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Aerolink Air Services Pty Ltd v Sunflower Aviation Ltd [2014] FJHC 397; HBC013.2011 (4 June 2014)

IN THE HIGH COURT OF FIJI AT LAUTOKA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC 013 OF 2011

BETWEEN:

AEROLINK AIR SERVICES PTY LIMITED
an Australian Corporation having its offices at C/- Downes Barrington (St George), Suite 16, Level 3, 4 Cross Street, Hurtsville, New South Wales A2220, Australia.
FIRST PLAINTIFF

AND:

DANIEL PATRICK RYAN
of 268 Cicada Glen Road, Ingleside, new South Wales 2101, Australia, Company
SECOND PLAINTIFF

AND:

SUNFLOWER AVIATION LIMITED
a limited liability company having
its registered office at Sunflower Hanger, London Avenue, Nadi Airport, Fiji Islands.
FIRST DEFENDANT

AND:

ROSHAN ALI of Nadi and SYLVIA GUKULA BALE aka SYLVIA
COLLINGWOOD of Fasa Subdivision, Nadi in the Republic of Fiji,
Managing Director and Sales & Marketing Officer respectively as the
Executor and Executrix and Trustees of the Estate of DONALD IAN
COLLINGWOOD late of Fasa Subdivision, Nadi Retired Person Testate.
SECOND DEFENDANT

Appearances: Ms Tuitoga J for Plaintiffs
Mr Ram H for Defendants

Date of Hearing: 4th June 2014

Interlocutory Judgement

Introduction

1. By the Notice of Motion dated 20th may 2014 the defendants sought inter alia the
following Orders from Court:

1. An ORDER that the Interim Orders made by the Honourable Court against the defendants on the 23rd of April 2014 be set aside, varied and/or dissolved and the obligations imposed on the Defendants pursuant to the said orders be discharged.

2. In the alternative An ORDER the said Interim orders made on the 23rd day of April 2014 be dissolved and the following securities be held as security for the plaintiffs claim in the event that the Honourable Court finds that the Defendants are liable to pay the Plaintiffs any or such sums of money payable in the action herein:

a. Personal undertaking from Ian Hamish Collingwood, the sole beneficiary of the Estate of Donald Collingwood the Second Defendant herein, to pay the Plaintiffs such sums of money that the Honourable Court may orders as payable to the Plaintiffs in the civil action herein.

b. An undertaking of the Second Defendant that it would hold the following properties:

i. All that piece and parcel of land comprised in Certificate of Title No. 23701 known as "Waqadra" and containing 1032 M2 in Nadi district Lot 10 on DP 5954 together with the improvements thereon; and

ii. All that piece and parcel of land comprised in Certificate of Title No. 24028 known as "Waqadra" and containing 1011 M2 in Nadi district being Lot 1 on DP 5953 together with the improvements thereon

as security for payment of the Plaintiffs as aforesaid. Further that the Second Defendant would carry out the process of registering the interests of the Estate of Donald Collingwood and the estate of Robyne Collingwood on the said two certificates of title.

c. A sum of Five Hundred Thousand Dollars [$500,000.00] from the proceeds of the sale of the shares in the First Defendant into the Trust Account of Rams Law, Barristers & Solicitors of Nadi subject to any prior right of claim of Fiji Island Revenue and Customs Authority, any secured and preferential creditors.

3. An ORDER that Plaintiffs pay for the cost of the application.

4. Any other orders that the Court deems just and expedient.

2. The defendants notice of Motion is supported by an affidavit of Roshan Ali, Managing Director of the first defendant company sworn on 20th May 2014.

3. This application is made in opposition to the Interim Injunction Orders granted by Court on 23rd April 2014 upon reading the Affidavits of Daniel Patrict Ryan sworn on the 18th of February 2014 and M. Belinda Vanua sworn on the 9th of April 2014 and upon hearing the counsels for both parties.

4. Application for Injunction Orders

By an inter-parte Notice of Motion dated 16th of April 2014 the plaintiffs sought the following orders from Court.

1. That the defendant by himself and/or through his servants and/or agents and/or his solicitors, and/or employees and/or estate howsoever be restrained from transferring, dealing with, charging, mortgaging, assigning, disposing off or removing from the jurisdiction or from its ownership or control within the jurisdiction of this Court, including.

a. That the estate of the deceased, Donald Collingwood, do forthwith disclose and within fourteen days after the service of the order on him make and serve on the Plaintiffs' Solicitors an affidavit disclosing the full value of all and each of his assets within the jurisdiction and of this Court identifying with full particularly the nature and whereabouts of all such assets and whether the same be held in his own name or jointly or by nominees specifying;

b. The identity of all bank, financial institution or other accounts held in his name or names either jointly or by nominees on his behalf and the balance of each of such accounts and the name and address of the branch at which it is held.

c. Any other assets, money or goods owned by him and the whereabouts of the same and the names and addresses of all persons having the possession, custody or control of such assists, moneys or goods at the date of service of this order.

2. Alternatively, the estate declare and give sufficient security of money and/or assets to the Honourable Court and not transfer, deal with, charge, mortgage, assign, dispose off or remove from the jurisdiction or from tis ownership and control any of its properties or moneys or assets over which the estate has ownership of Donald Ian Collingwood until the finalisation and/or final judgement of this action.

3. Such further or other orders as a court in the circumstances considers appropriate.

5. The plaintiffs inter-parte Notice of Motion was supported by the two affidavits
mentioned in paragraph 3 hereof.

6. In his Affidavit sworn on 18th February 2014 Daniel Patrick Ryan deposed inter-
alia that

i) He is the second named plaintiff and director, Secretary and a shareholder of the first named company.

ii) The first defendant is a domestic airline company and the second defendant was at the material time a shareholder and director of the said company.

iii) First plaintiff and the first defendant would do business commercially where the first plaintiff would supply aircrafts, spare parts etc, and the second defendant would hire the aircrafts to use in its domestic airline services.

iv) In late 2004 the second defendant approached him about hiring one of the plaintiffs aircrafts which was currently with Air Fiji for a period of 1 year and a second air craft at a later date for a period of 15 months.

v) On or about 31st January 2005 he sent a fax with a memorandum of understanding to the first defendant showing the terms of payment and the time frame of the aircraft being hired; it was executed by the defendant and faxed back to plaintiffs office.

vi) He subsequently arranged to have the first aircraft flown from Nausori airport to the first defendants hanger in Nadi; and it was in a flyable condition; he also had the 2nd Air Craft ready to be delivered to Fiji from Australia to the first defendant.

vii) By October 2005 the plaintiffs sent its first invoice to the defendant for the use of the 1st Aircraft but the defendant kept 'marking around' with the plaintiffs regarding the first aircraft not being airworthy and not applying for the Certificate of Airworthiness (C of A) form which was a license to fly around Fiji.

viii) The defendants have refused and continue to refuse to pay for leasing of the first and second aircrafts and due to this he took the matter to Courts for the Courts to decide.

ix) He had demanded the return of the first aircraft from the defendant as they were not paying for it but the defendants refused to return the same.

x) He is aware that the second defendant passed away.

xi) He has been hearing rumours of the first defendant trying to sell out and he was made aware that Inter Island Airways were purchasing the first defendant and he also heard that Mr Turnbull, the Managing Director of Inter Island Airways has bought all of the second defendants assets.

xii) He is concerned if the first defendant and the second defendant estate sells out all its assets and winds up he will not be able to enforce the judgement if the court grants it on his favour.

xiii) He does not want to stop the first defendants from operating business or from selling if it wishes to or has done so, he wants the first and second defendants and/or its estate to have enough money and/or assets to be held either by the Court or at an account frozen until the finalisation of this matter.

xiii) As a representative of the first plaintiff, the first plaintiff gives its undertaking to its damages in this action and annex as DR9 the first plaintiffs authority for the undertaking. The first plaintiff will further undertake to leave the first aircraft at the hanger in Namaka if the Court requires it as an undertaking and finalisation of this action.

xix) Back in 2012 or 2013 a cyclone that hit Fiji had damaged the First Aircraft propeller and engine and he had lodged a claim and insurance company have sent the propeller and engine to Australia for checking to see whether it can be repaired or not and the insurance company has yet to determine on whether to pay out the insurance or repair the first Aircraft.

xv) In the alternative if the insurance pays out as a representative of the company and his capacity as the second plaintiff they will deposit the money into whichever account the court decides that he should deposit the money into and leave it until the finalisation of this case.

7. In the affidavit filed in support of the Notice of Motion of the defendants sworn by its Managing Director Rohan Ali he has deposed inter alia that

i) The first defendant was an airline company and the second defendant is only a shareholder a director of the first defendant company.

ii) The first plaintiff requested possession of its aircraft VH WBI from Air Fiji and then flew the same from Nausori to Nadi to have its maintenance and certificate of Airworthiness (C of A) check done at the first defendants hanger and thereafter leasing it to the first defendant once all relevant approvals were obtained.

iii) That the Memorandum of Understanding dated 31st January 2005 was only an agreement in principal as a preliminary agreement for the first plaintiff and the first defendant to work together with the hope that when the first plaintiff regained possession of the aircraft and it met the requirements of the relevant authorities the first plaintiff and the first defendant would enter into a formal lease agreement to operate the aircraft.

iv) The Plaintiffs were fully aware that it was the first plaintiffs responsibility to ensure that the aircraft had a valid Certificate of Airworthiness but the plaintiffs tried to imply that it was the defendants responsibility and that the defendants were failing in their obligation.

v) Without the C of A the commencement date for the operating lease could not be determined. Thus the question of operating lease did not arise.

vi) Despite the above the plaintiffs became desperate for money for the aircraft they were under pressure from the first plaintiffs financiers for it. Initially the plaintiffs wanted lease payment from 31st of January 2005, when they realised it was unrealistic expectation they tried it convince the defendants that it was only fair that the second defendant should pay lease from 12th September 2005.

vii) After the initial invoice of October 2005 the plaintiffs did not raise and send any further invoices or statements for the first defendant to pay any money for leasing of the aircraft.

viii) That by a letter dated 16th may 2007 the plaintiffs advised the defendants that its aircraft VH-0ZF was with the plaintiffs in Ingram, Queensland and that if the first defendant required the same the first plaintiff could have it over in Fiji by the 27th of May 2005.

ix) The first defendant responded to the above letter and advised that its requirement still existed but due to the confusion about the first aircraft's Certificate of Airworthiness it did not want the second aircraft.

x) That despite the defendant's clear position that it did not require the second aircraft and despite the first that the second aircraft was never supplied the plaintiff have claimed for lease payments for the same.

xi) That in the year 2010 the first defendant demanded the first plaintiff to pay for its services for hangar rent from 21st April 2005 to July 2005 and for other services it had provided the first plaintiff.

xii) That by a letter dated the 23rd November 2010 the first plaintiff made an offer and made arrangements for payment for the first defendant's services.

xiii) That at the time that the first plaintiff agreed to settle the first defendant's claim in November 2010 it did not raise any issue or demands or claim for any form of lease payment that it is now claiming.

xiv) That the defendant does not owe any money to the plaintiff as the first aircraft provided by the plaintiff was not in an operational condition and also did not have the Certificate of Airworthiness, and the second aircraft was never supplied to the defendants.

(xv) That the plaintiffs have not disclosed any cause of action against the Estate of the second defendant and the Memorandum of Understanding dated 31st January 2005 was entered between the first plaintiff and the first defendant.

xvi) That by a letter dated 12th May 2014 the defendants by their Solicitor disclosed to the plaintiffs that the defendants had entered in an agreement to sell the first defendant's business and that the present injunction is restraining the sales to be concluded and offered alternative securities that would more than meet the plaintiffs' claim.

xvii) That the undertaking as to damages is in respect of an aircraft that does not have any Certificate of Airworthiness and despite all the efforts of the plaintiffs they have not been able to offer the Certificate since the year 2004. It cannot be operated and it has no commercial value. To make matters worse since it was badly damaged in the 2012 or 2013 cyclone and the plaintiff have sent the air craft engine and propeller to Australia it does not have the essential components either. Further that the plaintiff do not have any assets or properties in Fiji and any insurance claim for the aircraft would be payable in Australia not in Fiji.

xviii) That on 3rd April 2014 the defendants entered into a share sale Agreement to sell all the shares in first defendant Company and the parties were to complete the transaction on the 30th April 2014 or other date as agreed between the parties thereto.

xiv) That the injunction granted has now restrained the defendants from selling and transferring the shares in the first defendant and the purchaser had threated that unless the sale is completed by 6th June 2014 it may withdraw from purchasing. If the purchaser withdraws from the transaction the defendants will suffer irreparable Loss and damages including monetary losses that would run into several million dollars.

8. The Plaintiffs have filed an affidavit in opposition sworn by the second plaintiff on 2nd June 2014. In the said affidavit 2nd plaintiff has deposed inter-alia that:

i) That the 2nd defendant did most of the decision making through his own personal capacity and through his company and there for he believes should be heard during the trial.

ii) The aircraft had a Certificate of Air worthiness to enable to fly from Nausori to Nadi and it was in need of additional repairs and maintenance but it was airworthy and had a C 2 to check from qualified engineers from Air Fiji and certified safe to fly.

iii) The extensive work done have been done later and was not necessary needed at the time for the defendant not to apply to operate the aircraft and obtain to the Certificate of Air worthiness

iv) That he advised the second defendant they would provide an airworthy Aircraft not Certificate of Air Worthiness.

v) That the first defendant did not have the necessary approval to operate a Embraer 110 that he supplied as he was lead to believe by the second defendant that they did have it. That he received a letter from CAFFI and forwarded the same to second defendant regarding this.

vi) The aircraft had a Certificate of Air Worthiness when delivered to first defendant and it was coming up for renewal, the delay was a result on first defendant having their JAR 145 approval.

vii) The aircraft was delivered to 2nd defendant with a current Certificate of Airworthiness, therefore it could have produced income from day one. First defendant did not have approval to operate this type of aircraft therefore they could not operate the aircraft.

viii) After the first statement, first defendant did not have the monies to pay and after his conversation with the second defendant he said that until the aircraft was flying and they had their approvals they would not be able to pay the lease payments and it was pointless for the plaintiffs to issue second invoice when they could not make the first payment.

ix) That they were claiming from 2006 – 15 months lease payments on the first aircraft and 12 months for the second as per the agreement.

x) The security for cost is the aircraft which is still on Nadi Airport although the engine and propellers have been returned to Australia for insurance work. The airframe would be valued between USD $150,000.00 and USD $200,000.00 and that they recently sold an airframe to Air Rarotonga for USD $180,000.00

xi) That he prays the defendants application be struck out and his mareva injunction stay in place unless the defendants are able to provide a security of AUD $750,000.00 minimum into Court.

9. The defendants have filed an affidavit in reply sworn by Roshan Ali on 3rd June 2014. In the said affidavit Roshan Ali has deposed inter alia that:

i) The first defendant had absolutely nothing to do with late Donald Collingwood in his personal capacity and that any dealings which the first plaintiff had with the second defendant was only in his capacity as a director of the first defendant.

ii) The aircraft was flown from Nausori to Nadi as a ferry flight and not as a commercial flight and for such flights certificate of Airworthiness is not required.

iii) That the plaintiff was never mislead that the first defendant had the capabilities to maintain the type of aircraft the plaintiff had.

iv) That he denies the aircraft had the necessary Certificate of Airworthiness and further states that even if it did it was up for renewal as admitted by the second plaintiff on his affidavit and it was never renewed. Furthermore, the arrangements for renewal of Certificate of Airworthiness was only under the MoU and no leasing arrangements could have been entered into until all such issues were addressed and resolved. An operating lease would only have been signed when all these were carried out and aircraft lease wouldn't only be payable when a lease agreement would have been entered into.

v) That the first plaintiff as the owner of the aircraft is required to provide an airworthy aircraft that meets all requirements of the regulatory authorities including Certificate of Airworthiness for the purpose of leasing. Once the aircraft is leased it then becomes the responsibility of the lessee to renew the Certificate of Airworthiness. In this case the first plaintiff never carried out its obligations under the MoU to have the aircraft ready for leasing.

10. When this matter came up for hearing on 4th June 2014 Counsel for both parties submitted their legal arguments to court.

Law and Analysis

11. In granting an injunction the Court is guided by the principals laid down in American Cyanamid Co V Ethicon [1975] UKHL 1; [1975] AC 396 case.

Accordingly the three principle questions which must be answered in in determining whether to exercise the discretion to grant an injunction or not are:

i) Is there a serious question to be tried?

ii) Are damages an adequate remedy?

iii) Where does the balance of convenience lie?

Is there a Serious question to be tried?

12. The plaintiff is relying on the Memorandum of Understanding (MoU) marked as DR3 executed by the parties to show the terms of payment and the timeframe of the aircraft being hired.

13. It is evident from the MoU that it is executed between the first plaintiff company and the first defendant company. The second defendant although he is a shareholder, director and a secretary of the company has not entered into the MoU in his personal capacity.

14. Therefore, I am of the view that the Plaintiff has not disclosed a cause of action against the second defendant or in other words there is no serious question to be tried between the plaintiffs and the second defendant in this matter.

15. Furthermore, it is clear from the facts deposed by both parties in their affidavits that the disputes have arisen between them on the following matters

i) Who is to undertake the major and minor repair costs of the aircraft?
ii) Who is to obtain the Certificate of Airworthiness?

16. The MOU executed between the parties does not refer to important obligations of each party in detail. Though clause 8 of the MoU mentions that an operating lease for a period of 12 months would be signed by both parties that have never eventuated.

17. Therefore, it is not clear from the evidence before me whether the plaintiff or the defendant is bound to obtain the Certificate of Airworthiness? etc;

18. It is stated in paragraph 7.15 of the affidavit of Roshan Ali that after the initial invoice of October 2005 the plaintiff did not raise and send any further invoices or statements for the first defendant to pay any money for leasing the aircraft.

19. In paragraph 8, 7.5 of the affidavit in opposition of the second plaintiff has deposed that after the second defendant informed him that until the aircraft was flying and they had their approvals they would not be able to pay the lease payment and it was pointless for the plaintiffs to issue a second invoice expecting payment for that when they could not make the first payment.

20. The second plaintiff in his letter dated 5th October 2005 addressed to the second defendant (RA9) had stated that they wanted the lease to commence on 12th September, 2005 and that they have not forced that point but now it is critical that this aircraft shows a return to the first defendant from 01st October 2005 which seems to be a fair starting point and that they will be sending an invoice to defendants accounts payable for the first lease payment.

21. In considering the facts deposed in the affidavits of both parties, I am of the view that the issues have arise between them on the lease of the aircrafts as there was no proper agreement signed by them defining the obligation of each party in respect of the leasing aircrafts. The plaintiff has even refrained from submitting invoices to the defendants after October 2005.

22. Furthermore, though the plaintiffs claim damages on a second aircraft there is no evidence to prove that it was provided by them to the defendants.

23. The MOU does not set out a time frame of the commencement and termination of the lease and therefore each party has acted on mutual understanding as they were not bound by any contractual obligations. It is clear from the plaintiffs letter marked as RA9 even the commencement of the lease period was not definite and fixed.

24. From the plain reading of the MoU it is clear that is was only a preliminary step towards entering into an agreement. It only reflects an "understanding" between the parties prior to entering into lease agreement. However, it is evident from the sequence of events that had occurred subsequent to signing it the parties have failed to act upon the "understanding" which prevented them from entering into a lease agreement for the purpose of hiring the Aircrafts.

25. Without the lease agreement between the parties the terms on which the aircrafts were leased by the plaintiffs to the defendants cannot be ascertained. In my view this has lead to the disputes between the parties as there was no agreement between them. Though the plaintiffs are alleging that the defendants have failed to fulfil their obligations prior to signing a lease agreement there is no evidence to prove that the defendants were bound by such obligations. Therefore, I am of the view the plaintiffs have failed to submit adequate evidence to prove that their legal rights were violated by the defendants or otherwise that the defendants are in breach of any conditions of an agreement. As such I hold that the plaintiffs have not adduced evidence to the prove that there is a serious question to be tried in this matter.

26. As mentioned above, there is no cause of action disclosed by the plaintiffs against the second defendant as the MoU is executed only with the first defendant Company. Considering all of the above, I hold that the plaintiff has failed to establish that there is a serious question to be tried in this matter.

Whether damages would be an adequate remedy

27. The first plaintiff has undertaken to leave the first aircraft at the hanger in Namaka if the Court requires it as an undertaking for damages in addition to the personal undertaking.

28. In the affidavit of Roshan Ali he has deposed that the undertaking as to damages is in respect of an aircraft that does not have any Certificate of Airworthiness and that it has no commercial value. He has stated further that the plaintiff has sent the aircrafts engine and propeller to Australia since it was badly damaged in the 2012 or 2013 Cyclone; and that any insurance claim it may have would be payable in Australia not in Fiji.

29. The plaintiff has stated in paragraph 26 of the affidavit in response that although the engine and propellers have been returned to Australia for insurance work the airframe would be valued between USD$150,000.00 and USD$200,000.00 and that they have sold such airframe for USD$180,000.00.

Though the plaintiff gives an undertaking to deposit any payment that would be made by the Insurance Company for the repairs of the aircraft there is no assurance whether the Insurer will make such a payment to the plaintiffs.

30. In considering the evidence deposed, I am of the view that the plaintiff should have submitted a valuation from a competent person for the aircraft as it is not airworthy at the moment. Without such a valuation it is not prudent for the court to accept such an aircraft as an undertaking for damages.

31. Moreover, the defendants have alleged that the plaintiffs do not have any assets in Fiji and their address is stated in the Writ of Summons to be from New South Wales, Australia.

32. Therefore, I am of the view that the plaintiffs being residents of Australia and providing only an aircraft which is not airworthy in Fiji as an undertaking for damages cannot be taken as sufficient material before the court to fortify the undertaking. No material has been disclosed to fortify the personal undertaking either.

33. In Natural Waters of Viti Ltd V Crystal Clear Minister Water (Fiji) Ltd [2004] FJCA 59, ABU 0011, 2004S and ABU 0011A 2004S (26 November 2004) The court stated as follows:

"Applicants for interim injunctions who offer an undertaking as to damages should always proffer sufficient evidence of their financial position. The Court needs this information in order to assess the balance of convenience and whether damages would be an adequate remedy"

34. The court having considered the undertaking of the plaintiffs is of the view that the affidavits do not confirm sufficient information of the financial position of the plaintiffs in order to assess the balance of convenience.

35. The restraining order already granted till the next date of this matter prevents the defendants from selling or transferring the shares and operating their business.

36. It is evident from the evidence placed before Court that the plaintiffs are residents of Australia without any asset in Fiji. It is also evident that there is no serious question to be tried in this matter. As such if the plaintiffs action is struck out or dismissed at the end of a hearing they will not be in a position to compensate for the loss the defendants will suffer due to the restraining orders.

37. Considering all of the above, I am of the view that the balance of convenience

in this matter is in favour of the defendants.

Conclusion

38. After weighing all the relevant factor in this case, I find that the plaintiffs have failed to satisfy the principles laid down in the American Cyanamid case for injunctive relief.

Accordingly, I make the following orders.

39. (a) That the Interim Injunction Orders granted by the Court against the
defendants on 23rd April 2014 be set aside, dissolved and the obligations imposed on the defendants pursuant to the said orders be discharged.

(b) The plaintiffs must pay the 1st and 2nd defendant costs summarily accessed at $3,500.

L.S. Abeygunaratne
Judge
04/06/2014