IN THE SEYCHELLES COURT OF APPEAL

[Coram:     F. Macgregor (PCA) , A. Fernando (J.A) , M. Twomey (J.A)]

Civil Appeal SCA 11/2017

(Appeal from Supreme Court Decision CS 09/2013)

Heard:             09 August 2019

Counsel:          Mr. B. Georges for the Appellant

                       Mr. C. Lablache for the Respondent                       

Delivered:        23 August 2019

JUDGMENT

F. MACGREGOR (PCA)

[1]       The Appellant on 21 November 2008 entered into a written hire agreement with the Respondent whereby the Appellant leased the hire craft to the Respondent, together with other equipments for a period of twelve months.

[2]       The hire agreement was to be renewed automatically at the end of every twelve month period, when the hire agreement came to an end, unless the Appellant or Respondent objected to such renewal. During the hire agreement, the Respondent was to pay the Appellant seventy per cent (70%) of the net revenue, of the business, whilst the Respondent was to retain thirty per cent (30%) of the monthly revenue of the business.

[3]       In February 2012, the Respondent is alleged to have illegally terminated the hire agreement causing the Appellant to take possession of the hire craft. As a result of the breach of contract, the Appellant suffered damages.

[4]       The damages are particularised as follows;

1. Depreciation in the value of the hire craft due to failure to exercise of reasonable care in respect of hire craftSCR 1,000,000.00

2. Value of the Dingy which has never been returned to PlaintiffSCR 20,000.00

3)    Loss of profit from non-payment of rental, in the terms

 set in the contract                                                                     SCR 800,000.00

[5]       The Court below after analysing the evidence found that the agreement was illegal and hence void. As such the Appellant could not seek to recover payments under an illegal contract. It is unenforceable.

[6]       The Learned trial Judge also made the following remarks, that is that the lease agreement was tainted with illegality and thus unenforceable because it was part of a “scam” to enable the Appellant to avoid the licensing restriction applicable to non-Seychellois relating to boat charter business.

[7]       It is against this background that this appeal has been lodged. The Appellant been dissatisfied with the judgment given in the Supreme Court on 23 March 2016 seeks this court to reverse the findings made in the Trial Court.

Grounds of appeal

[8]       The Appellant has three grounds of appeal and these are:

Ground 1

The judgment of the court does not do justice to the matters pleaded, the evidence led and the justice of the case. It appears to be a hastily-written ruling by a judge who was in a hurry to deliver the judgment at the end of his contract.

Ground 2

In the absence of any cogent evidence to that effect, the learned trial Judge erred in his finding that a non-Seychellois could not be the proprietor of a business in Seychelles without a licence. Consequently, his other findings are tainted with error.

Ground 3

The learned trial judge erred in dismissing all the Appellant’s claims on the basis that the contract was tainted with illegality. At least, he ought to have considered the issue of the claim relating to the reduction in value of the vessel during the period it was with the Defendant

[9]       The Appellant at the hearing of this appeal espoused that all the three grounds of appeal are linked; therefore this court will consider them as one and proceed on that basis. For clarity purposes, the ground that was mainly pursued and argued at length was ground 3.

[10]       After much argument in the hearing before us, the Appellants Counsel signalled to the court that he cannot claim profits from an illegal contract, hence those parts of his ground of appeal that deal with the claim for profits will not be pursued.

[11]       He thereafter concentrated on the claim for the misuse of the boat which he argued conveyed obligations with or without the contract.  We note that in paragraph [5] of the Appellants plaint in the court below, after pleading contract in its preceding paragraphs [3] and [4], the words “further in terms of the civil code, the Defendant was obliged to use reasonable care in respect of the hire craft and the equipment, including the Dinghy.

[12]     The Defendant in his defence below in paragraph [4] of his statement of defence states “paragraph [5] is not admitted”.

[13]     By virtue of section 75 of the Seychelles Civil Code Procedure which states,

 “The statement of defence must contain a clear and distinct statement of the material facts on which the defendant relies to meet the claim. A mere general denial of the plaintiff's claim is not sufficient. Material facts alleged in the plaint must be distinctly denied or they will be taken to be admitted.”

I find that the general denial is not sufficient and therefore, anything not denied is considered admitted.

[14]     In paragraph [5] of the Respondents defence, he refers to the boat in May 2011 encountering major damages and breakdown and from October 2011 to February 2012, it encountered mechanical problems which rendered it unseaworthy for the operation of the business.

[15]     The Appellant had testified that the boat was not handed over to the Respondent until the beginning of 2009. The boat remained in the possession of the Respondent until March 2012 (39 months).

[16]     On conducting an evaluation of the condition of the boat in November 2009, it was reported that the boat’s value stood at SCR 1.6 million, which is very similar to the purchase price. However, according to Captain Pierre Grancourt’s 2012 report on the evaluation of the boat, he had highlighted that the boat had suffered significant wear.  After reviewing the Captain’s testimony, it is clear that normal devaluation of a boat per year would stand at 10% in regards to the engine and 5% in regards to the hull. However, if the boat is cared for and maintained, this devaluation would be less. Overall, the report found that the boat had depreciated in value to SCR 900, 000.

[17]     Taking into account that 10% of this depreciation was due to normal wear and tear, the boat had still depreciated to SCR 810, 000 in value. 

[18]     The Appellant had testified that he used the boat twice a year, while Mr Rodney highlighted that this time accounted for a total of 2 months each year. During the period that this boat was leased to the Respondent, the Appellant had possession of the boat for a total of 6 months, while the Respondent had possession for 33 months.

[19]     Therefore, when calculating the apportionment of blame, 15% of the blame is placed on the Appellant, while 85% of the blame lies with the Respondent.

[20]      The Appellant has also sought damages of SCR 1, 000,000 for the depreciation in the value of the vessel. While the agreement between both the Respondent and the Appellant is void, I find that the Respondent still had a duty of care to ensure that the condition of the boat, which did not belong to them and was in their possession for 33 months, was maintained. However, within 3 years, and taking into account the 10% of fair wear and tear, the vessel in question had depreciated in value from SCR 1.6 million to SCR 810, 000.

[21]   Therefore, in the case of full liability I would award SCR 810, 000 of damages for the depreciation in the value of the vessel.

[22]    However, as I have apportioned 15% of the blame of the Appellant and 85% of the blame on the Respondent, the total amount payable to the Appellant is SCR 688,500.

[23]    No order granted as to costs.

F. MacGregor (PCA)

I concur:.                                ………………….                                           A.Fernando (J.A)

Signed, dated and delivered at Palais de Justice, Ile du Port on 23 August 2019

M. Twomey (J.A)

[1]       I have read the learned President of the Court of Appeal MacGregor’s decision in this matter and agree with him that the contract was tainted with turpitude. However, I cannot agree with him that damages still arise in this matter due to the fact that the Respondent caused a depreciation to the boat’s value resulting in damages to be paid. I give my reasons below.

Background

[2]       The Appellant purchased a vessel in November 2008. On 21 November 2008, the Appellant entered into a contract with the Respondent under which the Respondent would lease the vessel, along with other equipment, including a dinghy, from the Appellant for a period of 12 months. This contract would then be renewed at the end of every 12 months unless either the Appellant or the Respondent objected to its renewal. However, in March 2012, the contract was terminated and the Appellant in a plaint before the court a quo claimed that the Respondent had failed to use reasonable care in respect of the vessel and its equipment, and as a result, the value of the vessel had depreciated significantly and the dinghy had never been returned to the Appellant.

[3]       The Appellant claimed that under the agreement, the Respondent was required to pay him 70% of the monthly net revenue of the business whilst the Respondent retained the remaining 30%. The Appellant claims that the Respondent failed to pay him this revenue. As a result, he sought damages for the depreciation in the value of the vessel, the value of the dinghy which was never returned to him, and a loss of profit from the non-payment of the rental fee.

[4]       The learned Trial Judge found that the Appellant, a non-Seychellois, purchased a vessel and decided that he would use it to carry out business in Seychelles as a boat charter. He held that the Appellant was fully aware that he was legally required to possess a licence before he could conduct business in Seychelles, that there was a strong possibility that he would not be granted the licence, and that he entered into an agreement with the Respondent in an attempt to circumvent this legal requirement. The Court found that this agreement was tainted with illegality and that it was part of a ‘scam’ which allowed the Respondent to conduct business in Seychelles. In the circumstances, he found that the agreement between both parties was void and the Plaint was dismissed.

The Appeal

[5]       The Grounds of Appeal are as follows:

• The Judgement of the Court does not do justice to the matters pleaded, the evidence led, and the justice of the case. It appears to be a hastily-written ruling by a Judge who was in a hurry to deliver the Judgment at the end of his contract.
• In the absence of any cogent evidence to that effect, the learned Trial Judge erred in this finding that a non-Seychellois could not be the proprietor of a business in Seychelles without a licence. Consequently, his other findings are tainted with that error.
• The learned Trial Judge erred in dismissing all the Appellant’s claims on the basis that the contract was tainted with illegality. At least, he ought to have considered the issue of the claim relating to the reduction in value of the vessel during the period it was with the Defendant. 

[6]       The Appellant at the hearing of this appeal submitted that all the three grounds of appeal were linked; I therefore consider them as one and proceed on that basis. For the purposes of clarity, it must be stated that the ground that was mainly pursued and argued was ground 3 of the appeal.

Submissions

[7]       The Appellant submits that the Respondent entered willingly into the agreement and used its provisions to its advantage. The agreement had the force of law between the parties and it should have been performed in good faith by both. In raising the defence that the agreement was a sham after three years of its use, the Respondent is simply dissembling the facts.

[8]       Counsel for the Appellant further submits that the evidence as a whole reveals that this was an arrangement which held the essential conditions of the law of contract found in the Civil Code, in particular Article 1134 –

• “Agreements lawfully concluded shall have the force of law for those who have entered into them.

They shall not be revoked except by mutual consent or for causes which the law authorise.

They shall be performed in good faith.”

[9]       The Respondent, on the other hand, submits that the learned Trial Judge cannot be faulted for finding that the lease agreement was part of a “scam” to allow the Appellant to circumvent the licensing restriction applicable to non-Seychellois. Having reached that conclusion, it was appropriate for the Judge to dismiss the claim of the Appellant without having to determine the other issues arising from the alleged contract between the parties.

[10]     It is the submission of the Respondent that it is settled jurisprudence that an agreement, whose object is contrary to law or public policy, would be invalid and its breaches would not be justiciable. This Court was referred to Articles 6, 1108 and 1134 of the Civil Code of Seychelles, and a plethora of cases, namely Avalon (Proprietary) Limited & Ors v Berlouis (SCA 25/2002) [2003] SCCA 4 (05 December 2003); La Gigolette Ltd v Durup (1978) SLR 101; and Maesching V Colling (25 November 2005) SCA, Civil Slide 11 of 2005 (unreported); Marcelon v Lawrence (1990) SLR 210.

[11]     Counsel for the Respondent submitted that the restriction applying to non-Seychellois interests in the boat charter business is a matter of law. Boat charter businesses are required to be licensed under section 3 of the Control of Hire Craft Act. The Investment Code of Seychelles Act 2005, which came into force in 2008, restricted the boat charter business involving less than 6 boats to Seychellois or Seychellois controlled Seychelles companies exclusively (Section 3(2) read with paragraph 1.1 of Schedule 1). This Legislation was replaced in 2011 by the Investment Act 2010, yet maintained the same provisions.

[12]     The legislative policy was meant to reserve the benefits of the restricted yacht charter business for Seychellois only. The agreement between the Appellant and the Respondent was clearly meant to undermine that policy.

Discussion

[13]     A great deal of evidence was led in this case for our consideration. Despite the formalities between the parties, pleadings, documentary evidence, the issue of the legality or illegality of the contract, the essential facts are that the Appellant purchased the boat and organised and paid for the establishment of the Respondent Company. A  written agreement was drawn up in which the Appellant gave possession and use of the boat to the Respondent for the purpose of a boat charter business for a period of three years, except for about two months each year when the Appellant would reclaim possession and use of the boat.

[14]     Having considered all the submissions made before this Court, it is crystal clear that the law on this matter is settled. There is no remedy that can be claimed under a contract tainted with illegality. The Appellant created a contract to enable him to circumvent clear provisions of the law. 

[15]     Articles 6, 1108 and 1133 of the Seychelles Civil Code provide –

“Article 6. It shall be forbidden to exclude the rules of public policy by private agreement. Rules of public policy need not be expressly stated”

“Article 1108. Four conditions are essential for the validity of an agreement-

The consent of the party, who binds himself,

His capacity to enter into a contract,

A definite object which forms the subject matter of the undertaking,

That it should not be against the law or against public policy.”

“Article 1133. The object of an agreement is unlawful when it is prohibited by law or when it infringes the principles of public policy” (Emphasis added)

[16]     While the contract, that is, the lease of the boat between the Appellant and the Respondent, from the face of it looks pristine, the reason behind it or its object as admitted by both parties was to undermine the law regarding non-Seychellois operating a charter business of less than 6 boats.  If it is against the law or against public policy, the obligation is invalid in terms of article 1108 of the Seychelles Civil Code (Jacobs v Devoud [1978] SLR 164).

[17]     In Monthy v Buron (SCA 06/2013) [2015] SCCA 15, the Appellant entered into an agreement with the Respondent for the construction of a three bedroomed house.  It was revealed during the course of the hearing that the reason which drove the parties to the agreement was that payment for the contract would be made in foreign exchange at the black market rate. The Court held at paragraph 16 of its Judgment that –

• “A court cannot endorse an agreement that is against public policy. The rule is contained in the maxim of ex turpi causa which is also a concept known to the English common law. In Euro-Diam Ltd v Bathurst [1990] 1 QB 1, the Court of Appeal held the ex turpi causa defence ultimately rests on a principle of public policy that the courts will not assist a plaintiff who has been guilty of illegal (or immoral) conduct of which the courts should take notice. It applies if in all the circumstances it would be an affront to the public conscience to grant the plaintiff the relief which he seeks because the court would thereby appear to assist or encourage in his illegal conduct or to encourage others in similar acts”

[18]     Similarly in the present case, we are inclined to accept the submissions of the Respondent as it is clear that the contract was against public policy and therefore illegal.

[19]     The Appellant submitted that should the contract be found illegal, this Court should consider granting damages for the misuse of the boat which he argued conveyed obligations irrespective of whether contract was illegal or not.

[20]     An award under delict cannot arise in this case as it would offend the principle of non cumul de responsabilités contained in Article 1370 (2), which prohibits duplicitous actions and obliges an aggrieved party to opt for only one cause of action to pursue when it can be founded either in contract or delict. The law on this matter is settled - see in particular the authorities of Labiche v Ah-Kong (2010) SLR 172, Madeleine v National Drugs Enforcement Agency (CS 25/2016) [2017] SCSC 422 (19 May 2017), Tree Sword (Pty) Ltd v Puciani (SCA 09/2014) [2016] SCCA 19 (12 August 2016);Multichoice Africa Ltd v Intelvision Network Ltd & Ors (Civil Appeal SCA 45/2017) [2019] SCCA 1 (09 April 2019). Further, the court may not formulate an alternative cause of action for the Appellant (Charlie v Francoise SCA No 12/1994 (unreported).

[21]     Ultimately, since the contract is void because of turpitude, its breach does not arise and therefore no damages are due. 

[22]     Consequently, this appeal is dismissed with costs.

M. Twomey (J.A)

Signed, dated and delivered at Palais de Justice, Ile du Port on 23 August 2019