very different to approval under the Act and subsequent cancellation; that whereas in 1981 there was no Act regulating fisheries, the Minister was exercising his Constitutional right and power to control fisheries. Mr Kattan submitted that whereas subsequent to the Act, he would be exercising specific powers but that it should not make any difference whether the Minister exercised general powers freely in 1981 or specific powers under the Act. Therefore he submits that as approval under the Act would not amount to a contract between the Minister and licensee, so it could not be, in absence of Act when the Minister was exercising general powers.

Mr Kattan then submitted that if the Court were to hold that the Statement of Claim discloses a contract, he contends as an alternative submission that the Government by its very nature is distinct from a private individual and that actions taken by the Government are normally taken in the interests of the Public as a whole and that there was an authority that where Government breached alleged agreement by taking measures in the public interest, the Courts have refused to enforce such contracts.

He referred to the Commissioner of Crown Lands v Page (1960) 2 QB 274, the obiter dictum in that case at page 292 by Mr Justice Devlin and further to the case of Rederiaktiebolaget Amphritrite v The King (1921) 3 K.B. p. 500 where it was held: that the Government's undertaking was not enforceable in a Court of Law, it not being within the competence of the Crown to make a contract which would have the effect of limiting its power of executive action in future.

Mr Kattan submitted that the facts alleged in that case are similar to our case.

That the Plaintiffs were given approval to come and fish and that the Government, through the Council of Ministers, cancelled the Plaintiffs approval. He stated that Mr Crossland who was the Director of Fisheries has filed an Affidavit. Annex "C" is a letter from the Director of Fisheries dated 17th August 1981 which states:

"The Ministry of Agriculture, Forestry and Fisheries has agreed to your group's proposal to carry out trial fishing for deep water prawns for a period of six months around South Efate. I would like to set out below the principles under which the trials are to be carried out.

1. The Ministry gives the right for the prawn group to carry out fishing operations for prawns using traps for a six month period beginning 1st August 1981.
2. The prawn group has the right to access to shore and port facilities and the right to sell the catch on the local market.
3. The Fisheries Department will assist by providing technical advice, but the Government is in no way financially responsible for the project.
4. The group has the right to use up to two boats for their operations.
5. The group will keep full records of operations and catches and make these freely available to the Government.
6. The group will involve local people to the maximum extent possible in fishing and on-shore operations.
7. Personnel of the Fisheries Department will have access to the boats as required to carry out observer duties."

There was a letter of the 1st September which altered the starting date to the 15th September 1981. (Annex "E").

There is also a letter dated the 17th August 1981 from Mr Crossland, complaining about the behaviour which is pertinent to this case, which states:

"Last week we came to a verbal agreement for the Fisheries Department to assist your prawn fishing group with some trials during the remainder of this month.

Certain events have caused me to reconsider this agreement.

1. On Thursday 13th August I returned to the office about 1645 to observe two of your group preparing one of our catamarans for sea in order to set the prawn traps. One of your group placed on board a carton of beer.
This kind of irresponsible behaviour is inexcusable.

2. On Monday 17th August I was visited by the Harbourmaster, Capt. J. Walls, who came to report that one of his pilot vessels had nearly collided with the buoy from your group's fish trap which was placed directly in the shipping channel. The Harbourmaster further told me that his boat had previously removed the fish trap on a separate occasion because it was obstructing the channel, and had spoken to you about it.
3. The flags on your buoys are marked "Fisheries Department", whereas your group has no connection with the Department. This misidentification is to be removed at once.
Would you please call at my office at your earliest convenience to explain what steps you intend to take to ensure that further unsatisfactory activities do not occur. Otherwise I will consider the Department's assistance to your group at an end."

Another letter of the 17th August 1981 from the Plaintiff Ellis to Mr Crossland is pertinent:

"With reference to your letter setting out the conditions for our deep water prawn trapping trials, we feel that section one gives cause for some concern. In our proposal headed "Fishing Plan", section 5.8 clearly requests that the six month trials will commence as soon as our vessel is built. This will not be accomplished until approximately the middle of September. You will I'm sure understand that proper trials cannot be done without a suitable vessel used on an exclusive and regular basis. Clarification of this point will help relieve our anxiety. All other points in your letter are clearly understood and in keeping with our original proposal."

This being so, the Plaintiff must be taken to have fully understood that the Government was in no way financially responsible for the project.

A letter of the 2nd November 1981 is also relevant (Annex "F"). It reads:

"The paper on the above project was recently submitted to the Council of Ministers for decision. I regret to advise that the project proposal was rejected by the Council.

The Council rejected the survey being conducted by a private business organisation. The Council is of the opinion that should further survey be carried out to complete the project, then USP should be requested to resume the work on behalf of the government. Furthermore it should do this with the local people who should be helped to exploit the prawn resource on a commercial basis. The Council further agreed that all marine research or survey programme within the territorial waters be restricted to the government for the people of Vanuatu and not be allowed to foreign private business persons.

To follow up the decision of the Council of Ministers could you please do the following:

1. Advise the group of the government decision.
2. Draft a letter for me to the Prime Minister requesting USP to do the survey for us."

Finally the letter marked "G" dated 3rd November 1981 is relevant as it rejects the proposal for deep water prawn survey put forward by the Plaintiffs' group.

All the letters are annexed to the affidavit of James Crossland.

Mr Kattan submitted that even if a contract was held to exist, it would not be an enforceable contract on the principles enumerated in the Amphitrite case.

Mr Kattan then referred to his second submission which related to the Plaintiffs alleged misrepresentation by Government, to the effect that when the Director of Fisheries gave approval on the 17th August 1981, he knew that that approval would be rescinded at a future date.

It was his submission that for the Plaintiffs to succeed, they must show that when the Director and or Minister made the representation set out in the letter of 17th August 1981, as amended by the letter of 1st September 1981, at the time the Director of Fisheries was aware that the Government had no intention of allowing them to fish for six months.

No such allegation is made in the Statement of Claim. He agreed that the Government would be liable for misrepresentation if the Director fraudulently misrepresented facts to the Plaintiffs.

He referred to Clerk and Lindsell on Tort, 15th Ed. p. 843 i.e. "If the Defendant knows his statement to be untrue, he will be responsible." He submitted there was no allegation that at the time when the Director of Fisheries gave his approval he was misleading the Plaintiffs - he stated the true position as it was. The fact that the Government later changed its mind cannot give cause of action for misrepresentation.

Mr McKeague who appeared for the Plaintiffs then replied. On the first issue he submitted that the entire transaction that took place between the parties must be looked at as determining there was a contractual relationship and that Mr Kattan has referred to various factors which, he submits, show that there can be no contract. The first of such is the question of consideration which Mr Kattan attacks as being impossible to establish with any precision. Mr McKeague submitted there are many forms of contractual relationship where the consideration not being specified in monetary terms is none the less valuable consideration A consideration of love and affection being one example.

On the facts before me, I am of the opinion that consideration in any sense or form is not apparent.

Mr McKeague submitted that the benefits to Vanuatu referred to in paragraphs 6, 7, 8 and 15 of the Statement of Claim can be real and tangible consideration.

He submitted that Mr Kattan referred to the benefits as being speculative and never contemplated by the parties at the time of the original agreement but that the Affidavit of Mr Crossland in paragraph 2, second sentence, states:

"I informed the first Plaintiff that he would need to submit a detailed project proposal for consideration by the Ministry."

Sub-paragraph (d): "involvement of local people in fishing and onshore operations."

It was a Government requirement Mr McKeague submitted. There was a complete proposal setting out the intention of the Plaintiffs. That in the letter Annex "C" the first sentence refers to "The Ministry has agreed to your group's proposals." All details necessary having been set out.

Mr McKeague submitted it was quite clear from this and circumstances as a whole that the Department was very much turning its mind as to how the Plaintiffs' activity was going to benefit the Government and whether it was in the Government's interest in the broad sense and that if the Ministry considered the proposals were not of any benefit, it was reasonable to infer that approval would not have been given.

Mr McKeague replied to further submissions of Mr Kattan as follows:

(a) That the Plaintiffs were clearly embarking on a large commercial venture - obviously sought assurances that they would be able to continue as an on going project and were therefore requested and did submit full proposals.
(b) That the concept of executive approval or action or the exercising of Constitutional duties is not a bar to the Court looking to see whether a contractual relationship exists. This was made clear in the case of Laker Airways Ltd v. Department of Trade (1977) 2 A.E.R. p. 182.
(c) That the decision by Rowlette in Rederiaktiebolaget Amphitrite v. The King probably represents the law but it was a case where the Government merely expressed intention to act in a certain way in a certain event but was a case resulting from the war period.
(d) In this case, actual approval was given of certain action by the Plaintiffs - it was hardly a mere undertaking.
(e) The Plaintiffs do not seek to enforce the contract by way of Specific Performance or raise an estoppel - they claim damages.
(f) Following the statement by Lord Denning in the Laker case "The underlying principle is that the Crown cannot be estopped from exercising its powers, whether given in a statute or by common law, when it is doing so in the proper exercise of its duty to act for the public good, even though this may work some injustice or unfairness to a private individual."

On the second submission of Mr Kattan, Mr McKeague replied:

(a) Not concerned with fraudulent misstatements but careless misstatement such as that in paragraph 21 (b) of the Statement of Claim "That approval given to the Plaintiffs in the said letter dated 17th August 1981 would not be revoked, cancelled or otherwise terminated within the period of six months from the 15th September 1981."
(b) It had to be within the Ministry's knowledge that the Plaintiffs were going to undertake their project and act upon the approval and the six months period was a vital element of it.
(c) That the Government giving approval, at the very best represented to the Plaintiffs they could carry on activities for six months.
(d) The essence of the case is that representation was made and permission granted and subsequently withdrawn and such is actionable under the broad concept of careless misstatement.
(e) That the Ministry must have known that the economic effect of the subsequent revocation to the Plaintiffs would be disastrous. Mr McKeague to substantiate his submission referred to the case of Meates v. A.G. [1983] NZLR 308. I will refer to this case later.

The Plaintiffs seemingly were a group interested in carrying out trial fishing for deep water prawns in the waters of Vanuatu and had to seek the approval of the Government before they could undertake their project. With this in mind they got in touch with the Director of Fisheries, James Crossland, (hereinafter called the Director), a person on loan to the Government by the United Nations Food and Agricultural Organisation, and who claimed and was granted immunity in these proceedings. The first Plaintiff was told that he would need to submit a detailed project proposal for consideration by the Ministry.

At the outset, one has to remember that the approach was made by the first Plaintiff. What the Director told the said first Plaintiff was to him routine procedure to anyone making such inquiries. The Plaintiff would have to keep the Director informed of what he was proposing to do and thus the Director would be in a position to pass such information to the Minister and in due course to the Council of Ministers who make the decisions for Government.

The Director, according to his Affidavit, informed the first Plaintiff what the proposal should specify. No mention was ever made that a contract should be drawn up between the parties or that the Plaintiff should be compensated in any way for any of his efforts.

In about July 1981 the Director received the written project proposal from the first Plaintiff which is Annex "A" to the Director's Affidavit. The main proposals seem to be:

2.1 To carry out a 6 month survey to establish the feasibility of deep water trapping.
2.3 To enter into initial negotiations with Ni-Vanuatu with the aim of establishing a joint venture operation following the initial trial period.

Long term objectives

3.1 To establish a joint venture deep water prawn fishing and marketing operation.
Proposals of such joint venture

4.1 Following the initial trial it is envisaged that a joint venture operation will be established with a village community on South Efate etc.
4.2 It is considered that the major part of the profits of the joint venture in the initial stages will be ploughed back into the organisation so that the initial capital investment can be recovered to provide working capital for the establishment of further joint ventures in other areas.
Fishing plan
5.1 For the purpose of conducting the initial feasibility study it is intended to have a vessel built locally etc etc.,
5.7 Unfortunately the accurate costing cannot be determined due to the fluctuating value of the Vatu in relation to the Australian Dollar etc.
5.8 Should permission be given to conduct these trials etc.,
5.9 Should the trials be successful for both the investors and the Ni-Vanuatu participants etc.,

All the matters set out indicate what the Plaintiff intended was that he should be allowed to carry out trials. Nowhere does it state that if the trial period is cancelled, then the Government would have to compensate the operators. Nowhere is it stated that the operators will only carry out the trials if they are guaranteed a clear six months period in which to carry out the trials. They ask for permission to carry out trials without attempting to seek any guarantee should such trials be terminated.

In the letter of the 17th August 1981, marked "C" to the Director's affidavit, and which has been set out in full aforesaid, the Director set out the principles under which the trials are to be carried out for a period of six months.

Paragraph 3 of the said letter categorically states that the Government is in no way financially responsible for the project.

This paragraph should have been a clear warning to the Plaintiffs that the Government were allowing them a trial fishing period but did not wish to be involved financially.

When using the expression "The Ministry of Agriculture, Forestry and Fisheries has agreed to your group's proposal" it seems that the Director was dealing with the matter entirely on his own initiative as he sends a copy of his letter to Mr I. Abbil, Ministry of Agriculture. There is no indication that the Minister consented to the trials. Again the letter marked "E" is from the Director altering the starting date to 15th September.

It would seem that the first indication of the Minister's involvement was when he wrote to the Director on the 2nd November 1981, having raised the matter before the Council of Ministers. It states - marked "F" to the Director's affidavit:

"The paper on the above project was recently submitted to the Council of Ministers for decision. I regret to advise that the project proposal was rejected by the Council. The Council rejected the survey being conducted by a private business organisation. The Council is of the opinion that should a survey be carried out to complete the project, then USP should be requested to resume the work on behalf of the Government. Furthermore it should do this with the local people who should be helped to exploit the prawn resources on a commercial basis. The Council further agreed that all marine research or survey programmes within the territorial waters be restricted to the Government for the people of Vanuatu and not be allowed to foreign private business persons.

To follow up the decision of the Council of Ministers could you please do the following:

1. Advise the group of the Government decision.

2. Draft a letter for me to the Prime Minister requesting USP to do the survey for us. Sethy Regenvanu Minister of Agriculture Forestry & Fisheries"

In due course and as requested by the Minister, the Director wrote to the first Plaintiff - letter dated 3rd November 1981:

"I regret to advise you that the Government of Vanuatu has rejected the proposal for the deep water prawn survey put forward by your group. The Council further decided that all marine research or survey programmes within the territorial waters be restricted to the Government for the people of Vanuatu and not be allowed to foreign private business person. I must therefore advise you that the operations of your group in regard to prawn fishing must cease forthwith."

This is the correspondence that took place between the Director and the Plaintiffs and on which they base their claim that a contract existed between them and the Government and that the consideration was the benefit their operations would bring to the people of Vanuatu.

Mr Kattan from the outset has contended that no such contract existed and the action of the Government was purely an executive act in the public good.

In the case of Commissioner of Crown Lands v. Page at page 292, Devlin L.J., referred to by Mr Kattan, states:

"In some of the cases in which public authorities have been defendants the judgments have been put on the ground that it would be ultra vires for them to bind themselves not to exercise their powers; and it has also been said that a promise to do so would be contrary to public policy. It may be difficult to apply this reasoning to the Crown, but it seems to me to be unnecessary to delve into the constitutional position. When the Crown, in dealing with its subjects, is dealing as if it too were a private person, and is granting leases or buying and selling as ordinary persons do, it is absurd to suppose that it is making any promise about the way in which it will conduct the affairs of the nation. No one can imagine, for example, that when the Crown makes a contract which could not be fulfilled in time of war, it is pledging itself not to declare war for so long as the contract lasts. Even if, therefore, there was an express covenant for quiet enjoyment, or an express promise by the Crown that it would not do any act which might hinder the other party to the contract in the performance of his obligation, the covenant or promise must by necessary implication be read to exclude those measures affecting the nation as a whole which the Crown takes for the public good"

It would seem in this case that the Government, by cancelling the project was doing so in the public good. In the letter of the Minister marked "F" it states:

"The Council further agreed that all marine research or survey program within the territorial waters be restricted to the Government for the people of Vanuatu and not be allowed to foreign private business persons".

Such being the case, the Government would not be bound even if there was any contract existing but in my opinion there was no contract.

The Amphitrite case referred to by Mr Kattan although a very old case and a war time case, is an authority which seemingly has never been upset. There it was held that it was not within the competence of the Crown to make a contract which would have the effect of limiting its powers of executive action in future.

In this case the Government was acting on its Constitutional power in that it had no statutory powers at the time. But the same principles apply; of course where there are statutory powers a Minister must comply with such, as was held in the Laker case, the facts of which bear no resemblance to this case. It is an interesting case in so far as Lord Denning M.R. delves into the law of prerogative power. He related the facts as follows:

"In that case, Laker Airways, after full inquiry, had been granted a licence by the authorities in England. They had been designated as a carrier for the North Atlantic route. They had been granted a permit by the authorities in the U.S.A. Skytrain was ready to take off. It only awaited clearance from control. The one thing that remained was for the President to sign the U.S.A. permit; but this was little more than a formality, seeing that the President was under a treaty obligation to sign it 'without undue delay'. He could be expected to do so in the near future. Unless someone intervened, he would do so. The question is; was it proper for the Secretary of State at that stage to stop it himself? Could he do it by withdrawing the designation, as he said in February 1976 that he intended to do?"

Denning continues:

"In answering this question, It is important to notice that, if there was a proper case for stopping Skytrain, there were available some perfectly good means of doing it. They were already provided by the 1971 Act. One particular means was provided by S.4. Under that section the Secretary of State could himself get the licence revoked. He could direct the Civil Aviation authority to revoke it and they would have to obey. But this was only in carefully defined circumstances, such as in the interests of national security or good international relations. For instance, if the Secretary of State thought that it was in the interests of good relations with the U.S.A. that Skytrain should be stopped, he could direct the Civil Aviation authority to revoke the licence; and they would have to obey without holding any inquiry or hearing Laker Airways at all. But in this case the Secretary of State did not give any directions under S.4. So, presumably, the circumstance did not exist so as to permit him to do so. Another means of stopping Skytrain would be for the British Airways Board to apply again to the Civil Aviation authority asking for the licence to be revoked - for instance, on the ground that traffic would be diverted from them - but, in that case, there would have to be a fresh inquiry. There would have to be a hearing at which Laker Airways could state their case. An independent and expert body would make the decision."

Denning M.R. continues at p. 194:

"Seeing then that those statutory means were available for stopping Skytrain if there was a proper case for it, the question is whether the Secretary of State can stop it by other means. Can he do it by withdrawing the designation? Can he do indirectly that which he can do directly? Can he displace the statute by invoking a prerogative? If he could do this it would mean that, by a sidewind, Laker Airways Ltd would be deprived of the protection which the Act affords them. There would be no inquiry, no hearing, no safeguard against injustice.

The Secretary of State could do it off his own head by withdrawing the designation without a word to anyone. To my mind such a procedure was never contemplated by the Act.

The Secretary of State was mistaken in thinking that he could do it. No doubt he did it with the best of motives. He felt that it was for the public good that Skytrain should not be allowed to start. Nevertheless he went about it, I think, in the wrong way. He misdirected himself as to his powers. And it is well-established law that, if a discretionary power is exercised under the influence of a misdirection, it is not properly exercised, and the court can say so."

In the Laker case the Secretary of State was bound by the Act but in this case no Act existed when the Council of Ministers made their decision that the permission granted to the Plaintiffs should be cancelled. I am satisfied that when they did so they were exercising their duty to act constitutionally for the public good, even though this may work some injustice or unfairness to a private individual.

The Council of Ministers did have the prerogative to withdraw the permission and in my opinion, properly exercised the prerogative and accordingly there would be no case for estoppel.

The Council of Ministers were exercising the prerogative for the public good and are entitled to do so, even though it worked an injustice to someone.

In 9 Halsburys' Laws of England (4th Ed.),paragraph 300 deals with whether or not a contract is to be implied and this usually involves a consideration of whether the parties intended to create legal relations. It states:-

"In many instances there can be no doubt that a legal relationship was intended, and in others it will be equally clear that it was not; but there will also be cases where the matter remains in doubt, and the court is then faced with the task of determining the intention of the parties. Ordinarily, the test will be the objective one of whether a reasonable man would regard the offer made to him as one which was intended to create legal relations; and what is decided may be considerably influenced by the importance of the agreement to the parties, and this is especially the case if one of them has performed his side of the agreement."

On looking at the correspondence between the parties, I am unable to find that there is any contract that can be implied binding the Defendant to protect and indemnify the Plaintiffs to the full extent of their financial undertaking in the scheme.

Mr McKeague, on the second leg of his submission and contained in paragraphs 21 to 27 of the Statement of Claim, referred to Meates case but again I am satisfied the facts therein bear no relation to the facts in this case. In that case the Prime Minister and Ministers were in constant consultation with Meates. The facts are:

"After the 1972 general election Mr K. Meates entered into discussions and correspondence with the Prime Minister, the Minister of Trade and Industry and the Minister of Finance regarding the establishment of industries on the West Coast of the South Island in accordance with the newly-elected Government's policies of regional development. Matai Industries Ltd was incorporated on 9 July 1973 with a share capital of $1 million. One factory commenced operations in Westport before the company was formally incorporated, and four factories were officially opened by the Prime Minister in November 1973. By the time of the official opening the company had a serious cash flow problem. The Government had guaranteed the company's bank account and financial assistance had been provided through the Development Finance Corporation but the Government subsidies expected by Matai had not been forthcoming. The Government was adamant that there should be no retrenchment and appointed a receiver on 19 February 1974. But on 24 September 1974 a decision was made to sell the assets of the company.

The shareholders brought an action against the Government claiming damages of $1 million on the grounds, inter alia, (1) that the Government was in breach of a contract made on 12 April 1973 for the supply of services and the provision of regional development assistance to the company; (2) that the plaintiffs had been induced by negligent statement or advice from the Prime Minister and other Ministers to establish the company to assist the Government with its regional development program and (3) that once the company got into financial difficulties the Minister of Trade and Industry had assured the plaintiffs that if they acceded to the appointment of a receiver their interests would be safeguarded and they would be indemnified; relying on these assurances, they had not taken normal commercial steps to safeguard their own position and consequently had lost the whole of the shareholders' funds. In the Supreme Court the Judge rejected all the plaintiffs' claims and dismissed the action. The plaintiffs appealed.

Held: 1 (per totam curiam): The Government owed the shareholders a duty of care. There was a sufficient relationship of proximity or neighbourhood that, in the reasonable contemplation of the Government, carelessness on its part might be likely to cause damage to the shareholders. Whilst Ministers of the Crown did not as such carry on a business or profession, they necessarily held themselves out as having special knowledge and authority in the fields of their own portfolios or, in the case of the Prime Minister, the major fields of his Government's policy. If they undertook to give specific advice regarding the application of Government policy in given cases, in circumstances where they should have known that their advice would be relied on, they were bound to be reasonably careful. Here there was a clear duty on the Government to be careful in its predictions of official help, in the advice given and the statements made to the shareholders.

2 (per Woodhouse P and Ongley J): The Government had assured the shareholders that they would be indemnified and had resisted any retrenchment, instructing the company to continue trading in the face of continuing losses. The Government's assurances had culminated in a press statement issued jointly by the directors of Matai and the Minister of Trade and Industry which assured employees, creditors and shareholders that their interests would be safeguarded. The encouragement that was offered by the Government was misleading and in breach of the duty to be careful. The undertakings and statements acted upon were an effective cause of the shareholders' loss of the value of their equity. The shareholders' equity was valued as at the date of the receiver's appointment at $340,000 and damages of that amount were awarded. Appeal allowed.

(per Cooke J dissenting): No breach of the Government's duty of care had been proved. Nor had any contract of indemnity, express or implied, been made between the Government and the shareholders. There was nothing in the notes of evidence or the documents which warranted interfering with the trial Judge's view of the facts.

At page 364 Woodhouse J states:

"It is a general complaint that in reliance upon Government promises or assurances that public assistance would be available, the appellants embarked upon and then were persuaded to persist with the Matai project.

On such a basis the only allegation is that the relationship of negotiation was translated into binding commitments in the contractual sense while the other is that at the least it produced a duty of care situation which in terms of the tort of negligence was breached."

From the judgment of Woodhouse J it is abundantly clear that both the Prime Minister, Mr Kirk and another Minister on behalf of the Government gave encouragement to the Plaintiff by its policy of offering incentives for industrial development in provincial and rural areas. Further it was accepted by the Government that in principle some kind of assistance to overcome geographical problems would sooner or later be provided, whether in the form of a capital grant or a running freight subsidy or both.

In that case the final conclusions are set out at page 391 which I will repeat to show that in my opinion the Court of Appeal were correct in their finding on the facts therein but bear no relation to the facts in this case.

Conclusions:

1. A mutually intense effort to support industrial development on the West Coast created about 230 jobs some of which remained.

2. But money problems for Matai grew faster than the attention to them it was thought (in Government and official circles) they could or should properly receive.

3. So that by January and February 1974 the shareholders appear to have lost about two-thirds of their original investments of $1 million.

4. Prompt action then to cease operations and realise the assets to best advantage would have enabled all claims against the company to have been met out of its own resources. But there were the inhibiting factors of the Matai opening held so publicly and so recently; and understandable reluctance to put an end to employment and help for the local economy.

5. However, the remaining one-third of their original investment could have been salvaged in favour of the shareholders if prompt action had been taken.

6. In that situation it follows that the losses of the Government amounting to $4.1 million arose during and as a result of the receivership.

7. At one point in his judgment the Chief Justice spoke of the actual implementation of assistance available under the regional development scheme. He said that the shareholders "were, no doubt, motivated by the anticipation of such assistance in pressing ahead with the projects on the West Coast." Then he said: "The development assistance offered became more difficult of attainment, however, when the policies came to be implemented and fell under the scrutiny of Department officials."

8. That remark may point to the basic problem underlying this case: the inability of the machinery of Government to accommodate itself to a novel situation.

9. The situation itself was the outcome of the Government's commitment to a socially desirable development programme. Its wish to give practical effect to that policy on the one hand and the normal responsibilities of the Departments on the other to take sufficient time to carefully process and scrutinise any application for Government aid were probably pulling in opposite directions.

10. While Ministers naturally enough were in favour with pushing on with the Matai project and said so, their advisers in terms of their conventional approach to this kind of investigation were recommending caution and a degree of delay. Unfortunately caution was overtaken by events.

In the case before me, the Government, a Minister or Director gave no assurances or encouragement of any kind. In fact the Director clearly stated in his letter of the 17th August 1981 marked "C" to his affidavit that the Government is in no way financially responsible for the project From the letters that passed between the parties, I am of the opinion that the position of the Government was so clear that the Plaintiffs could not possibly be under any illusion that the Government were holding out any hope of anything resulting from their voluntary trials. In my opinion, Mr Crossland, by virtue of the correspondence he had with the Plaintiffs and the evidence contained in his sworn affidavit, did not make any false representations to the Plaintiffs as alleged in paragraphs 21 to 27 of the Statement of Claim.

As I am of the opinion that no contract existed between the parties and is unenforceable if such did exist, and as I hold that the Director of Fisheries did not make any misrepresentation to the Plaintiffs as set out in paragraphs 21 to 27, the claim of the Plaintiffs fails.

There will be judgment for the Defendant with costs.

12 December 1985

FREDERICK G. COOKE
CHIEF JUSTICE