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Saleimoa Plantation Limited v National Provident Fund [2000] WSSC 53 (25 July 2000)

IN THE SUPREME COURT OF SAMOA
HELD AT APIA

BETWEEN

SALEIMOA PLANTATION LIMITED
Plaintiff

AND

THE NATIONAL PROVIDENT FUND
First Defendant

AND

THE DEVELOPMENT BANK OF SAMOA
Second Defendant

Counsel: Mr P. Fepuleai for the Plaintiff
Ms P. Tanielu for the First Defendant
Mr S. Samau for the Second Defendant

Date of Hearing: 24 July 2000
Date of Ruling: 25 July 2000

RULING OF JUSTICE WILSON

HIS HONOUR: By its amended statement of claim the plaintiff seeks orders for specific performance of an alleged contract. In paragraph 14 of the amended statement of claim, the plaintiff pleads inter alia that the alleged contract arose when there was verbal agreement on 29 December 1999 "to a full and final settlement SUBJECT TO THE APPROVAL OF THE RESPECTIVE BOARDS OF THE FIRST AND SECOND DEFENDANTS...." In paragraph 19 of the amended statement of claim the plaintiff pleads that "the parties had on or about the 18 January 2000 by letters entered into an enforceable contract which the first defendant has now refused to honour."

By an amended notice of motion dated 24 July 2000, the plaintiff seeks an order for specific performance of what, on any reasonable reading of that formal document, must be the alleged contract dated 29 December 1999, i.e. when the plaintiff and the first and second defendants "verbally agreed, SUBJECT TO THE APPROVAL OF THE RESPECTIVE BOARDS OF THE FIRST AND SECOND DEFENDANTS, to a full and final settlement amongst the parties to settle all debts owing by the plaintiff to the first and second defendants." It is to be noted that the plaintiff does not seek an order for specific performance of any purported contract or agreement entered on or about the 18 January 2000; the plaintiff says that the first defendant simply "confirmed the oral agreement of 29 December 1999 by letter..."

The second defendant, by its statement of defence, inter alia denies the facts alleged in paragraphs 14 and 15 of the statement of claim and pleads "that the meeting attended by Mr Asiata S. Vaai and the General Manager of the first defendant and the General Manager and Legal Manager of the second defendant on 23 December (sic - "29 December") was to formulate a final proposal for the approval of the respective Boards of Directors of the first and second defendants" and "that what the parties agreed upon was the final proposal of the consideration and approval of the respective Boards and not the binding agreement."

The first defendant, in its statement of defence, inter alia pleads in a similar fashion in response to paragraphs 14 and 15 of the statement of claim.

I have heard an amended application, by way of motion, to strike out the statement of claim upon the grounds:

(1) That no cause of action is disclosed.

(2) That the proceedings are frivolous and vexatious.

(3) That the proceedings are an abuse of the court process.

Tendered before me and received were a number of affidavits which have been marked respectively exhibits A, B, C, D and E. A folder of copies of the pleadings and court documents and copies of the affidavits, together with "the synopsis of submissions on behalf of the plaintiff in support of the application by way of motion for an order for specific performance," was also handed up for my assistance.

The first defendant, through its counsel, handed up a draft "outline of argument of counsel for the first defendant in support of application for orders striking out proceedings" - that was also for my assistance and for understanding counsel's submissions.

The second defendant, through its counsel, handed up a document for my assistance called "Submissions for the second defendant".

By ground (1) the first defendant seeks to rely upon Rule 70 of the Supreme Court (Civil Procedure) Rules 1980. By Grounds (2) and (3) the first defendant seeks to invoke the inherent jurisdiction of this court.

The application, in so far as it is based on ground (1), will only be granted when the case is plain and obvious [Drummond-Jackson v British Medical Association (1970) 1 All ER 1094], where the case is clear and beyond doubt [Dyson v Attorney -General [1910] UKLawRpKQB 203; (1911) 1 KB 410], where the cause of action is on the face of it obviously unsustainable [Attorney-General of the Duchy of Lancaster v London and North Western Rly Co. [1892] UKLawRpCh 134; (1892) 3 Ch 274] or where the case is unarguable [Nagle v Feilden (1966) 2 QB 633]. In relation to this aspect of the case, i.e. ground (1), I have not had regard to the affidavits, just the amended pleadings. With reference to this argument arising from ground (1), in my judgment, this case is plain and obvious, the case is clear beyond doubt, the cause of action seeking specific performance of a "contract" which was, as all parties agreed, SUBJECT TO THE APPROVAL OF THE RESPECTIVE BOARDS OF THE FIRST AND SECOND DEFENDANTS, It is, on its face, obviously unsustainable, and the case is unarguable.

In fact, Mr Fepuleai, counsel for the plaintiff, was not able to refer me to one decided case or authoritative text book or the like which is authority for the proposition that a conditional "agreement" of this type is an enforceable contract.

The application based on grounds (2) and (3) calls for the exercise of a discretionary in jurisdiction. I agree with (and follow) the authorities relied upon by Lussick J. in the 1994 decision of the Supreme Court of Samoa in Leafa Vitale v Porotesano Malifa, unreported decision dated 27 June 1994. This jurisdiction is to be exercised with great circumspection and only where it is perfectly clear that the plea cannot succeed; this jurisdiction ought to be exercised sparingly and only in exceptional cases. But that is the first of two fundamental, although complementary, principles which the learned authors of Halsbury's Laws of England (Fourth Edition) discuss at Volume 37 paragraph 430. The other fundamental principle is that a stay or even dismissal of proceedings may "often be required by the very essence of justice to be done" so as to "prevent the parties being harassed and put to expense by frivolous, vexatious or hopeless litigation."

In the exercise of this jurisdiction of this court, in so far as it may be necessary to do so, I exercise it with great circumspection and when it is perfectly clear to me that the plaintiff's plea cannot succeed. I conclude that, to refuse the first defendant's application, would involve the defendants being harassed and being put to expense by frivolous, vexatious and hopeless litigation. This is one of those exceptional and rare cases in which this jurisdiction, if it is necessary to exercise it, should be invoked to protect the defendants.

Even if the plaintiffs pleading alleged that the "contract" of 29 December 1999 was "subject to contract", I would have found that no cause of action was disclosed. The situation is stronger here from the first defendant's point of view, where the "contract" is expressed to be SUBJECT TO THE APPROVAL OF THE RESPECTIVE BOARDS OF THE FIRST AND SECOND DEFENDANTS.

The terms of what was agreed, on 29 December 1999 could not have been intended to have (and do not have) any binding effect on their own. The parties to that "agreement" who, it is to be remembered were, in the case of the two defendant corporations, their General Managers, have so provided that their "agreement" be SUBJECT TO THE APPROVAL OF THEIR RESPECTIVE BOARDS either because they had dealt only with major matters or simply because they wished to reserve to their principals a right to withdraw at any time until the approvals had been given, or, in the case of the first defendant, because of the powers, rights, duties and obligations set out in the National Provident Fund Act of 1972 (see Sections 4 and 5). The question depends upon the intention disclosed by the language the parties have employed [see Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 and Allan v Carbone (1975) 132 CLR 52].

The common law has not developed the law to the point that corporations are bound by important and complex commercial "agreements" prior to (and notwithstanding the absence of) the approval of their Boards [compare Concorde Enterprises Ltd. v Anthony Motors (Hutt) Ltd. (1981) 2 NZLR 385]. Here there were negotiations conducted between the General Manager and Managing Director and principal shareholder of the plaintiff company on the one hand, and the General Managers of the defendant corporations on the other hand, in contemplation of the reference back to the Boards of the defendant corporations. The normal inference is that each of the defendants did not intend to be bound before the approval of their Board had been obtained.

On any view of the pleading of the plaintiff in its amended statement of claim that the verbal agreement was SUBJECT TO THE APPROVAL OF THE RESPECTIVE BOARDS OF THE FIRST AND SECOND DEFENDANTS, it is plain that the representatives of the parties at the meeting on 29 December 1999 all intended that the defendants would not become bound in contract until the approval of the respective Boards had been given. The events of the 29 December 1999 amounted to no more that a preliminary agreement and not, in itself, a binding contract [see Allen v Carbone supra per Stephen J, Mason J (as he then was) and Murphy J at p.533].

The situation here, as I have previously indicated, has some similarity to, but is not identical with the situation when a preliminary agreement is made "subject to contract."

As is acknowledged in the pleadings by all parties, the representatives of the parties on 29 December 1999 adopted the words: "SUBJECT TO THE APPROVAL OF THE RESPECTIVE BOARDS OF THE FIRST AND SECOND DEFENDANTS." In my opinion, the law says that those words have a decisive effect. They mean; "Although these things have been agreed, our agreement is not to be regarded as binding. These are only tentative matters subject to further consideration or negotiation. The agreement is not binding" [see, in a case of 'subject to contract', the approach of Lord Denning MR in Munton v Greater London Council (1976) 2 All ER 815 at p.820 and, in a case of 'conditional on the vendor obtaining a renewal of leases,' the approach of the Judicial Committee of the Privy Council in Aberfoyle Plantations Ltd. v Cheng (1960) AC 115]. It cannot be said of the words used here "SUBJECT TO THE APPROVAL OF THE RESPECTIVE BOARDS OF THE FIRST AND SECOND DEFENDANTS," as Mr Fepuleai implied in his submissions to me, that they are meaningless and do nor prevent a binding contract from arising [compare Richards (Michael) Properties v Corporation of Wardens of St Saviour's Parish, Southwark (1975) 3 All ER 416].

The Boards of Corporations, such as the two defendants here, are not to be seen as "rubber-stamps" or entities devoid of the capacity for independent decision-making. The condition here is a condition precedent which, not being void for uncertainty, is perfectly valid. To adopt the words of Lord Jenkins in Cheng's case supra, the General Managers of the parties here expressed the obligations of the parties to be subject to the condition contained in the words "SUBJECT TO THE APPROVAL OF THE RESPECTIVE BOARDS." It was thus made plain beyond argument that the condition was a condition precedent on the fulfilment of which the formation of a contract was made to depend.

The effect of my application of the law to the situation arising here is that I hold that no cause of action is disclosed and, on that account, the statement of claim is struck out. If it were necessary for me to exercise the court's discretion appertaining to the submission that the amended statement of claim be struck out as frivolous and vexatious and an abuse of the process of the court, I would exercise my discretion in favour of the applicant, the first defendant. For me not to strike out the amended statement of claim at this stage of these proceedings and in the circumstances would be, in my judgment, manifestly unfair to the defendants and would bring the administration of justice into disrepute amongst right-thinking people [see Hunter v Midlands [1981] UKHL 13; (1981) 3 All ER 727].

For all these reasons, the amended statement of claim of the plaintiff is struck out. Subject to hearing further from counsel for the plaintiff and the second defendant, I have in mind to dismiss the action against both defendants and hear counsel for all parties as to the question of costs.

[His Honour, after hearing from counsel, dismissed the action against both defendants, ordered that the plaintiff pay to the defendants their costs of these proceedings (to be certified by him) within 14 days from this date, and directed that, in the event of the quantum of costs not being agreed, each of the defendants to submit to the court, with copies to each other and the plaintiff, a memorandum in writing identifying the costs sought and the broad basis upon which those costs are claimed].

JUSTICE WILSON