IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. 70 OF 2001

Between:

SYDNEY JAMES LEE and
JACQUELINE ROSEMARIE LEE
Plaintiffs

and

ESTATE MANAGEMENT SERVICES LIMITED
Defendant

and

MINAMI-TAIHEIYO KAIHATSU KABUSHIKI KAISHA
Third Party

Mr. Nilesh Prasad for the Plaintiff
Mr. P. Knight for the Defendant
Mr. A. Bale for Third Party

Date of Judgment: 24 August 2005

JUDGMENT

In this action (Civil Action No. 70 of 2001S) there was an appeal to Court of Appeal against the judgment of Scott J (now Judge of Appeal) given on 21 August 2002.

The primary Judge entered summary judgment for the plaintiffs (who were respondents in the said appeal) whereupon the defendant (who was appellant in the said appeal) challenged the quantum of Scott J’s award and order for costs.

As a result of the following orders made by the Court of Appeal on 30 May 2003 the following issues have been remitted to this court for trial:

“The appellant is given leave to defend as to quantum in respect of the following issues:

a)	the respondents’ claim arising out of the successive devaluations of the Fiji dollar; and

b)	the respondents’ claim for compound interest from 22 April 1987 to 5 April 2002 at the rate of 13.5% per annum;” 

This matter was referred to me on 25 June 2004 by Fatiaki J (now Chief Justice) to hear. The parties appeared before me on 19 July 2004 when I made orders to file further affidavits. After the filing of written submissions the matter was heard by me on 23 November 2004. Both counsel relied on their written
submissions.

Background facts

Although the background facts are contained in the High Court and Court of Appeal judgments I think I ought to reiterate certain portions of it here for the sake of completeness and easy reference as a background to the case.

By an agreement dated 22nd June 1982 Sydney James Lee and Jacqueline Rosemarie Lee (hereinafter referred to as the ‘Plaintiffs’) contracted to purchase a piece of land at Pacific Harbour being a freehold property described as Lot 1250 on the Provisional Plan of the subdivision approved by the Subdivision of Land Board on 9th January 1970 being part of land in Certificate Title 10913 for the sum of FJ$14,000. The Plaintiff then proceeded to make the necessary payments for the said lot as stipulated under the agreement and the final payment was made on the 22nd of April 1987. The contract provided that upon this final payment Estate Management Services Limited (hereinafter referred to as the ‘Defendant’) would have already carried out various development works on the said land and effected a transfer of title and given vacant possession thereafter to the Plaintiffs.

It is essential to this case to note the course that was taken by the Plaintiffs after the date of the final payment. At this date the Defendants had failed to discharge their obligation under the contract. However following this there were persistent enquiries made by the Plaintiffs to the Defendant between 1987 and 1989 calculated towards having the contract completed, but to no avail. In the words of the Court of Appeal “hopes for a resolution short of litigation between the parties initiated by the Plaintiffs was not fulfilled”. On 30th October 1992 a letter of demand was sent to the Defendant for the transfer of the land and this letter was replied to by the Defendant to the effect that the land was not developed; that they could not issue title; and that the land was sold to the third party viz Minami-Taiheiyo Kaihatsu Kabushiki Kaisha (a Japanese Company). Following further efforts for a resolution recourse to litigation was eventually chosen by the Plaintiffs. Thence only did the Plaintiffs commence an action for breach of contract against the Defendant bearing in mind the success of the action in Peter Gervaise Joseph Erye v. Estate Management Services Limited and Miniami-Taiheiyo Kaihatsu Kabushiki Kaishua Civil Action No. 407 of 1992.

The specific particulars of claim relevant here are:

a)	Payment of the sum of F$14,000 together with any devaluation exchange losses occurred to the Fiji currency since payment by the Plaintiffs to the Defendant.

b)	Interest at the rate of F$13.50 as charged on overdrafts by commercial banks in Fiji on the said sum of $14,000 or at such other rate as the Court thinks fit and/or under the provisions of the Law Reform (Miscellaneous Provisions) (Death and Interest) Act.

These claims were granted by the High Court with the sums as stated above. On appeal the Court of Appeal held:

1.	The appeal against the judgment in favour of the respondents against the appellant for FS91,206.09, is allowed and the judgment is vacated.

2.	In lieu thereof there will be judgment in favour of the respondents against the appellants for the sum of $14,000.

3.	The appeal against the order for costs of F$1500 in favour of the respondents against the appellants is dismissed.

4.	The sums of F$14,000 and F$1500 referred to in orders 2 and 3 are to be paid to the respondents within 14 days of the delivery of the Judgment.

5.	The appellant is given leave to defend as to quantum in respect of the following issues:

a)	The respondents claim arising out of the successive devaluations of the Fiji dollar;

b)	The respondents claim for compound interest from 22/04/87 to 05/04/02 at the rate of 13.5% per annum.

6.	The action is remitted to the High Court for the trial of the two issues for which leave to defend has been granted to the appellant.

7.	Any further directions as to the trial are to be given in the High Court.

The grounds on which the appellants appealed were:

1)	Judge erred in allowing the devaluation of the Fiji dollar to be factored into damages awarded to Plaintiffs when the agreement for sale and purchase was expressed in Fiji Dollars.

2)	Judge erred in allowing interest at 13.5%. Here the appellant attacked the commencement dated of 22nd April 1987 (the date when the final instalment was paid on the lot) and the period for which interest was awarded as 22 April 1987 to 5 April 2002.

3)	The Appellant complained that the judge erred in fixing the costs at $1500.00.

The present proceedings

I shall now deal with the issues before me.

(a)	Plaintiffs’ argument

(i)	On the issue of devaluation it is the plaintiffs’ submission that the balance of the purchase price the sum of F$10,500 was paid by the plaintiff in instalments of F$639.39 from Australia. The total sum was paid by 22 April 1987.

In their written submission the plaintiffs state that the Fiji dollar was devalued in various percentages from June 1987 to 20 January 1998. As a result the total devaluation exchange loss suffered by the plaintiff came to A$7085.99.

Counsel for the plaintiffs referred the Court to the New Zealand case of Isaac Naylor & Sons Ltd v New Zealand Co-operative Wool Marketing Association Ltd ([1981] 1 NZLR 361) where the claim for exchange losses was considered. Counsel submits that the situation in that case was the same as in the present case.

The plaintiffs want the Court to apply similar principles as in Issac Naylor case. They say that had the defendant been ready to conclude the transaction by 22 April 1987 this action would never have arisen. The devaluation of the Fiji dollar first occurred on 29 June 1987.

Counsel submits that applying the principles of damages for breach of contract, the exchange loss in the present case was not too remote and ought to be allowed.

(ii)	Interest

On the issue of interest the plaintiffs submit that they are entitled to interest on the purchase price paid by them (Peter Gervaise Joseph Eyre v Estate Management Services Limited and Anor. C.A. No. 407/92 – 30 April 1997 – Pathik J).

There the rate of interest awarded was 7%.

(b)	Defendant’s submission

(i)	On devaluation the defendant submits that there is no sustainable basis as to why the devaluation of the Fiji dollar should be taken into account in determining the amount to the plaintiffs.

It is further submitted that at the time the sale and purchase agreement was entered into, the devaluation of the Fiji Dollar was not reasonably foreseeable and therefore should not be taken into account in an assessment of damages.

(ii)	As far as interest is concerned it is the defendant’s submission that compound interest is not allowed under section 3 of the Law Reform (Miscellaneous Provisions) (Death and Interest) Act, Cap. 27.

The defendant further submits that under that Act the amount of interest is discretionary and can only be awarded for the period between the date when the cause of action arose and the date of judgment.

The defendant submits that interest should commence from 15 February 2001 (date writ of summons filed) or at the very earliest 30 October 1992 i.e. the date of the solicitor’s letter of demand.

Determination of the issues

There are two main issues for Court’s determination, namely ‘devaluation’ and ‘interest’.

Devaluation

On devaluation the plaintiffs claim that the total devaluation exchange loss suffered by them comes to A$7,085.99.

I have considered the arguments put forward by them on this aspect.

I agree with the submissions made by counsel for the defendant.

The claim is in Australian dollars. The contract price is in Fiji dollars, namely, F$14,000.00 and the plaintiffs’ obligation was to pay in Fiji dollars.

This was a case which is based on a claim on repayment of the purchase price herein.

The plaintiffs have raised a novel point. 

The parties entered into a contract of sale and purchase. Like other clauses in the agreement, a provision for ‘devaluation’ should have been inserted therein in so many words if that was in contemplation at the time of entering into the agreement.

The parties did not do so and the Court is not going to make an agreement for them. Payment for devaluation is not something which is the natural consequence in a sale and purchase agreement. All that the defendant as vendor is entitled to is the payment in the currency stated in the agreement.

The plaintiffs rely on the authority of Isaac Naylor and Sons Ltd (supra). I am of the view that this case should be distinguished as far as the facts go. The Plaintiff in that case claimed for losses caused by delays on the part of the Defendant in taking delivery of a certain consignment of wool. The delay had the effect of postponing the dates when the payments fell due. Between the last dates when payments could have been made had the shipping instructions been given in accordance with the contracts and the actual dates of payment the value of the sterling fell in relation to the New Zealand dollar. It was held, inter alia, in that case that:

“1.	In contracts made in international trade and resulting in the exchange of currency by one party, there is no special rule against the recovery of exchange losses. Such losses will be recoverable if the criteria ordinarily applied in damages cases in contract are satisfied. On the facts the exchange loss was not too remote. The true measure of the plaintiffs loss was the sum required to put it in the position it would have achieved in New Zealand dollars if the contract had been properly performed.”

It can be deduced from the case that the delay mentioned in the above authority is of a different nature to that in the present case scenario. In the said authority the delay led to the incurring of costs that when it actually came to the day of making payment that was an additional weight on the part of the person paying to bear the costs of the exchange fluctuation then he would have had the contract been fulfilled at the time agreed. Further to this it appears that the very nature of trade requires that parties be open to risks and one of these is obviously the willingness to assume the costs related to changes or fluctuations in currencies. It could also be apparent from this degree of foreseeability that is characteristic of international trade transactions raises that possibility and suspicion in these cases that such a degree may allow people to cause delay willingly in the hope that the exchange currency fluctuations is taken advantage of.

In the present case the devaluations of the dollar came in after the making of the final payment. The question of the scope of accounting for devaluation therefore in this case is outside the scope of the facts that was used to justify accounting devaluation in the above authority where the delay actually separated the supposed date of payment of the contract price from the date of actual payment. And in the space of time in between the fluctuations occurred that directly affected the performance of the contract as far as consideration was concerned.

Claim for interest

As far as the claim for interest is concerned, there is dispute as to what the plaintiffs are entitled to.

The question and the issue is whether they should be paid compound interest on the purchase price paid by them.

Under Law Reform (Miscellaneous Provisions) (Death and Interest) Act Cap. 27 the Court has a discretionary power to award interest. The period for which it is to be given is also discretionary.

In Halsbury Vol. 32 4th Ed. para 106 it is stated:

“Interest is the return or compensation for the use or retention by one person of sum of money belonging to or owned by another.”

Although there is no agreement to pay interest in the contract in case of default, nevertheless, at common law interest is payable where “it can be implied from the course of dealing between the parties or from the nature of the transaction” “in certain cases by way of damages for breach of a contract”. (Halsb. ibid para. 108); and where a particular relationship exists, such as vendor and purchaser, as here, there is an equitable right to interest “and where the purchaser is entitled to rescind the contract and recover his deposit, he is entitled to interest on the deposit” [Day v Singleton (1899) 2 Ch. 320 at 327, C.A., Halsb. ibid para 109 n.5].

The principle regarding payment of interest, as enunciated by Lord Herschell LC in London Chatham and Dover Rly Co. v South Eastern Rly Co. (1893) A.C. 429 at 437 and which has been repeatedly cited and followed is:

“…I think that when money is owing from one party to another and that other is driven to have recourse to legal proceedings in order to recover the amount due to him, the party who is wrongfully withholding the money from the other ought not in justice to benefit by having that money in his possession and enjoying the use of it, when the money ought to be in the possession of the other party who is entitled to its use. Therefore, if I could see my way to do so, I should certainly be disposed to give the appellants, or anybody in a similar position, interest upon the amount withheld from the time of action brought at all events.”

Now as to the period, the Plaintiffs in my view can only claim interest from the time they wrote to the defendant on 30 October 1992 and later came to know that the land was already sold to a Third Party. Before that the Plaintiffs were not concerned as they did not ascertain the situation. That would be the time when I would say the cause of action arose. The award of interest is a discretionary matter and “among other factors, unreasonable delay by a plaintiff in prosecuting a claim may lead a court not to award interest for the full period from the date of the loss”. (McNeill J. in Metal Box Ltd v Curry Ltd 1987 QBD 341 at 346). Here it is obvious that the Plaintiffs were unconcerned until 1992.

I now turn to the question of the rate at which interest is to be paid.

The plaintiff’s argument is that the commercial banks’ lending rates in Fiji for the period 1987 to July 2004 was 11.24% according to details supplied by the Reserve Bank of Fiji as they appeared in their Quarterly Review. They are asking this Court to award interest at the same rate.

The defendant on the other hand argues that there is no evidence that between 1987 and 2003 the plaintiffs were in overdraft.

It submits that the appropriate rate of interest to be awarded under the act is the rate that banks would have paid if the debt had been paid and placed on deposit with the bank. It says that the average interest rate paid by banks on savings deposits between 1987 and 2003 is about 3% per annum.

The plaintiffs’ calculation is for period 1987 to 2004 whereas the defendant’s is 1987 to 2003. I reject the defendant’s method of calculation for some bank only give one per cent. That would be a most unjust method of calculating interest in a situation such as the present.

The proper method would be the one suggested by the plaintiffs namely, a percentage based on average lending rate.

Therefore in the exercise of my discretion bearing in mind the facts and circumstances of this case interest will be calculated at the figure of 9%. Accordingly that interest is awarded to the plaintiffs from 30 October 1992 to the date of this judgment. It is now a simple matter of mathematics to calculate on the principal sum of F$14,000.00.

The plaintiffs are not entitled to compound interest. If payment of compound interest was in the contemplation of the parties to the agreement then it should have been so stated specifically. There is no intention to pay compound interest according to the agreement.

Payment of compound interest is not something which flows naturally from a breach of contract.

Furthermore, in any case proviso (a) to section 3 of the Law Reform Act does not allow compound interest where it is stated that this section ‘shall’ not ‘authorise the giving of interest upon interest’. Even at common law compound interest is only awarded in special classes of cases such as where there is fraud etc (McGregor on Damages 16th Ed. page 670).

The plaintiffs’ counsel referred to Hungerfords & Others v Walker & Others (1990) 171 C.L.R. 125. That case does not apply here because of the very nature of relationship that was existing between the parties, namely, fiduciary relationship.

Conclusion

In the outcome, I hold that the question of allowing fluctuations in the currency to affect damages in this case appears to be out of scope with the particular type of facts that existed on the authorities relied upon by the Plaintiffs. The facts are therefore distinguished from the circumstances of these authorities.

I would say that the alleged devaluation of the Fiji dollar does not affect the agreement between the parties for, inter alia, it was not in their contemplation and as something which would flow from the alleged breach.

It was so held in the House of Lords case of Koufos v C. Czarnikow Ltd [1969] 1 A.C. 350 at 351. It was held:

“that the sole rule as to the measure of damages for any kind of breach of any kind of contract was that the aggrieved party was entitled to recover such part of the damage actually caused by the breach as the defaulting party should reasonably have contemplated would flow from the breach; …”

Secondly, simple interest and not compound interest is to be allowed to the plaintiffs at the rate of 9% from 30 October 1992 to the date of payment of the principal sum of $14,000.

For these reasons I decide on the two questions posed for my determination as follows and order accordingly:

(a)	the plaintiffs are not entitled to their claim arising out of any successive devaluations of the Fiji dollar; and

(b)	the plaintiffs are only entitled to simple interest on the principal sum of F$14,000.00 which I allow but not compound interest at the rate of 9% from 30 October 1992 to the date of payment of the principal sum of F$14,000.00 as ordered by the Court of Appeal.

D. Pathik
Judge
At Suva
24 August 2005