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3 Hungry Bears Bar & Grill Pte Ltd v P. Meghji & Company Pte Ltd [2022] FJHC 177; HBC29.2022 (7 April 2022)


IN THE HIGH COURT OF FIJI

AT LAUTOKA

CIVIL JURISDICTION


HBC 29 of 2022


BETWEEN:


3 HUNGRY BEARS BAR & GRILL PTE LIMITED a limited liability Company having its registered office at First Floor, 1 Walu Street, Lautoka, Fiji.
PLAINTIFF


A N D:


P. MEGHJI & COMPANY PTE LIMITED a limited liability Company having its registered Office at

52 Narara Parade, Lautoka, Fiji.

DEFENDANT


Appearances: Mr. J. Sharma the Plaintiff
Mr. R. Gordon for the Defendant
Date of Hearing: 11 March 2022
Date of Ruling: 07 April 2022


R U L I N G


BACKGROUND


  1. At the heart of this matter is a tenancy agreement dated 27 June 207. The said agreement was entered into by Chung Kan Lai (“Lai”) trading as 3 Hungry Bears Bar & Grill Pte Limited (“3HBs”) – as tenant, on the one hand – and P. Meghji & Company Pte Limited (“P Meghji”) – as landlord, on the other. The subject matter of the agreement is a piece of land and a double story commercial building erected thereon (“premises”). The land is legally described as Lot 19 on DP 380 comprised in Lease No. 33496. The key features of the agreement are as follows:
Term
7 years
Commencement Date
01 January 2016
Expiry Date
31 December 2023
Rental
  • First 4 years
(01.01.16 to 31.12.19)

  • Next 3 years
(01.01.20 to 31.12.23)
$7,000 plus VAT per month

$7,500 plus VAT per month

  1. The preamble to the contract describes the parties as follows:
    1. P. MEGHJI & COMPANY LIMITED a limited liability company having its registered office at 52 Narara Parade, Lautoka (which together with its successors and assigns is hereinafter called “the Landlord”)
    2. CHUNG KAN LAI trading as “3 HUNGRY BEARS BAR & GRILL” of 1 Walu Street, Lautoka (which together with its successors and assigns is hereinafter called “the Tenant”)
  2. The agreement was duly consented to by the Director of Lands. According to the statement of claim, Lai executed the agreement after consulting with, and in the presence of, his solicitor. His solicitor did advise him that the agreement applied to his successors and assigns. This means, according to the alleged advice received, that the benefit as well as the burden under the agreement could be assigned to a limited liability company operating in the name of 3HBs without the need to obtain a fresh consent from the Director of Lands.
  3. For some years, from the commencement of the tenancy in question, to January 2020, Lai operated a restaurant and bar/nightclub business on the premises.
  4. Alice Ho Yan Lai (“Alice”) is Lai’s sister. I gather from the statement of claim and from the affidavits sworn by Alice and filed herein, that Alice was involved one way or another in Lai’s business. She asserts, and I have no reason at this time not to believe her, that she and Lai were involved in giving instructions to their solicitor over negotiations on the lease agreement in question in this case. However, whether Alice did have a beneficial interest in Lai’s business and if so, to what extent, is not clear to me.
  5. It appears from the statement of claim that, for some time prior to 4 January 2019, there was some thought about transferring Lai’s business as a going concern to a corporate entity which is to be called 3HBs. From what I gather, the idea was that the company was to “take over” the business operation which Lai has been operating as a sole trader under the business name of 3HBs. Hence, while the business will continue to run and operate on pretty much the same basis as it has been over the years, it is to be in the hands of the new corporate entity rather than Lai operating as a sole trader.
  6. Pursuant to that thinking, an application was lodged to register 3 HUNGRY BEARS BAR & GRILL PTE LIMITED (“3HBs Co.”) as a limited liability company on 14 January 2019. The Certificate of Incorporation of 3HBs Co. was issued on 18 June 2020. Notably, 3HBs Co.’s sole director and shareholder is Alice.
  7. Undoubtedly, the process of transferring Lai’s business as a going concern would entail inter alia a “transfer” or an “assignment” of some of Lai’s related business assets. Clearly, this must include the leasehold interest in question. As pleaded in the statement of claim, P Meghji was duly notified of the change and of 3HBs Co. being the successor and assign of Lai trading as 3HBs.
  8. According to the statement of claim, P Meghji did accept 3HBs Co. as the successor of Lai trading as 3HBs because the former started issuing rental invoices for the premises to 3HBs Co. and the latter continued to pay rental.

COVID-19 COMPLICATIONS - TERMINATION NOTICE


  1. On 9 March 2020, Alice approached P Meghji with a proposal that the latter either waive rental until business was back to normal or the parties mutually agree to terminate the agreement. As pleaded, P Meghji opted for reduced rent which 3HBs agreed to. I note that, at this point in time, 3HBs Co. was yet to be fully incorporated – though, the application to incorporate and register it as a company was already in process.
  2. However, on 20 December 2020, P Meghji issued a Termination Notice demanding that the premises be vacated by 31 January 2022. It is not clear to me whether the said Notice was addressed to Lai trading as 3HBs or whether it was issued to 3HBS Co. Notably, by this time, 3HBs Co. was already incorporated.
  3. 3HBs Co. protests that the said notice is in breach of the agreement which is to end on 31 December 2023. Faced with that threat, 3HBs Co. then filed the writ of summons and statement of claim seeking various injunctive and declaratory orders. There are, currently in place, some injunctive orders granted by the Master on 01 February 2022 which prevent P Meghji from taking any further steps to evict 3HBs Co. from the premises.
  4. Notably, it was when Gordon & Company filed an Acknowledgment of Service on 14 February 2022 with an application to appeal the Master’s orders, that 3HBs Co. filed their current application.

CURRENT APPLICATION


  1. The current application is a Summons dated 15 February 2022 and filed on the same day by Janend Sharma Lawyers. The summons seeks the following orders:
  2. The affidavit of Alice sworn on 14 February 2022 is filed herein support of the summons. As I have said, Alice is the director of 3HBs Co. She asserts that she is personally aware of the fact that Messrs. Gordon & Company had represented Lai trading as 3HBs when the tenancy agreement in question was being negotiated with P Meghji. Alice deposes that her brother Lai also confirms the same, however, no sworn an affidavit of Lai to this effect has been filed by the plaintiff. According to Alice, Mr. Wasu Pillay of Gordon & Company had advised her and Lai on the Lease Agreement. Alice further deposes that she was also involved in the negotiations and consultation with Gordon & Company in respect of the said agreement.
  3. At paragraphs (6), (7) and (8), Alice deposes as follows;

OPPOSITION


  1. The Defendants have filed the Affidavit of Wasu Sivanesh Pillay (“Pillay”) sworn on 16 February 2022 in opposition. Pillay categorically refutes the allegations in paragraph 4 of Alice’s affidavit. Instead, he asserts (I quote) that:
    1. Gordon & Company and I never represented Chung Kan Lai trading as 3 Hungry Bears Bar & Grill when the tenancy agreement was being negotiated with the Defendant as alleged herein.
    2. Gordon & Company and/or I never advised Chung Kan Lai or Alice Ho Yan Lai on the lease agreement or any lease agreement as alleged herein.
  2. He further deposes that neither he nor Gordon & Company was ever involved in the drafting of the agreement in question - nor did they offer any comment over it at negotiation stage – nor were they involved in any negotiation whatsoever over the agreement – nor was he ever engaged in any consultation with Alice in respect of any tenancy agreement.
  3. Pillay asserts that he simply witnessed the signature of Chung Kan Lai in the said agreement. At the relevant time, Lai was operating a restaurant below the office of Gordon & Company. He used to frequent Lai’s restaurant as a customer. Lai had asked him to witness his signature to the agreement and to deliver the agreement to Young & Associates. Pillay says that he obliged – but did not charge any fee for these services. He further states that neither he nor Gordon & Company ever opened any file for Lai in relation to the tenancy agreement in question – nor was there any fee agreement or any retainer agreement or contract for Gordon & Company.
  4. Pillay deposes that he has caused a search of all the active and archived files at Gordon & Company but has found no file in relation to the agreement in question.

REPLY


  1. Alice highlights the following key points by an affidavit in reply she swore on 24 February 2022:

“We refer to the draft Tenancy Agreement (“the Agreement”), a copy of which was given to Chung Kan Lai (“our client”).


(3) the letter is referenced “P. Meghji & Company Limited & Chung Kan Lai t/a 3 Hungry Bears Bar & Grill – Memorandum of Agreement for Tenancy of Building on Lease No: 133496”.

(4) by the said letter - Pillay admits that they acted for Chung Kan Lai.

(5) she and her brother Lai did consult Gordon & Company in respect of the Tenancy Agreement in question.

(6) upon their (Alice’s and Lai’s) instructions, Gordon & Company had reviewed the draft Tenancy Agreement which was drafted by Young & Associates

(7) Gordon & Company had represented both Alice and Lai. Gordon & Company had reviewed the Tenancy Agreement, dispensed legal advice, liaised with Young & Associates – and negotiated the Tenancy Agreement upon Alice’s and Lai’s instructions.

(8) Gordon & Company was retained by Alice and Lai to review, advise upon, negotiate with and liaise with Young & Associates on the Tenancy Agreement.

(9) once the Tenancy Agreement was finalized, Pillay witnessed Lai’s signature on the Tenancy Agreement.

(10) there is another letter where Gordon & Company vide its letter dated 21 November, 2018 “Application for Consent to Sub-let Lease No. 133496 Reference 4/7/1394 P. Meghji & Company Limited to Chung Kan Lai” wrote to the Divisional Lands Manager of Lands Department Lautoka enclosing:
  1. Sub-Letting Agreement x 2;
  2. Land Rent Receipt;
  3. City Rate paid as at 31st December 2018;
  4. Copy of TIN Letter. A copy of the said letter dated 21st November, 2018 is annexed hereto marked “AL-2”.

(11) Alice annexes a copy of Fiji Revenue Receipt dated 21 November, 2018 issued to Gordon & Company by Lands Department for payment of Consent Fee for sublet to 3HBs.

(12) given the two letters written, Gordon & Company ought to have opened a file in relation to the Tenancy Agreement as any competent law firm would have.

(13) it has been almost six years since the Tenancy Agreement was prepared, reviewed, negotiated and/or finalized. Alice no longer recalls nor have records of fee arrangement with Gordon & Company. She says that Gordon & Company ought to have full records. These records are with Young & Associates.

(14) Alice recalls her and Lai having had meetings at their shop or office with Pillay where they sought and were given legal advice on transferring the name 3HBs from Lai to Alice in a limited liability company.

(15) Pillay explained how 3 Hungry Bears as a high-risk business should have liability insurance cover or to turn it into a limited liability company. In that conversation, Alice and Lai had provided confidential information.

(16) Alice does not want to disclose in her affidavit the exact confidential information that she and Lai had revealed. However, it was along the lines of legal requirements, residence (s),

licenses, whether all the information provided by her and Lai would have an adverse impact on the Tenancy Agreement and whether, if the need arose, Pillay can attest to the same.


(17) Alice further deposes that she and Lai continued to receive advice from Pillay and in fact Pillay further mentioned that he had the same landlord.

(18) Alice says she reserves the need to call Pillay as a witness to give evidence on 3HB’s behalf.

SUBMISSIONS


  1. The plaintiff submits as follows:
(i)
Pillay’s categorical denial in his affidavit of the allegation of having acted for Lai trading as 3HBs was a lie. This is why Alice had to produce documentary evidence to the contrary in her Affidavit in Reply.
(ii)
P. Meghji does not seem to be aware of the current proceedings – hence – there is no evidence of any authority to Pillay to swear any affidavit.
(iii)
solicitors owe a duty to their clients as well as to the Court to ensure that they do not appear in a matter in which they have an actual or potential conflict of interest or where, by reason of their relationship with their client, their professional independence can be called into question or compromised (as per Master V.D Sharma as he then was in In Sharma v Uluivuda [2017] FJHC 196; HBC 304.2013 (16 March 2017).
(iv)
the evidence is clear that Gordon & Co negotiated the agreement in question and had represented Lai trading as 3HBs – on instructions of Lai and Alice.
(v)
confidential information was given to Gordon & Co in the course of the above instructions.
(vi)
3HBs cannot divulge the full confidential information as that would be tantamount to Alice waiving confidentiality.
(vii)
in R.C Manubhai & Co. Ltd v Herbert Construction Company (Fiji) Ltd [2014] FJCA 175; ABU0002.2010 (29 May 2014), Almeida Guneratne JA leans more in favour of a more liberal approach favouring “the real risk of prejudice or mischief” and “the possibility of unwitting disclosure” test as applied in Wan v McDonald [1992] FCA 4; [1992] 33 FCR 491; 105 ALR 473.
(viii)
in line with the above approach, Guneratne JA adopted the following test of Gillard J in World Medical Manufacturing Corp v Phillips Ormonde [2000] VSC.
(ix)
Hence, when confronted with the question as to whether a lawyer should be allowed to act against a former client, the following questions should be asked:

(a)
is the former supplier of services whether it be a solicitor, accountant or a patent attorney or some other person providing services, in possession of information provided by the former client which is confidential and which the former client has not consented to disclosure?

(b)
is or may the information be relevant to the new matter in which the interest of the other client is or may be adverse to his own?

(c)
if the answers to the first two issues are yea, then there is a risk which is real and not merely fanciful nor theoretical that there will be disclosure?

(d)
if there is that risk then the evidential burden which is heavy, rests upon the provider of the services to establish that there is no risk of disclosure and this may be established in

exceptional cases by the provision of a “Chinese wall” but this is rarely of sufficient protection.

(e)
should a permanent injunction be granted?
(x)
Guneratne JA then suggested a further question to be asked:

"Is there a nexus between the cause of action together with the claim contained in the Statement of Claim of the new client and the confidential information he might be said to
be in possession through his relationship with the former client that could be regarded as material and might be detrimental to the former client?"
(xi)
Guneratne JA has also said:

Tests Commonly Employed to Ascertain a Conflict of Interest

[43] Upon an examination of the authorities referred to by the learned Judge and the authorities relied upon by learned Counsel for the Appellants (including the celebrated case in Prince Jefrin Bolv. K v. KPMG and Others [1998] UKHL 52; [1999] 1 All ER 5 ER 517. I venture to formulate the following tests in ascertainisituation in which a conflionflict or potential conflict of interest could be said to have arisen.

[44] First, the cot must arise out of the cause of action pleaded by a new clew client and in any information pertaining to the former client a lawyer reasonably could be said to be in possession.

[45] Secondly, such information must impact on the cause of action so pleaded.

[46] These are two tests formulated by this Court in R Cbhai & Co .and .and 2 Others v. Herbert Construction Company (Fiji) Limited.; ABU 0002 of 2010, 29 May 2014.

[47] Applying those twos, even if the plaintiff–respondent is to be regardedarded as a former client of Mr. Narayan (even for a day), the factors feeding those tests are totally absent in the instant case.

[48] Another test that could be extracted from past precedents is the possibility of a lawyer for a party being called as a material witness in ongoing proceedings. (See: Cl Karlson&#1b> [1996] 17 WAR 493.

[49] What is the degree of possibility in Mr. Nara Narayan being called as a witness, let alone as a 'material witness' in the action filed by the plaintiff– respondent, other than to depose that, on 30 September, 2013 he had moved for a date on behalf of the plaintiff, a fact on which in any event there is no dispute and is common ground?

[50] In regard to the scope and content of instructions that could give rise to a conflict situation I found some useful dicta in R v Birk [1990] 19 NSWLR 677 which this Courtd with appr approval in the &#16e (sup (supra), which has no appo application even by any stretch of imagination to the instant case.

[51] Viewed from thaspectI do not think a nk a situation smacking of a conflict of i of interest has arisen in this case.

[52] Yet another test is where, because of allegations made in the pleadings or even outside them, a lawyer (whether solicitor or counsel) would be required to defend his professional conduct.

[53] What is the conduct of Mr. Narayan that is in question? Could his moving for a date on an instruction sheet issued by the plaintiff's solicitors when he had not the remotest idea that, he would be retained on behalf of the defendants constitute conduct that he would be required to defend?

[54] All that had taken place ante lmotam (be0;(before the case ).
(xii)
And further:

The Interests Involv determining a conflict of t of interests situation

[75] What are the interests involved? First, that of a client having full confidence in his or her lawyer to appear on his or her behalf which the defendants-appellants have clearly shown.

[76] Secondly, that full confidence as including the protection of confidential information (which has no relevance to the instant case).

[77] Thirdly, the interest in the freedom of a lawyer to take instructions from his client (in the instant case from the defendants-appellants, although Mr. Narayan had appeared for the plaintiff on an earlier date for a limited purpose, the defendants-appellants having no problem with that).

[78] And, lastly, the interest of the client (the defendants – appellants in the instant case) to be represented by the lawyer of their choice (Mr. Narayan), notwithstanding the fact that, he had appeared for the opposing party on an earlier date (no doubt, in the same case).

[79] These are the interests that need to be addressed and what follows is a balancing of those interests. (Vide: Re: A firm of solicitors [1996] 3 WLR 16; Alpha Wealth Financial Services Pty Ltd v. Frank Lady Rivers Olive Company [2005] WASC 189; (see further Lawyers' Responsibilities and Accountability - Cases, Problems and Commentary, Ysaiah Ross and Peter MacFarlane, 3rd edition, Butterworths, 2007).

[80] Applying those criteria I cannot see how a single of those interests could be said to have been compromised.

  1. Gordon & Company submits:
(i)
as a preliminary objection, Alice had only disclosed in her affidavit in reply, material which she alleges puts Gordon & Company in a conflicted position.
(ii)
the general rule is that an applicant stands or falls by his founding affidavit. He must therefore make his case in the founding affidavit. Alice’s affidavit in reply therefore should be excluded.
(iii)
the court however has a discretion to permit new material in the replying affidavit.
(iv)
at the time when the tenancy agreement in question was executed, Lai trading as 3HBs was not a limited liability company.
(v)
3HBs, the plaintiff in this case, was only incorporated on 14 January 2019 and commenced trading from 01 January 2020.
(vi)
there are some inconsistencies. There is for example annexed to Alice’s affidavit in reply an agreement dated 26 October 2016 the terms of which are different from the 27 June 2017 agreement. The agreement dated 27 June 2017 was consented to by the Director of Lands on 21 June 2017.
(vii)
the applicable law is that which was stated by the House of Lords in Bolkiah v KPMG [1998] UKHL 52; [1999] AC 222; [1999] 1 All ER 517; [1999] 2 WLR 215 (16 December 1998)
(viii)
the key points to extract from Bolkiah – are as follows:

(a)
there is no absolute rule of law in England that a solicitor may not act in litigation against a former client.

(b)
a solicitor may be restrained from acting if such restriction is necessary to avoid a significant risk of the disclosure or misuse of confidential information belonging to the former client.

(c)
hence, a solicitor or his firm is precluded from acting for a client with an interest adverse to that of a former client in the same or connected matter

(d)
before the court can intervene on behalf of a former client, the court must be satisfied that:

(i) the solicitor is in possession of information confidential to the former client and the disclosure of which the former client has not consented to
(ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own

(e)
the basis of the court’s jurisdiction is the protection of the former client’s confidential information.
(ix)
the solicitor’s duty to preserve the confidentiality of a former client is a duty to keep information confidential. It is not merely a duty to take all reasonable steps to do so. Bolkiah cited as follows:

The extent of the solicitor’s duty
Whether founded on contract or equity, the duty to preserve confidentiality is unqualified. It is a duty to keep the information confidential, not merely to take all reasonable steps to do so. Moreover, it is not merely a duty not to communicate the information to a third party. It is a duty not to misuse it, that is to say, without the consent of the former client to make any use of it or to cause any use to be made of it by others otherwise than for his benefit. The former client cannot be protected completely from accidental or inadvertent disclosure. But he is entitled to prevent his former solicitor from exposing him to any avoidable risk; and this includes the increased risk of the use of the information to his prejudice arising from the acceptance of instructions to act for another client with an adverse interest in a matter to which the information is or may be relevant.
(x)
the court should intervene unless it is satisfied that there is no risk of disclosure.
(xi)
the risk must be a real one, and not merely fanciful or theoretical. But it need not be substantial.

COMMENTS


  1. I acknowledge the submission of Mr. Gordon that Alice should have laid out all her cards face up on the table in her founding affidavit. I also acknowledge that – ultimately - the Court has a discretion as to whether to accept Alice’s affidavit in reply.
  2. I accept Alice’s affidavit in reply. The material which Alice discloses in her Affidavit in Reply pertain to documents which originate from the offices of Gordon & Company. It can hardly be said that Gordon & Company has been caught by surprise or has been prejudiced in any way by the disclosure of these documents.
  3. I also take into account the fact that these documents highlight what appears to be a blatant misinformation in the affidavit of Pillay in his categorical denial of having acted for Lai and/or Alice. As Alice deposes, which I accept, she only saw the need to disclose these documents in her affidavit in reply – in response to Pillay’s categorical denial in his affidavit. In any event, had

Gordon & Company sought leave to file a reply to Alice’s affidavit in reply, I would most certainly have granted it.


  1. I believe that certain confidential information would have been divulged to Pillay by Lai and Alice in their instructions to Pillay. In saying this, I am referring both to the instructions pertaining to the incorporation of 3HBs Co – which – I gather from Alice’s affidavit – was attended to by Pillay.
  2. As I have noted above, Alice recalls her and Lai having had meetings at their shop or office with Pillay where they sought and were given legal advice on transferring the name 3HBs from Lai to

Alice in a limited liability company and Pillay rendering them advice on how 3 Hungry Bears as a high-risk business should have liability insurance cover or to turn it into a limited liability company. In that conversation, Alice and Lai had provided confidential information.


  1. Would any of this be relevant to any issue about the tenancy agreement in question?
  2. Mr. Sharma had hinted in argument that the issue in this case may turn ultimately on whether or not 3HBs Co. is a valid successor and assign of Lai trading as 3HBs. This may or may not turn ultimately on the exact nature of the purported transfer or assignment of the business as a going concern from Lai trading as 3HBs to 3HBS Co – the reasons why the transfer or assignment was made, whether any assets were transferred from the former to the latter, whether any consideration was paid at all etc. Such transactions may have tax consequences. Arguably, these are highly confidential in themselves.
  3. Mr. Gordon’s submissions, by highlighting the fact that the entity which executed the said agreement was different from the plaintiff in this case, merely accentuates the high likelihood of the issue in this case turning on whether 3HBs Co. is a valid assign of Lai trading as 3HBS.
  4. I accept that some of the information that may pertain to the above will be confidential and consequently, there is a risk which is real and not merely fanciful nor theoretical that there will be disclosure. I also accept Alice’s position that she may have to call Pillay as a witness if need be.
  5. To adopt Guneratne JA’s words, there is indeed a nexus between the cause of action in this case and the confidential information which Pillay and Gordon & Company should have in their possession in relation to the tenancy agreement in question and the incorporation of 3HBs Co.
  6. Having said that, the evidential burden which is heavy, rests upon Pillay and/or Gordon & Company to establish that there is no risk of disclosure. I must say that Pillay’s affidavit, on balance, is devoid of any veracity on account of the exposure which Alice’s affidavit in Reply has brought. A blanket denial of having acted for Lai and or Alice, when there is evidence suggesting otherwise, achieves nothing in assuring this Court that there is no risk of disclosure.

CONCLUSION


  1. I adopt the approach of Guneratne JA in R.C Manubhai & Co. Ltd v Herbert Construction Company (Fiji) Ltd [2014] FJCA 175; ABU0002.2010 (29 May 2014) and for the reasons I have stated above, grant the following orders:

..................................

Anare Tuilevuka

JUDGE

Lautoka


07 April 2022

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