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K. Naidu Investments Proprietary Ltd v Merchant Finance and Investment Company Ltd [2009] FJHC 367; HBC333.2009 (16 November 2009)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION HBC 333 OF 2009

BETWEEN:

K NAIDU INVESTMENTS PROPRIETARY LIMITED
PLAINTIFF

AND:

MERCHANT FINANCE AND INVESTMENT COMPANY LIMITED
DEFENDANT

Ms R Karan for the Plaintiff

DECISION

This is an ex parte application for an interlocutory injunction restraining the Defendant from proceeding to dispose of six vehicles by auction or otherwise until the determination of the proceedings commenced by Writ.

The application was filed on 4 November and was supported by an affidavit sworn by Krishna Sami Naidu on 3 November and also filed on 4 November 2009.

The application came before me in the afternoon of 4 November 2009 as a matter of urgency.

Having read the affidavit in support and after hearing Counsel for the Plaintiff I indicated that the application for the interlocutory injunction was rejected. These are my reasons for that decision.

I accept the evidence in the Plaintiff’s affidavit that the Defendant had placed an advertisement in the Fiji Times last Saturday (31 October 2009) indicating that the vehicles the subject matter of the application were available for inspection and were to be auctioned on Thursday 5 November 2009 at 4.30p.m. I find therefore that it was appropriate to bring an ex parte application as a matter of urgency.

The relevant material in the Plaintiff’s affidavit can be stated briefly.

The Plaintiff is engaged in earth moving works, logging and conducts a trucking business. The Plaintiff has obtained finance from the Defendant over a number of years for the conduct of its business. The Plaintiff’s plant and equipment was the subject of a Bill of Sale held by the Defendant until full and final payment of all outstanding loan amounts. The relevant loan agreement was dated 28 March 2008. The last Bill of Sale was dated 30 May 2007.

In its affidavit, the Plaintiff claims that plant and equipment became damaged in March 2008 as a result of flooding in Labasa. The plant and equipment could not be used and the Plaintiff was unable to perform contract works and as a result fell behind in its payments to the Plaintiff.

As at 30 April 2008 there was an amount of about $20,000 owing to the Plaintiff pursuant to the loan agreement. At about that time the Defendant instructed its bailiff to take possession of certain plant and equipment belonging to the Plaintiff as a result of the default.

The Plaintiff, in the affidavit, appears to complain that such seizure was effected without notice. However Counsel conceded before me that there was no requirement in either the loan documents or the Bill of Sale that notice be given by the Defendant. Counsel submitted that there was a requirement at common law to give notice but did not have any authority to support her submission.

Correspondence passed between the parties in the months following the seizure of the plant and equipment.

By letter dated 29 January 2009 the Defendant made an offer to restructure the current loan facility. The amount of the offer was $984,477.00 for the purpose of restructuring the Plaintiff’s current account held with the Defendant. It was a detailed offer set out in three and a half pages. It was signed by the Defendant’s Manager Suva. The affidavit in support leaves no doubt in my mind that the Plaintiff received the letter dated 29 January 2009 setting out the offer.

It is appropriate to consider the significant provisions of that letter. First, under the heading "Availability Period" the following appears:

"This offer is available for acceptance for a period of 14 days from the date hereof (unless extended by mutual agreement) and unless accepted within such period, shall lapse."

Secondly, the second last sentence in the last paragraph states:

"Please sign your acceptance under seal in the space allocated below and return the original to us. The copy is for your records."

On the last page there appears what may be termed "the acceptance sheet". First, there appears the sentence:

"We accept the above terms and conditions."

There then appears a sealing clause and provision for signing by a Director and a Director/Secretary. There is also provision for the signatures of two named Guarantors that are to be witnessed.

The problem for the Plaintiff is that this page appears not to have been completed. The copy annexed to the affidavit is blank in terms of company seal, signatures and witnesses.

In the affidavit in support there is only a vague reference in paragraph 13 that states that the Plaintiff accepted the offer. There is no evidence before me that the Plaintiff accepted the offer in the manner prescribed in the offer or within the time prescribed in the offer.

In a letter dated 24 February 2009 from the Plaintiff to the Defendant’s Chief Executive Officer there is no reference to the offer of 29 January 2009 or its acceptance. However the Plaintiff purports to be acting on the agreement by identifying a problem concerning a term in the offer that related to full payment of the insurance premium.

There was no reply by the Defendant to that letter.

By letter dated 2 April 2009 the Plaintiff repeated its request that the Defendant release the plant and equipment (machines) so that it can meet payments as they full due. In this letter there is also a reference to the offer. At the commencement of the third paragraph the Plaintiff states:

"I further refer to offer letter dated 29 January 2009 which was duly accepted and contented by both the parties. ... I also wish to advise that I had complied with all the requirements as stated in the offer letter. ..."

Once again, there is no reference to the date of acceptance and no assertion that the offer was accepted in the manner and within the time stipulated. A mere assertion that the offer had been duly accepted does not in itself take the matter any further.

There was no reply to that letter by the Defendant. Furthermore the Plaintiff could not point to any material received by the Plaintiff from the Defendant that indicated that the Defendant was dealing with the Plaintiff on the basis that there had been acceptance by the Plaintiff of the offer dated 29 January 2009.

The only correspondence from the Defendant was a letter dated 27 April 2009 from the Defendant’s solicitors. In that letter there was a claim made for a large amount of money under the loan agreement dated 28 March 2008. The letter also stated that in default the Defendant intended to consider exercising a number of options, including its rights under the Bill of Sale.

That correspondence is not consistent with the assertion by the Plaintiff that it had accepted the offer dated 29 January 2009. Furthermore there was no material in the Plaintiff’s affidavit to indicate that the Plaintiff had replied to the Defendant’s letter disputing the Defendant’s claims under the 2008 loan agreement.

A High Court Writ was issued on 9 October 2009. Although there was no reference in the Affidavit as to the date of service, Counsel informed me that it had been served some time towards the end of October. Counsel also conceded that the assertion implied by paragraph 19 of the Affidavit was, under those circumstances, misleading.

The legal principles to be applied by this Court in an application such as the present are well established and well known. The first test is whether the Plaintiff’s Statement of Claim gives rise to a serious question to be tried. It is accepted that the threshold for the Plaintiff to satisfy this test is that stated by Lord Diplock in American Cyanamid Co. v. Ethicon Ltd. [1975] UKHL 1; [1975] AC 396 at 409:

"The Court no doubt must be satisfied that the claim is not frivolous or vexatious, in other words, that there is a serious question to be tried".

In its statement of claim the Plaintiff claims damages for losses incurred as a result of the Defendant’s actions. The Plaintiff relies upon what appears to be breaches of agreements, although there is also a claim in negligence.

First, in paragraph 8 the Plaintiff claims:

"That due to the negligence of the Defendant of not issuing any notice that its loan account was in arrears and by its mere instructions to its bailiff to repossess Plaintiff’s machines, the Plaintiff has suffered immense loss as a result of which all its logging contract was rescinded due to non-performance since the machines were in custody of the Defendant."

Apart from the generally vague manner in which the claim is made, Counsel for the Plaintiff conceded that there was no term in either the 2008 loan Agreement or the Bill of Sale that required the Defendant to give such notice.

It should be noted that paragraph 12 of the Statement of Claim refers to the Letter of Offer dated 29 January 2009. Paragraph 13 blandly states that the Plaintiff accepted the new loan offer. There are no particulars as to the acceptance of the offer by the Plaintiff let alone particulars that would be necessary to establish that the offer was accepted in the manner specified in the offer and within the time stipulated in the offer.

Paragraph 17 implies that the Defendant has breached the restructure agreement that was set out in the letter dated 29 January 2009 by its neglect and failure to release the machines. The Plaintiff claims that it lost its entire contract for logging and lost out its business completely.

I am not satisfied on the material before me that the Plaintiff accepted in the prescribed manner and time the offer set out in the letter dated 29 January 2009. There is no evidence that the parties were "ad idem" or that they were now dealing with each other under the terms and conditions of the restructure offer.

As a result I have concluded that the Plaintiff has failed to establish that it has a serious question to be tried. There was no term in the 2008 Loan Agreement or the Bill of Sale that required notice before seizure of the plant and equipment. There was no evidence that the offer in the letter dated 2009 was accepted by the Plaintiff in the prescribed manner and time. There was no material in the affidavit in support that would suggest that the quantum of the debt owed by the Plaintiff to the Defendant was in dispute.

The application is dismissed.

W D Calanchini
JUDGE

16 November 2009
At Suva