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Rama v Sher Ali & Sons Ltd [2016] FJHC 491; Civil Appeal 09.2014 (16 May 2016)

IN THE HIGH COURT OF FIJI
AT SUVA
APPELLATE JURISDICTION

High Court Civil Appeal No: 09 of 2014

(Magistrates Court Civil Action No. 454 of 2009)

BETWEEN : NITYA RAMA

Appellant

AND : SHER ALI & SONS LIMITED

1^st Respondent

AND : PATEL & SHARMA LAWYERS

2^nd Respondent

BEFORE : The Hon. Mr Justice David Alfred

Counsel : Mr P R Singh for the Appellant
Mr D S Naidu for the Respondent

Date of Hearing : 15 March 2016
Date of Judgment : 16 May 2016

JUDGMENT

1. This is an appeal from the undated ruling, on a non-suit Application, made by the learned Resident Magistrate, at Suva, whereby he dismissed the Plaintiff’s claim with costs (the Magistrate’s decision).
   
2. The solicitors for the Appellant when they filed the Notice of Intention to Appeal similarly did not state the date of the ruling the Appellant intended to appeal.
   
3. I had therefore to discover from the Appeal Record that the date of the Ruling is stated as 20 June 2011.
   
4. The Magistrate in the Ruling said the issue was whether the Plaintiff is entitled to the sum of $10,000.00 paid as deposit by the Defendant. The Magistrate found:
   • (1) The contract was void due to non-disclosure of material facts by the Plaintiff.
   • (2) The Plaintiff was not ready to perform the contract.
   • (3) There was no breach of contract by the Defendant. He concluded the Plaintiff was not entitled to the deposit of $10,000.00 paid by the Defendant and accordingly dismissed the Plaintiff’s claim with costs.
     
5. The grounds of Appeal are that:
   1. The Magistrate had erred in law and in fact in finding:
      • (1) The contract was void due to the Plaintiff’s non-disclosure of material facts.
      • (2) The Plaintiff was not ready to perform the contract.
      • (3) There was no breach of contract by the Defendant.
      • (4) The agreement was void due to it being bare to the developments on the property and in the Plaintiff not disclosing there was a mortgage to Westpac Banking Corporation.
   2. The Magistrate erred in law and in fact when he failed to evaluate the Defendant’s Defence while making his decision.
      
6. At the commencement of the hearing, Counsel for the Appellant confirmed that the Appellant (Plaintiff) had withdrawn its action against the Second Respondent/Second Defendant.
   
7. Counsel for the Respondent confirmed the $10,000.00 deposit sum had been refunded to the purchaser by the common solicitor.
   
8. The Appellant’s Counsel now submitted. He said the defence of fundamental breach was raised for the first time. The purchaser had inspected the property. The Defendant (Appellant) had never called any evidence. The Magistrate was not entitled to say the mortgage to Westpac Banking Corporation was not disclosed because it was not pleaded. Counsel said he did not apply for a stay of the Magistrate’s Ruling and concluded by saying the deposit should be refunded.
   
9. Counsel for the Respondent then submitted. He said the Messrs Patel & Sharma were the common solicitors for the parties. The practice in Fiji is to disclose all encumbrances on the title. They were not sure if the Plaintiff was ready to complete when the letter of rescission was sent. The Defendant did not rescind the contract.
   
10. Appellant’s Counsel in his reply said the fact that there was no response to the letter of rescission meant the Defendant was not ready to sign. He said in Fiji, only the Vendor signs the transfer and settles the encumbrances at the time of settlement.
    
11. At the conclusion of the hearing I informed I would take time for consideration.
    
12. As this is an appeal I heard the matter afresh, which means I am going to depart from the constituents of the Ruling.
    
13. I now proceed to deliver my judgment. The point raised in this
    Appeal is an extremely short one: viz whether the Appellant is entitled to claim the sum of $10,000.00 from the Respondent. The answer will be found within the 4 corners of the agreement.
    
14. In reaching my decision I start with the Memorandum of Agreement dated 7 July 2009 (Agreement). This provides as follows:
    • (i) By clause 1, The purchase price is $280,000.00, of which $10,000.00 shall be paid by the Purchase into the trust account of Messrs Patel & Sharma and the balance sum to be paid by bank cheque to the vendor upon and at settlement.
    • (ii) Clause 2 states the said premises is sold free of, inter alia, charges and encumbrances whatsoever.
    • (iii) Clause 3 provides settlement shall be effected “within 90 days (3) calendar month, from the date of execution of this agreement or any other date mutually agreed by the parties.”

At settlement:

(a) The Vendor will hand over a registrable transfer of the said property in favour of the Purchaser together with the Certificate of Title in exchange for a bank cheque for the balance purchase price in the name of the Vendor “or payable to Vendors Solicitor’s Trust Account.”
(iv) Clause 15 provides that if the purchaser defaults in any payment due, the vendor, inter alia, “b. may rescind this contract of sale and thereupon all moneys theretofore paid or under the terms of sale applied in reduction of the purchase money shall be forfeited to the vendor as liquidated damages.”

15. By a letter dated 29 October 2009, Messrs Kohli & Singh, the solicitors for the Vendor/Appellant/Plaintiff, acting on the instruction of the Appellant wrote to the Respondent/Purchaser/1^stDefendant stating that they noted $10,000 had been paid as deposit to Messrs Patel & Sharma and the balance sum of $270,000.00 was due and payable within 90 days from the date of the agreement and had not been paid, and that therefore under clause 15(b) of the agreement their client rescinded the contract and advised the Appellant that the $10,000.00 deposited “is forfeited to our client”.

16. The said solicitors in their letter dated 18 November 2009 to Messrs Patel and Sharma advised them that pursuant to clause 15(b) the Agreement had been rescinded, the deposit forfeited to their client (Appellant), and urgently requested the $10,000.00 deposited in Patel & Sharma’s trust account to be paid into their trust account immediately, failing which court proceedings would be instituted.
    
17. The Amended Statement of Claim states in para 8 that the Plaintiff’s solicitors wrote to the “Defendants solicitors” asking them to forward the sum of $10,000.00 but no response had been received.
    
18. I do not accept the Magistrate’s view that the agreement was void. It is standard conveyancing practice in Fiji that the requirement that the vendor hand over a registrable transfer and the certificate of title can be complied with by him at the time of settlement.
    
19. Non disclosure in the agreement of an encumbrance or charge in favour of the vendor’s financer does not avoid the agreement. This is because any astute purchaser or his solicitor would make a land search which would disclose the existence of the charge.
    
20. The Purchaser did not rescind the Agreement. Instead, it was the Vendor who did so. Consequently clause 15 comes into play. The Vendor exercised (b) of the 3 remedies available to him. Therefore all he was entitled to was to have all moneys theretofore paid, forfeited to him as liquidated damages.
    
21. This has 2 unequivocal implications for him. The first is he was only entitled to the deposit sum of $10,000.00 because that was apparently all that had been paid under the terms of sale.
    
22. The second is this forfeited sum would be liquidated damages, Osborn’s Concise Law Dictionary (7^th edition) defines “liquidated damages as “a genuine covenanted pre-estimate of damages for an anticipated breach of contract, as contrasted with a penalty. The sum fixed as liquidated damages is recoverable; a penalty is not.”
    
23. Stroud’s Judicial Dictionary (5^th edition) states: Where parties to a contract agree that, in the event of default by either, a sum stated shall be paid as “liquidated damages,” the primary meaning of that phrase is, that the sum named has been “assessed between the parties as the damages to be paid by the party in default.”
    
24. Therefore all that the Vendor/Appellant is entitled to at the end of the day is this sum and nothing more and certainly not general damages for breach of contract.
    
25. But can he claim this from the Respondent? It is plain as a pikestaff that from the beginning the Appellant was only looking at the solicitors Messrs Patel and Sharma for payment. In this he was correct, as also were his solicitors Messrs Kohli & Singh in only demanding payment from Messrs Patel & Sharma.
    
26. This is because the agreement only provides for the forfeited sum to be paid to the vendor. And this sum, being liquidated damages, is the only sum the vendor is entitled to. He can only look to Messrs Patel and Sharma for payment of the forfeited sum because this sum is held by them in their trust account (see clause 1 of the Agreement). Therefore it follows he cannot look elsewhere and certainly not at the Respondent for this payment. That is why from the start, the Appellant and his solicitors never demanded payment of the $10,000.00 deposit sum from the Respondent.
    
27. I therefore find and so hold that the Appellant cannot claim any sum whatsoever from the Respondent. The Appellant’s sole entitlement was $10,000 and no general damages and he was only entitled to obtain this sum from Messrs Patel & Sharma.
    
28. In fine, I uphold the Magistrate’s decision, dismiss this Appeal and order the Appellant to pay the Respondent the costs of this appeal which I summarily assess at $1,000.00
    

Delivered at Suva this 16^th day of May 2016.

DAVID ALFRED

JUDGE

High Court of Fiji