IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

Civil Action No. 092 of 2009L

BETWEEN :

IAN SPENCER LINCOLNE of Tavua, Fiji, 
Business Manager presently of Melbourne, Australia and 

KAREN ANGELA McGINNESS of Tavua, Fiji 
but now of Melbourne, Australia, Caregiver.
Plaintiff

AND :

DENARAU INVESTMENTS LIMITED (IN RECEIVERSHIP) 
a limited liability company having its registered office at 
Level 3, Pacific House, Butt Street, Suva, Fiji trading as 
FIJI BEACH RESORT & SPA managed by
 HILTON INTERNATIONAL.
Defendant

Before : Master Anare Tuilevuka.

Solicitors : Mishra Prakash & Associates, Lautoka – for the Plaintiff
Munro Leys, Suva for the Defendant.

Date of Ruling : 01st April, 2011.

RULING

[1].	The defendant is a foreign investor. It had been developing and marketing the well known Denarau Hilton-Hotel integrated resort project in Nadi. This development and marketing campaign was done in two-successive phases. Phase 1 was completed some years ago. Phase 2 was to involve the construction of some 200 villas.

[2].	At some point into phase 2 of the project, the defendant company went into receivership in New Zealand. This happened on 08th September 2009. These proceedings were already afoot when the defendant company went into receivership.

[3].	The plaintiffs were amongst the many who had committed to investing in a 3-bedroom penthouse sunset suite unit (“villa”) in phase 2. They signed a building contract (“agreement”) on 21st December 2005. Other purchasers were made to sign a similar agreement. 

[4].	The key features of the agreement are clauses 2.2, 3.2, 3.7, 4.1, 4.2(a), 4.3, 4.4, 5.4 and 9.3. Clause 4.1 obliged the defendant to commence, construct and complete the villa in a proper and professional manner in accordance with all statutory and regulatory requirements with all finishes and fittings, substantially in accordance with the Construction Details stipulated in the agreement. This obligation however appeared to be watered down by clauses 4.2, 4.2(a), 4.3, 4.4, 5.4 and 2.2. These gave the defendant the right:

(i)	to construct the project in stages without obliging it to complete every stage or to fully develop the whole project.

(ii)	at its sole discretion, to not commence, to stop, to restart and/or to change any aspect of the development of the project or any stage of the project.

(iii)	to substitute new finishes, fittings or fixtures of equivalent quality to those specified in the Construction Details in the contract.

[5].	Furthermore, by clause 4.3, purchasers acknowledged that the Layout Plan attached to their agreement was inchoate (i.e. that it was preliminary and not detailed and were yet to be developed into final working drawings and specifications). The purchasers also acknowledged that the project and the villas which were to be built on their behalf could be subject to change and amendment.

[6].	Clause 5.4 provided that there was no target date for settlement with the defendant giving no warranty as to when completion would be achieved. For their part, by signing the agreement, the purchasers acknowledge that the prospective settlement dates were indicative only and not binding on the defendant. Hence, eroding the purchasers right to claim for compensation.

[7].	To get back on track, less than a year after the plaintiffs signed the agreement, the defendant circulated a letter dated 20th October 2006 (“20th October letter”) to all purchasers in phase 2. The letter that the plaintiffs received is reproduced in full below:

Ian Spencer Lincolne & Karen Angela McGinness
PO Box 955
FIJI

Dear Ian & Karen

Agreement for Sale and Purchase dated 21-Dec-05 (“Sale Agreement”) for Villa number 57A (“Villa”) at Stage 2 of the Fiji Beach Resort and Spa development at Denarau Island, Fiji (“Resort” or “Project”).

I am writing to inform you of an important issue that has arisen, which involves your Villa and to ask for your understanding and co-operation.

The standard and amenity of the Stage 1 villas of the Fiji Beach Resort and Spa have surpassed everyone’s expectations and have set new bench marks for resorts at Denarau Island and in Fiji generally.

However, during our recent negotiations for the construction of Stage 2 we have come to the unfortunate realization that it has become cost prohibitive to complete the Stage 2 villas to the standard and quality of Stage 1. This is due to the booming Fiji economy and the resulting demand on local resources which is having a significant inflationary impact on costs associated with construction. We also need to allow for cost increases through to completion of your Villa, projected around March 2008.
We have limited choices available to us, if we are to proceed with Stage 2. We can:

•	Compromise the standards, quality and size of the Stage 2 villas;
•	Cancel Stage 2 of the Resort altogether; or
•	Obtain your agreement to an increase in the sale price of your villa and so retain the Stage 2 concept standards and quality.

There has been much debate and heartache as to the best way to resolve this issue without involving you, our valued purchaser, however, we have no other realistic alternative.

Denarau Investments is not prepared to complete the Stage 2 unless we can at least match the level of quality achieved in the completion of Stage1. We also feel that it would be a great disservice to our existing villa owners in Stage 1, the project and yourself to compromise on standard and quality.

To not proceed with Stage 2 (while fully within Denarau Investments rights under provision of your Sale Agreement – see clause 2.2) would be very disappointing for everybody involved in the project.

To complete the Resort to the standards achieved in Stage 1, we seek your agreement to an increase in the sale price of the Villa you have contracted to purchase. To facilitate this, Denarau Investments proposes that you offer to vary your Sale Agreement so that the sale price of your Villa is increased by $140,000.00 from $1,650,000.00. We estimate the current market value of your Villa to be $2,000,000.00. After increasing your sale price as above this will still provide you with a capital appreciation for your Villa.

In recognition of your commitment to the project, and agreement to the increase in the sale price of your Villa, Denarau Investments proposes to:

•	Accept that it is not necessary that you increase your deposit to 10% of the new purchase price – the existing deposit of $165,000.00 is all that is required to be paid until completion and settlement of the Villa and

•	Waive the requirement for payment of the second 5% deposit due on the Villa being closed in.

Please refer to the attached Addendum to the Sale Agreement for your Villa which sets out the proposed increased sale price and terms.

We have discussed the above proposal with our financiers who have provided “approval in principle”, subject to their director’s approval and successful conversion of existing Stage 2 sales to the revised prices as proposed by Denarau Investments.

Please sign the attached Addendum to the Sale Agreement and return it to us in the enclosed pre-addressed envelope and retain the copy for your records. Please do this by no later than Monday 30 October 2006.

Once this process has been completed and after consultation with our financiers, we will advise you of the outcome.

Thank you for being a dedicated purchaser of the Hilton Fiji Stage 2 Villas and for your kind understanding in these difficult circumstances. I truly regret having to write this letter to you, but unfortunately I have no other alternative. I am more than happy for you to call me to discuss this. Phone +64 21 972 416.

Regards,
Neville Mahon

[8].	Attached to this letter was an “Addendum to Sale Agreement”. I will not set out the addendum here. Suffice it to say that the addendum incorporated an irrevocable offer that the plaintiffs were invited to make in order to vary the agreement.

[9].	The plaintiffs did not sign the addendum. They did not immediately respond to the letter either. Instead, they simply took the letter to mean that the defendant was unable to complete the project. They expected to be refunded all monies they had paid and made a formal demand through their solicitor – albeit some two years or so later - but to no avail. 

[10].	Graham deposes that the defendant did send a further letter to the plaintiffs on 8th December 2006 advising that the additional $100,000 requested in the 20th October letter was no longer required. The plaintiff denies receiving the letter. That letter states as follows:

8 December 2006

Ian Spencer Lincolne & Karen Angela McGinness
PO Box 955
Tavua
Fiji

Dear Ian & Karen

Agreement for Sale & Purchase Dated 21-Dec-05 (“Sale Agreement”) for Villa No. 57A (“Villa”) at Stage 2 of the Fiji Beach Resort and Spa Development at Denarau Island Fiji (“Resort”) or (“Project”)

I refer to my letter of 19 October 2006 asking you to increase the price of your villa in Stage 2 of the Project. As I mentioned in the letter, this was very hard for me to do and I know that it has caused a lot of concern to our valued purchasers.

The outcome of my enquiry is that we received very substantial support from most of the purchasers. However, on balance and to treat all purchasers equally and fairly, I have decided not to continue with the proposal requesting you to offer to increase your purchase price. Denarau Investments Limited has resolved to continue with Stage 2 of the Project including your Villa. Denarau Investments Limited will not be accepting the offers of those purchasers who agreed to increase their purchase price. Your Sale Agreement will continue at the current sale price and terms.

The current situation in Fiji has opened up all sorts of possibilities for price reductions in our construction budget for Stage 2. This will go some way to mitigate the cost increase issues which I refer to in my letter of 19 October 2006. 

In addition you will be pleased to know that we have commenced construction of the Stage 2 Villas and I will keep you informed of progress as the project develops.

Thank you for your continuing support.

Regards.

Neville Mahon

[11].	The 8th December letter is important to the defendant’s case. Its purported effect is to cease the plaintiffs right to rescind the agreement pursuant to the defendant’s alleged repudiation by the 20th October letter. 

[12].	The plaintiffs deny receiving the 8th December letter. They say that – even if the letter was in fact received by them (which they deny), it cannot undo the repudiatory effect of the 20th October letter. One would presume that the same letter was circulated to all other purchasers – but this is not clear from the affidavit material. If the letter was so sent to all other purchasers, it is curious why no such letter was mentioned in the Trevor Allan Ludlow case (see paragraph 17 below). This is a credibility issue which I am not prepared to address now.

[13].	Graham also annexes to his affidavit a letter dated 25th November 2008 written by the defendant to the plaintiffs advising that the construction of the villa was well advanced and that the roof had been completed. A relevant certificate of completion was annexed to the letter.

[14].	It is not clear whether or not the plaintiffs did receive this letter. But even if they did, their argument undoubtedly would have to be that the letter cannot undo the repudiatory effect of the 20th October letter.

[15].	Notably, nearly three years after the above letters, a receiver/manager was appointed for the defendant company on 08th September 2009 (see above). The plaintiffs say that the fact that the defendant is now under receivership confirms that the defendant is unable to take the project to completion. That cannot be so because the receiver/manager has sworn an affidavit annexing photographs that appear to confirm that Villa 57A has indeed been built to completion.

[16].	What is before me now is an application for summary judgment filed on 15th July 2010 by Mishra Prakash & Associates seeking the following Orders:

(a)	an order and/or declaration that the contract between the plaintiffs and the defendant has been terminated.

(b)	alternatively the contract between the plaintiffs and the defendant is void and/or uncertain and/or unenforceable and/or is unlawful.

(c)	there be summary judgement for the plaintiffs against the defendant in the total sum of money paid by the plaintiffs to the stakeholders in the sums of $FJ$5,000.00 and NZ$164,984.22 and NZ$11,135.08.

(d)	there be judgement for damages for the plaintiffs against the defendant due to the devaluation of the Fijian dollar and decline of the New Zealand dollar against the Fijian dollar and the increase of the Australian dollar against the New Zealand dollar and further damages under the Fair Trading Decree.

(e)	there be interest awarded on the judgement sums at the rate of ten (10) per cent per annum for the plaintiffs against the defendant under the Law Reform (Miscellaneous Provisions) (Death and Interest) Act thereon from the 1st day of December, 2006 to date of judgement against the defendant.

[17].	Mr. Mishra had referred me to the judgement of Associate Judge Sargisson of the New Zealand High Court in Trevor Allan Ludlow & Carol Anne Braithwaite v Minter Ellison Rudd Watts & Denarau Investments Limited – CIV2007-404-249. 

[18].	That case concerned an application for summary judgement seeking a refund of deposit paid by the plaintiff who had paid deposit money towards a villa in the same Denarau-Hilton- project. 

[19].	In Trevor Allan Ludlow, the same 20th October letter was put under the microscope with the same argument raised that the letter amounted to a repudiatory breach of the same agreement in question such as to entitle the plaintiffs to rescind the agreement and recover their deposit.

[20].	In her ruling, Sargisson J first reviewed the law on repudiation. She then determined that the 20th October letter made it clear that Denarau Investments Limited did not intend to perform its obligations under the agreement. Its conduct therefore amounted to repudiation. 

[21].	She held that the letter made it clear that proceeding with Stage 2 at the prices provided under the agreement was no longer an option which indicated that a decision not to do what the contract provided was already made. 

[22].	She rejected the argument made on behalf of Denarau that the 20th October letter was an invitation to negotiate which effectively left open the possibility that Denarau would honour the agreements it had with purchasers.

I agree with the same reasoning and apply it in this case (see also Fiji Court of Appeal decision in Chandra v Ward [2010] FJCA 55; ABU0042.2008 (18 November 2010)). Incidentally, the New Zealand Court of Appeal was later to endorse Sargisson J’s approach and conclusion on appeal (see Denerau Investments Limited v Ludlow and others [2008] NZCA 158 (10 June 2008). 

[23].	In this case before me, I also find that the 20th October letter in effect amounted to a repudiatory breach of the agreement on the same reasoning applied in Trevor Allan Ludlow.

[24].	However – what I am not prepared to do now is to take the next step and make a finding that the repudiation was accepted by Lincolne and McGinnes. This is a conclusion difficult to reach on the material in the evidence filed. My reasons follow:
[25].	Whereas in Trevor Allan Ludlow, there was clear evidence that the plaintiffs had accepted the breach as a repudiation and then took immediate steps through letters-written and meetings-attended which were indicative of their intention to rescind the agreement – the case is not as straightforward as in Lincolne’s and McGinnes’s case.

[26].	Lincolne and McGinnes did not react as swiftly as the plaintiffs in Trevor Allan Ludlow did following the 20th October letter. They took some two years to write a letter of demand. In the interim, they just sat by expecting the deposit to be returned. 

[27].	Whilst they waited, there was to be further communication from the defendant to the plaintiffs vide their 8th December 2008 and 25th November 2008 letters (see above).

[28].	These letters suggest at least two things in the attitude of the defendant: firstly - that the defendant had taken the plaintiffs’ silence to mean that they were affirming the contract and secondly, that the defendant was then (and had then) taking/taken the agreement to completion.

[29].	Of course – whether or not the letters were in fact sent is a triable issue. And of course, whether the court’s inquiry need even go that far is another. Yes, the argument that the letters of 8th December and 25th November cannot undo the repudiatory effect of the 20th October letter – is another issue. 

[30].	The difficult issue in this case is – whether the plaintiffs’ refusal to sign the addendum (see above) effectively “sealed the deal” so to speak in as far as the rescission was concerned – or whether it amounted to a silence which constituted a waiver of their right to treat the agreement as repudiated and rendering them “estopped” from changing their election.

[31].	Mr. Mishra’s argument that the plaintiff’s refusal to execute the addendum to the 20th October letter was sufficient “conduct” to amount to an effective acceptance of the repudiation and a rescission of the agreement on their part is a strong one. 

[32].	Silence and inaction have been held by the House Lords to be capable of amounting to acceptance of repudiation in certain circumstances (see Vitol SA v Norelf Ltd [1996] 3 All ER 193. That case was decided in the context of an anticipatory-breach scenario. Lord Steyn who delivered the main speech said as follows:

Where a party has repudiated a contract the aggrieved party has an election to accept the repudiation or to affirm the contract: Fercometal SARL v Mediterranean Shipping Co SA, The Simona [1988] 2 All ER 742, [1989] AC 788 (2) An act of acceptance of a repudiation requires no particular form: a communication does not have to be couched in the language of an acceptance. It is sufficient that the communication or conduct clearly and unequivocally conveys to the repudiating party that the aggrieved party is treating the contract as at an end. (3) It is rightly conceded by counsel for the buyers that the aggrieved party need not personally, or by an agent, notify the repudiating party of his election to treat the contract as at the end. It is sufficient that the fact of the election comes to the repudiating party’s attention for example notification of an unauthorized broker or other intermediary maybe sufficient. Wood Factory Pty Ltd v Kiritos Pty Ltd [1985] 2 NSWLR 105 at 146 per (Mc Hugh), Najik Markets Pty Ltd v S –M Motor Repairs Pty Ltd (No.1) (1987) 10 NSWLR 49 at 54 per Young J and Carter and Harland Contract Law in Australia, (3rd edn, 1996) pp 689-69}, para 1970.

[33].	I am of the view that these issues are best left for trial, even if it all boils down to this one issue (see para 30 above). Certainly in this case, there is a difficult point of law involved. The Application for summary judgement is dismissed. Costs in the cause.

[34].	I will not recite Order 14 here. It is enough to state though that the procedure under Order 14 is available to any plaintiff who desires a quick judgment on his or her claim where there is no defence to a claim, or, if a defence is raised, it either fails to set up a bona fide defence or discloses no triable issues and will merely have the effect of delaying a judgement in favour of the plaintiff. 

[35].	The Court’s task is to determine whether there ought to be a trial (see Carpenters Fiji Ltd –v- Joes Farm Produce Ltd Civil Appeal Number ABU 0019/2006, the Court of Appeal at pages 9 and 10 of the judgment. See also Thomas J in Hibiscus Shopping Town Pty Ltd -v- Woolworths Ltd [1993] FLR 106 at 109; Magan Lal Brothers Ltd. –v- L. B. Masters & Company Civil Appeal No: 31/84; Halsbury's Laws of England (4th Edition) volume 37 para 413 – 415, notes 4)). 

[36].	The defendant may show cause against a plaintiffs claim on the merits e.g. that he has a good defence to the claim on the merits or there is a dispute as to the facts which ought to be tried or there is a difficult point of law involved. 

[37].	As stated, there is a difficult point of law involved as highlighted by the affidavits and submissions filed. I refuse the application for summary judgment. Costs in the cause. Case adjourned to 15th April 2011 for mention for further pre-trial directions. 

………………………………….
Anare Tuilevuka
Master

At Lautoka
01st April 2011