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High Court of Fiji |
IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION
CIVIL ACTION HBC 30 OF 2010
BETWEEN:
ST. AUBYN LIMITED
PLAINTIFF
AND:
YOUNG WOMAN’S CHRISTIAN
ASSOCIATION
DEFENDANT
Mr C Cameron for the Applicant (Plaintiff)
Ms L Vaurasi for the Defendant
DECISION
These proceedings are concerned with a lease. On 5 August 2004 the Defendant Association entered into a leasing agreement with the Plaintiff trading as "JJs On the Park" for a period of ten years to lease the ground, first, third, fourth and fifth floors of the YWCA Building (the premises) located adjacent to Sukuna Park in Suva. In the agreement the Defendant is referred to as the sub-lessor since it is the lessee under a lease from the Suva City Council. The Plaintiff is referred to as the sub-lessee.
Although a number of issues between the parties were outstanding under earlier leasing arrangements, there was no attempt made by the parties to resolve them when they signed the agreement dated 5 August 2004.
Those outstanding issues and other issues that had arisen after 5 August 2004 were settled by the parties in a Deed of Settlement and Release date 23 December 2005.
Since then the parties have been involved in an on-going dispute over the non-payment of rent by the Plaintiff on the one hand and over the failure by the Defendant to carry out repairs and to perform other obligations under the leasing agreement.
By letter dated 26 January 2010 the Defendant advised the Plaintiff that unless the amount of $189,429.46 plus interest was paid within 14 days from the date of the letter, it would terminate the leasing agreement and commence eviction proceedings whilst at the same time exercising any other rights and remedies available to it.
On 8 February 2010 the Plaintiff filed an ex parte application for an interlocutory injunction with a writ of summons endorsed with a Statement of Claim seeking an injunction restraining the Defendant from determining the lease until the Plaintiff’s claims are heard, from entering into possession of the Plaintiff’s demised premises and from distressing for rent against the Plaintiff.
The Plaintiff claims damages as a result of the Defendant’s breaches of the leasing agreement for loss of income, loss of reputation, potential loss of contracts and for damage to fittings, furniture, plant and equipment. The loss of income is quantified in a sum estimated to be $212,601.21 as at 31 December 2009.
The Plaintiff filed in support of its application an affidavit made by its Managing Director, Peter John Mazey, sworn on 3 February 2010.
I directed that the application be listed inter partes for mention on 12 February 2010. In the meantime the Defendant filed an answering affidavit sworn by its President, Leba Halofaki Mataitini on 11 February 2010. The Plaintiff then filed a reply affidavit sworn by Peter John Mazey on 19 February 2010.
When the application was called for hearing on 2 March 2010 I was informed by the parties that the lease had been determined by the Defendant. As a result the Plaintiff’s application had been overtaken by events and was ineffectual.
Upon the application of Counsel for the Plaintiff I granted leave to the Plaintiff to file and serve an amended application for an interlocutory injunction. I also gave directions to the parties for the filing of further affidavit material. More importantly, I directed that the Bailiff be restrained from proceeding further until the completion of the hearing of the Plaintiff’s amended application. The hearing was fixed for 31 March 2010.
On 17 March 2010 the Plaintiff filed its amended application seeking the following orders:
"1. Until further order of the Court, the respondent and/or its employees or agents be restrained from:
(a) Forfeiting the lease between the parties, where the respondent has not forfeited the lease.
(b) Distressing for rent against the applicant where the respondent has not forfeited the lease.
(c) Ejecting the applicant from the respondent’s building, situated at 21 Central Street and 10 Regal Lane, Suva, adjacent to Sukuna Park (the premises) or taking possession of the premises where the lease between the parties has been properly forfeited by the respondent.
[2 and 3 are not immediately relevant].
4. That all other matters currently in dispute between the parties arising in connection with the subject matter of the lease dated 5 August 2004 be referred to arbitration.
5. That these proceedings are stayed pending the outcome of the arbitration referred to in paragraph (3) above."
The parties subsequently filed further affidavit material and when the application came on for hearing I had before me a total of seven affidavits filed by the parties.
On 12 March 2010 the Defendant had filed its Defence and Notice of Counterclaim. In the counterclaim, the Defendant claims the sum of $193,422.20 consisting of $137,250.00 forfeited by the Defendant for the Plaintiff’s unfulfilled promise of immediate payment of balance rental arrears of $66,132.00. Further and alternatively the Defendant claims the sum of $189,429.46 for outstanding rent for the period June 2009 to January 2010. Further and alternatively the Defendant claims the sum of $14,727.00 as payments made by the Defendant for water rates (2006), repairs, water damage and FEA accounts (to 31 December 2009). It is claimed that these amounts were paid following the Plaintiff’s promise to pay rental arrears. It is claimed the Plaintiff has not honoured his promise. Damages, interest and costs are also claimed.
In fact the basis of the Plaintiff’s amended application for an interlocutory injunction was the receipt by it of a letter dated 26 February 2010 from the Defendant’s trustees that stated:
"Rental Arrears.
We refer to our letter to you dated 26 January 2010.
We note that 30 days has lapsed since the abovementioned letter was served on you.
We refer that to-date you have yet to pay the rental arrears owing of $189,429.45. Moreover your rent for the month of February has been paid on a weekly basis as opposed to the lump sum for the month. Our organisation has suffered and continues to suffer financially due to your failure to pay the demanded sum owing.
Take Notice that pursuant to clause 21 of the Agreement to Lease dated 5 August 2004 we are terminating the lease due to your failure to pay the demanded sum owing.
You are given 30 days to vacate the premises forthwith.
Take Further Notice that pursuant to clause 21.3 our Bailiff will be doing an inventory and recommending to us the chattels that will be held by us as a lien securing the amount of accrued rent."
The objection to rent being paid weekly is somewhat surprising in view of the comments that appeared in a letter dated 31 December 2009 from the Defendant to the Plaintiff’s Managing Director. On page 4 the following paragraph appears:
"We therefore ask that you meet us half-way by re-instating the weekly rental from Monday 28.12.09 so that the YWCA may effectively carry out its operations including firming up on its consultations with the Bank."
The principles that are to be applied by this Court in an application such as is presently before me were clearly stated by Lord Diplock in American Cyanamid Ltd. –v- Ethicon Ltd [1975] UKHL 1; [1975] AC 396. First, the Plaintiff is required to establish that his claim raises a serious question to be tried. The Plaintiff is not required to establish a prima facie case that he will gain a permanent injunction after trial. The test requires the affidavit material to contain sufficiently precise factual supporting evidence to satisfy the court that the claim is not frivolous, vexatious or hopeless.
At this stage it is not necessary to go much further into the facts or the law of the substantive issues. I am satisfied that there are several serious issues of fact and law to be tried. They concern, inter alia, whether the Defendant is in breach of the leasing agreement, whether the Plaintiff has suffered loss and damage, the right of a tenant to offset payments made for repairs that are the landlord’s responsibility against rent, the right of abatement under section 90 of the Property Law Act Cap 130, the obligation to pay the rent without deduction under clause 1.1 of the leasing agreement, the existence of any lien and finally whether the matter should be referred to arbitration.
I do not consider any of these issues to be frivolous. More significantly, they cannot be resolved simply by reference to the affidavits. The factual assertions made by both parties must be tested under oath by cross-examination. Lord Diplock in his speech in the American Cyanamid case (supra) made several observations on the role of the court in applications such as the present.
His Lordship started by noting at page 406 that:
"In those cases where the legal rights of the parties depend upon facts that are in dispute between them, the evidence available to the court at the hearing of the application for an interlocutory injunction is incomplete. It is given on affidavit and has not been tested by oral cross-examination."
Then at page 407 he continued:
"It is no part of the court’s function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial."
His Lordship at page 409 continued on the same point by adding:
"The court is not justified in embarking upon anything resembling a trial of the action upon conflicting affidavits in order to evaluate the strength of either party’s case."
On the issue of evaluation at the interlocutory stage he noted at page 410 that:
"In view of the fact that there are serious questions to be tried upon which the available evidence is incomplete, conflicting and untested, to express an opinion now as to the prospects of success of either party would only be embarrassing to the judge who will have eventually to try the case ."
The Fiji Court of Appeal has indicated that the principles set out in American Cyanamid (supra) are the appropriate tests to be applied in Fiji in such applications: Natural Waters of Viti Limited –v- Crystal Clear Mineral Water (Fiji) Limited (unreported Civil Appeal No 11 and 11A of 2004 delivered on 26 November 2004.
Having concluded that the Plaintiff has satisfied the first of the American Cyanamid tests, I turn now to the next limb which concerns the adequacy of damages. The issue is simply about whether damages would provide an adequate remedy to the Plaintiff. I accept that a problem arises in attempting to quantify the Plaintiff’s claim against the Defendant. There is no difficulty in calculating the actual amounts spent by the Plaintiff for physical repairs to the building. These are capable of determination by evidence and, if liability is established, are compensable. However, the difficulty arises in attempting to determine the loss of income as a result of the business being closed down and also the loss in what has been described as the capital value of the Plaintiff’s business by way of loss of good will which is principally reflected in loss of turnover. I am satisfied that the difficulty in calculating damages in this case indicates that damages would not be an adequate remedy for the Plaintiff.
In view of that conclusion it is necessary to consider the balance of convenience. The wording is perhaps a little misleading as Lord Diplock himself in NWL Ltd –v- Woods [1979] 1WLR 1294 accepted that the balance was more fundamental and more weighty than mere convenience. In that case Lord Diplock described the approach to be taken at page 1306 in the following terms:
"In assessing whether, what is compendiously called, the balance of convenience lies in granting or refusing interlocutory injunctions in actions between parties of undoubted solvency the judge is engaged in weighing the respective risks that injustice may result from his deciding one way rather than the other at a stage when the evidence is incomplete. On the one hand there is the risk that if the interlocutory injunction is refused but the Plaintiff succeeds in establishing at the trial his legal right for the protection of which the injunction had been sought he may in the meantime have suffered harm and inconvenience for which an award of money can provide no adequate recompense. On the other hand there is the risk that if the interlocutory injunction is granted but the Plaintiff fails at the trial the defendant may in the meantime have suffered harm and convenience which is similarly irrrecompensable. The nature and degree of harm and inconvenience that are likely to be sustained in these two events by the defendant and the plaintiff respectively in consequence of the grant or the refusal of the injunction are generally sufficiently disproportionate to bring down, by themselves, the balance on one side or the other; and this is what I understand to be the thrust of the decision of the House in American Cyanamid –v- Ethicon Ltd. Where, however, the grant or refusal of the interlocutory injunction will have the practical effect of putting an end to the action because the harm that will have been already caused to the losing party by its grant or its refusal is complete and of a kind for which money cannot constitute any worthwhile recompense, the degree of likelihood that the Plaintiff would have succeeded in establishing his right to an injunction if the action had gone to trial, is a factor to be brought into the balance by the judge in weighing the risks that injustice may result from his deciding the application one way rather than the other."
If I accept the assertions in the affidavits filed by the Plaintiff concerning its solvency I would have no difficulty in concluding that it was a solvent party.
In his fourth affidavit sworn on 30 March 2010 Mr Mazey claims that the Plaintiff "is and has always been solvent". He points out that the Plaintiff’s assets are more than sufficient to satisfy any adverse damages claim. In support of that claim, there is annexed to the affidavit a letter dated 25 March 2010 from Aliz Pacific Chartered Accountants which states on page 2 that:
"It is our opinion that the business of St Aubyn Limited trading as JJs on the Park is able to meet its obligations and pay its debts as and when they fall due and therefore does not fare any solvency or going concern issues as such."
Furthermore, the material in the fifth affidavit of Peter Mazey sworn on 31 March 2010, attempts to re-enforce the claim that the Plaintiff company is solvent.
Counsel for the Defendant urged me to reject this assertion for two reasons. First, the various figures provided in the financial statements were inconsistent. Secondly, the auditors were not independent. However for the purpose of the present application I am prepared to accept that the Plaintiff company is solvent.
The Defendant’s financial position is perhaps not quite so clear. The two affidavits filed on its behalf contain material that would indicate that the Defendant is in the midst of a cash flow shortfall problem. In her submission Counsel for the Defendant indicated that the Defendant’s finances "were suffering" as a result of the periodic non payment of rent by the Plaintiff.
In its written submission the Defendant claims to have the ability to pay any award of damages although there is no material in the affidavits to support this assertion.
If the application is not granted, then the Bailiff will move in and evict the Plaintiff. The business will be closed, most if not all of the assets seized and the Bank will then move against the Plaintiff company. The Plaintiff would as a result suffer irreparable damage.
If the injunction is granted then the Plaintiff can continue trading and make rental payments as they fall due. I note that the Plaintiff has continued to make weekly rental payments into its Solicitor’s trust account since the notice of forfeiture.
I also note that the business relationship between the parties appears to have broken down to the point where each has made inappropriate and unhelpful allegations against the other in the affidavit material.
However, considering all the factors that the parties urged upon me and taking into account the material in the affidavits I have concluded that the balance of convenience lies with the Plaintiff.
Under this heading I am also satisfied that the Plaintiff’s undertaking as to damages is sufficient to meet any award of damages to the Defendant in the event that the court has been misled and the Defendant has suffered loss as a result.
That, however, is not necessarily the end of the matter. In Klissers Farmhouse Bakeries Ltd. –v- Harvest Bakeries Ltd. [1985] 2 NZLR 140 at page 142 Cooke J (as then was) stated:
"Whether there is a serious question to be tried and the balance of convenience are two broad questions providing an accepted framework for approaching these applications. As the NWL (supra) speeches bring out the balance of convenience can have a very wide ambit. In any event the two heads are not exhaustive. Marshalling considerations under them is an aid to determining, as regards the grant or refusal of an interim injunction, where overall justice lies. In every case, the judge has finally to stand back and ask himself that question. At this final stage, if he has found the balance of convenience overwhelmingly or very clearly one way ... it will usually be right to be guided accordingly. But if on the other hand several considerations are still fairly evenly poised, regard to the relative strengths of the cases of the parties will usually be appropriate. We use the word "usually" deliberately and do not attempt any more precise formula ...."
Putting aside for the moment the present financial difficulties being experienced by the Defendant and to a lesser extent by the Plaintiff due to a downturn in business, and whatever their causes, I am of the strong view that the balance of convenience lies with the Plaintiff to the extent that allowing the Plaintiff to continue trading for the time being will assist both parties. It should not, however, be assumed by the Defendant that, in the event that an interlocutory injunction is granted, there has been a pre-determination of the merits of the claim and counter-claim.
Furthermore this is a case where the court’s discretion, taking into account the overall justice of the case, could be exercised in a way that minimizes the disadvantage that may possibly be experienced by the Defendant. In other words this is a case where stringent conditions could attach to the injunction.
On balance, and taking account of the consequences for the Plaintiff if the injunction is not granted against the consequences to the Defendant if the injunction is granted, I conclude that the application should be granted but on strict terms.
However, before proceeding to make the formal orders, there is one aspect of the Plaintiff’s application that I wish to address briefly. The question of a reference to arbitration is a preliminary issue upon which Counsel for the parties should address me more fully. As I noted during the course of the hearing, arbitration proceedings are generally cheaper, simpler, quicker and more flexible than proceedings in this court. The subject was not fully addressed before me during the hearing by Counsel. The preliminary issue will be listed for mention on the date specified in the orders below at which time a date for further oral argument will be fixed.
I make the following orders:
W D Calanchini
JUDGE
19 April 2010
At Suva
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