Cape Esperance Company Ltd v Success Company Ltd [1995] SBCA 10; CA-CAC 7 of 1994 (20 June 1995)

IN THE SOLOMON ISLANDS COURT OF APPEAL

Appeal No. 7 of 1994

BETWEEN:
	CAPE ESPERANCE COMPANY LIMITED (First Plaintiff) Appellant
AND
	ROBERT VICTOR EMERY and JOHN SULLIVAN (Second Plaintiff) Appellants
AND
	ESTHEPIA INTERNATIONAL LIMITED (Third Plaintiff) Appellant
AND
	SUCCESS COMPANY LIMITED (First Defendant) Respondent
AND
	ROSELYN DETTKE (Second Defendant) Respondent

Before:
Connolly P
McPherson J.A.
Los J.A.

Delivered the 20th day of June 1995

JUDGMENT - THE COURT

The first plaintiff is a company incorporated in Solomon Islands of which 95% of the shares are owned by the second plaintiffs, as administrators of the estate of Sunny Wun San Tong deceased. On 29 April 1993 the second plaintiffs contracted to sell those shares to the third plaintiff, which is a company incorporated in Hong Kong. The principal asset of the first plaintiff is its rights under a written contract (“the logging contract”) entered into on 5 December 1990 with persons describing themselves as “Representatives”, by which they agreed to grant to the first plaintiff “the right to fell, harvest and extract timber for sale from the customary lands on Ward 1, Guadalcanal Province”. The contract contains provisions regulating the cutting of timber, payment of royalties of the establishment of a sawmill, and other matters which it is not necessary to examine in detail.

The first defendant is a company also incorporated in Solomon Islands whose shareholders or members are representatives of the customary owners of land north of Honiara some of which comprises land which is said to be the subject of the first plaintiff’s logging contract. The second plaintiff is Mrs. Dettke, who promoted the first defendant as a means, so it is said, of ensuring that the customary landowners have a direct interest in the logging of timber on their land.

On 27 September 1993 the plaintiffs obtained from Palmer J. in the High Court of Solomon Islands an interim injunction restraining the defendants from: (1) conducting any timber operations and from felling or removing timber from the area of Guadalcanal covered by the first plaintiff’s Timber Licence No. T/M 2/5/81, namely Ward 1 Guadalcanal, (2) interfering with contractual relations between the second and third plaintiffs pursuant to the agreement for the sale of shares dated 29 April 1993; and (3) interfering with contractual relations between the first plaintiff and the landowners of Ward 1 pursuant to the logging contract of 5 December 1990. The order was obtained ex parte, and, on 16 August 1994, Palmer J. refused to extend the injunction or to make it permanent. Instead, on the application of the defendants, his Lordship discharged the interim injunction which he had previously made.

This is an appeal against the order discharging the injunction, in which the plaintiffs seek to have it reinstated as an interlocutory injunction or made perpetual.

The plaintiffs claim that the effect of the logging contract is to confer on the first plaintiff the exclusive right for the duration of the contract (which is 15 years) to fell and remove timber from the customary lands in Ward 1. The contract is not in terms expressed to confer such an exclusive right, but that appears to be its effect in point of law. See James Jones & Sons Ltd. v. Earl of Tankerville [1909] UKLawRpCh 94; [1909] 2 Ch. 440. The principal difficulty confronting the first plaintiff is that the particular areas of customary lands to which the logging contract applies are not precisely designated or delineated by reference to any map, boundaries or physical features of the lands in question. The contract contains no description or other means of identifying them apart from the bare statement that they are “the customary lands on Ward 1, Guadalcanal Province”. Ward 1 encompasses the entire area of land within a former political constituency, which has since 1990 been superseded by two new constituencies Ward 1 and Ward 2.

Even if it is assumed in favour of the plaintiffs that what is meant by that description is all the land in old Ward 1, the plaintiffs’ difficulties are not at an end. Land in old Ward 1 is the subject of customary rights including rights to the timber on it, which are vested in various tribes or communities of people who inhabit the area. Unless all of the people having such rights are bound by the first plaintiff’s logging contract, the plaintiffs are not in a position to show that the first plaintiff has under that contract, acquired the right to fell, harvest and extract timber from the whole of the land comprised in old Ward 1. They are not assisted by showing that at least some, but not all, of the customary landowners are contractually bound to permit logging on some of the land forming parts of the area of old ward 1. Even if it is possible to read the contract divisibly or distributively in that way, the problem remains of identifying the particular parts of the whole area of land in old Ward 1 to which the contract is capable of so applying. There is nothing to define or delimit, and so to distinguish, one such part or parts of the land from the remainder, or from any other part or parts of it.

The problem cannot be solved by resorting to the identities of the other parties to the logging contract entered into with the first plaintiff. They are described simply as “Representatives” It is possible to infer that in signing the contract they purported to represent customary landowners in old Ward 1; but neither their signatures nor anything else in the contract provide a clue as to who those landowners are or were. There is evidence in affidavits filed on behalf of the defendants that there are separate customary lands and owners of lands within the boundaries of new Wards 1 and 2. For example, Raymond Juapi of the Huabata tribe says his people own Vai customary land in what is now Ward l, and Anthony Limanisara says that the Kakau tribe owns Kolokiki customary land in what is now Ward 2. On the present state of the evidence, we are not able to identify the signatories to the logging contract with any particular tribes or communities or to identify any such tribes or community with particular areas of land in old Ward 1. If this could be done, it would still not be possible to say whether they are all or only some of the community landowners in that area. The questions that arise here are similar to those previously considered by Palmer J. in the case of the same logging contract in Cape Esperance Ltd. v. S.L.H. Timer Co-operation (Civil Case No. 37 of 1994; April 8, 1994).

In these circumstances, it would not be proper to grant the primary relief in the form in which it is now sought by the plaintiffs, which is an injunction forbidding the plaintiffs from conducting any timber operations on, or removing timber from, the area of Guadalcanal covered by the first plaintiff’s Timber Licence No. TIM 2/5/81. That licence, which issued in 1981, authorised the first plaintiff, subject to conditions (which in the case of customary land, include strict compliance with the procedure laid down in the Forests and Timber Ordinance 1977) to “cut , fell and take away timber from West Guadalcanal as delineated in red on attached map”. For present purposes it may be accepted that the area outlined in red is co-extensive with the area of old Ward 1 that is the subject or the first plaintiff’s logging contract of 5 December 1990. But an injunction extending to the whole of the area in question would cover the customary lands of all landowners including owners not shown to have been represented at the making of the logging contract in 1990. It would be wrong to extend the injunction to lands of persons who are not shown to be contractually bound to the first plaintiff.

It was suggested that this difficulty could be overcome by framing the injunction so as to confine its operation to customary lands of those landowners who are bound by the logging contract with the first plaintiff. However, an injunction in those terms would simply defer to some future occasion the task of identifying those who are bound by the contract, and so would create a risk of unintentional or unwitting contravention of the order in the meantime. Since disobedience to an injunction entails a liability to attachment and imprisonment, it is essential that any order be expressed in terms making it clear from the beginning precisely what it is that those affected by it may or may not do. See Commissioner of Water Resources v. Federated Engine Divers, etc. Association [1988] 2 Qd.R. 385, 390. An injunction which failed to delineate or otherwise identify the particular areas of land in respect of which it operated, but left that question to be determined only in proceedings to enforce the injunction by attachment, would not satisfy that requirement.

Throughout his submission on behalf of the plaintiffs, Mr. Sullivan of counsel stressed that the material in support of the plaintiffs’ application showed that there were serious questions to be tried. It was contended that on the principles governing interlocutory injunctions laid down in American Cyanamid Co. v. Ethicon Ltd [l975] A.C. 396, the plaintiffs were entitled to an interlocutory injunction pending trial on showing that the balance of convenience favoured maintaining the status quo. As to the latter, it was submitted that the plaintiffs were now in a position to demonstrate that the approval of the Foreign Investment Board contained no restriction on transfer of the shares in the first plaintiff from the second plaintiff to the third plaintiff. In the proceedings below it had been suggested that the approval in question was subject to conditions that would prevent the third plaintiff from engaging in logging activities. However, affidavits showing the true position were tendered on appeal, and it was conceded by the respondent that this question was not in issue on this appeal.

In addition, it was conceded that the first defendant’s own timber licence and logging agreement were defective, with the consequence that it had no authority itself to carry on logging activities on any part of the subject land. We are, however, not concerned in these proceedings to decide whether the first defendant is entitled in law to conduct logging activities on the land. If it does so without proper authority, it will risk contravening s.4 (1) of the Forests Resources and Timber Utilisation Act, which prohibits felling of trees for sale except in accordance with the requirements of that provision. However, the fact that the first defendant is, or would be, in breach of s.4(1) if it proceeded to cut and remove timber for sale without proper authority is not by itself enough to entitle the plaintiff to an injunction restraining the first defendant from doing so. To succeed in obtaining an injunction the plaintiffs must make out a claim showing that serious questions arise for determination; but they are bound to do so on the strength of their own title to relief and not on any weaknesses in the title of the first defendant.

The problem underlying the plaintiffs’ claim for an injunction is ultimately traceable to the fact that customary lands and the timber on them are owned by different tribes or communities comprising many people. The difficulties of making and enforcing contracts with an unincorporated group of individuals (who fluctuate from time to time in number and identity, are notorious. See, for example, Carlton cricket & Football Social Club v. Joseph [1970] VicRp 65; [1970] V.R. 487, where many of those problems are canvassed. Here the logging contract was signed by some 10 or 12 individuals claiming to be “Representatives” of the customary landowners, who are tribes or communities of people. Not only are they not identified, but it does not appear anywhere in evidence that the “representatives” who signed the contract were in fact authorised to bind all members of those tribes for communities. The problem has arisen sufficiently often in the relation to timber rights agreements of this kind for Parliament to have amended the Forest Resources and Timber Utilisations Act in 1990 by inserting in it a new part IIA entitled Approved Timber Agreement affecting customary Land. It contains a detailed procedure for approving such an agreement after holding a meeting between the area council and the owners of customary lands. Notice of the meeting must first be given to persons residing in the area who appear to have an interest in the land, timber or trees in question s.5C(2). By s. 5C (3) (b) the area council is required, in consultation with the Government and the customary landowners, to determine whether the persons proposing to grant the timber rights are all the persons entitled to grant such rights. It is only after agreement has been arrived at in this way that the Government may under s.5F approve such an agreement and issue a certificate to that effect. Part IIA is subject to a special provision in s.3 (b) of amending legislation enacted in 1990 and 1991 which validates an agreement for timber rights in respect of which a certificate of approval was issued before the amending legislation came into operation. It was this provision that was considered and interpreted by the Court of Appeal in Bell v. Allardyce Lumber Company Ltd. (Civil Case 5 of 1992; Sept. 15, 1992).

Part IIA of the Act commenced on 5 July 1990, which was before the first plaintiff’s logging contract was executed on 5 December 1990. On the face of it, therefore, the provisions of that Part applied to it. When asked about the matter in the course of the appeal Mr. Sullivan admitted that the first plaintiff did not have a certificate of approval under s.5F. The explanation was, he said, that the logging contract on which the plaintiffs relied was not subject to Part IIA because it was really an old agreement entered into by the first plaintiff with the customary landowners as far back as 1981. The logging contract dated 5 December 1990 was, he explained, simply a variation of or addition to that earlier 1981 agreement, as appeared from the covering page of the 1990 logging contract, which recites:

“This agreement is prepared as an addition to the logging agreement signed on 28/6/1981 to incorporate regulations of ‘The Standard Logging Agreement’ (1984).”

Whether or not, as regards the 1981 agreement the first plaintiff ever satisfied the condition of the 1981 Timber Licence requiring strict compliance with the Forests and Timber Ordinance 1977 Act, we need not stay to see. Unfortunately, the plaintiffs are not able to produce the 1981 logging agreement. As administrators of the Tong estate, the second plaintiffs have, we were informed from the Bar table, searched the estate papers for a copy of the agreement, but without success. No secondary evidence of its terms has been placed before the Court.

The result is that, on the best view for the plaintiffs, the Court is asked to enforce a logging agreement made in 1981, of which the only evidence is the addition made to it by the logging contract dated 5 December 1990. The result is to raise difficulties for the plaintiff even greater than those associated with the logging contract of 1990 viewed as if it were the entire agreement. We know nothing of the content or terms of the 1981 agreement; or who were the other parties to it or what land it purported to cover. All we know is that it appears to have been varied or added to by the logging contract of 1990, which was signed by a number of individuals claiming to be representatives of customary landowners. With the benefit of a certificate under s. 5F, the plaintiffs may have been able to say that all the customary landowners in old Ward 1 agreed to the 1990 logging contract; they could also have relied on the saving provisions, if otherwise satisfied, of s. 3 (b) of the Forest Resources Utilisation Act (Amendment) Act (No.7 of 1990) as validating any agreement for timber rights which the first plaintiff may have had with the customary landowners. Without having such a certificate, the plaintiffs are thrown back to proving by evidence in the ordinary way that the agreement of 1981, as varied or added to by the logging contract of 1990, conferred on them the exclusive rights they claim of felling and removing timber within the area bounded by old Ward 1.

We may say that, despite what appears from the cover sheet of the 1990 contract, we have some difficulty in regarding that contract simply as an addition to or variation of the earlier agreement of 1981. In passing, we note that the plaintiffs’ writ indorsement and notice of motion appear to treat the 1990 contract as an independent agreement or source of the rights they claim. In para. (c) of each of the writ and notice of motion the relief claimed speaks of “contractual relations between the first plaintiff and the landowners pursuant to a Timber Rights Agreement dated 5 December 1990”. For the reasons given, little is known about the 1981 agreement or its contents. However, the duration of the Timber Licence No. 2/5/81, which was evidently issued in association with it, provides that the Licence is valid only until 31 May 1996 (see cl.3), which is a term of approximately 15 years from the date of the logging agreement signed on 28/6/81 which is referred to on the covering sheet of the logging contract of 1990. By contrast, the 1990 contract provides in cl.3 that the duration of the agreement is, unless otherwise terminated, to be 15 years from its date, which was 5 December 1990. It is thus not easy to see how the later contract can be considered as simply an extension or variation of the earlier agreement. The respective durations of the two agreements appear to overlap, and it is therefore difficult to read them as together constituting as a single contract. In these circumstances the more likely inference seems to be that the logging contract of 1990 was intended to replace the earlier agreement of 1981, and so effected not a mere addition to or variation but an implied rescission of that agreement : cf. Morris v. Baron & Co. [1918] A.C. 1. In that event, the logging contract of 5 December 1990 would have been subject to the requirements of Part IIA of the Forest Resources and Timber Utilisation Act commencing on 5 July 1990. There is nothing to show that the first plaintiff has ever complied with the provisions of that Part.

It is perhaps not necessary at this point to reach a final conclusion on any of these matters, which were not the subject of detailed submissions before us. Suffice to say that, for all the reasons we have given, we consider that the only evidence of the first plaintiff’s claim to an exclusive right to fell and remove timber from old Ward 1 is much too flimsy a foundation for either a permanent injunction or even an injunction in favour of the plaintiffs pending trial. It may be that at trial the plaintiffs will succeed in showing that the persons with whom it claims to have contracted in 1981 or 1990 did represent, and had authority to bind, all customary landowners in the area. In a sense that may be said to be the “serious” question to be tried; but the evidence that is now produced in support of the plaintiffs’ claim is not sufficient to persuade this Court to exercise its discretion to grant an injunction at this stage to preserve such rights as the first plaintiff hopes to establish in the future in the lands in question, or in some presently unidentifiable part of them.

Apart from the evidence (or lack of it) relating to the first plaintiff’s logging contract or contracts, the plaintiffs also rely on a statement or representation said to have been made by the second defendant Mrs. Dettke to found an estoppel against herself and the first defendant from contesting the plaintiffs’ claims for an injunction to restrain the defendants from logging in the area of old Ward 1. The representation is said to have been made at a meeting on 20 April 1993 at the Leafhaus, Hibiscus Hotel, which was attended by the two second plaintiffs Emery and Sullivan, and also by Mrs. Dettke and a number of the customary landowners from the area, or their representatives. One of the purposes of the meeting was to gain the approval of the landowners to the proposed agreement for the transfer to the third plaintiff of the shares in the first plaintiff, which was later entered into between the second plaintiffs and the third plaintiff on 29 April 1993. According to para. 33 of the affidavit of Sullivan, Mrs. Dettke “conceded at the meeting that she and [the first defendant] Success were not entitled to interfere with [the first plaintiff] CEL’s sole right to exploit the timber resources of Ward 1”. The statement in para. 33 is not contradicted in the answering affidavit or affidavits of Mrs. Dettke, and it is right to say that, in the plaintiffs’ case as it now stands, there is ample evidence showing that the three plaintiffs acted to their detriment on the statements so made. They depose to having expended large sums of money in reliance upon that statement by Mrs. Dettke, who, it may be accepted for present purposes, sufficiently represented the corporate first defendant Success Company Limited on that occasion.

The plaintiffs’ submissions on this aspect of the matter raise several question of principle, including the extent to which the decision of the High Court of Australia in Waltons Stores (Interstate) Ltd. v. Maher (1988) 164 C.L.R. 387 represents the law in Solomon Islands. The real difficulty in giving effect to the estoppel relied on here is that it seeks to attain by an indirect route what the plaintiffs are not able to reach by the more direct avenue of proving the existence of an enforceable contract between the first plaintiff and the customary owners of lands in old Ward 1 conferring an exclusive right to fell and remove timber from those lands. It would, if acceded to, assist the plaintiffs in skirting the peremptory provisions of Part IIA of the Forest Resources and Timber Utilisation Act imposing procedures to be followed in order to obtain the agreement of the customary owners to a timber rights contract. It thus seeks to raise an estoppel in the face of a statute that is plainly designed to ensure that in reaching such an agreement the interests of the customary landowners are properly protected.

The plaintiffs’ response is that the injunction it seeks is intended only to prevent the defendants from conducting timber operations on the land in old Ward 1, and that this is a matter which affects only the relations between the plaintiffs and the defendants without impinging on the rights of the customary landowners. The response is disingenuous. The only right the first plaintiff possesses to fell and remove timber is the right it claims to derive under its contract with those landowners. The right is said to be exclusive to the first plaintiff, which means that, while it lasts, the customary landowners are precluded from conferring similar rights on the defendants or anyone else. The plaintiffs’ real complaint here is that, by attempting to confer a similar right on the first defendant, the landowners have unilaterally repudiated the first plaintiff’s exclusive right to fell and remove timber. That right may or may not, technically speaking, amount to a profit a prendre conferring a proprietary interest in the land of another, but it is obviously something closely analogous to it. At common law such a right could be created or subsist only by virtue of statute, prescription, or a deed under seal. See Megarry & Wade : The Law of Real Property (4th ed.), at 827. Under the Forest Resources and Timber Utilisation Act, s.5C(2) recognises that it is ,the customary owners, or persons who reside in the area, who have an interest in the land, trees or timber, and are entitled to grant those rights if the statutory procedure is observed.

It follows that it is impossible to say that the right asserted by the plaintiffs affects only the defendants and not the interests of the customary landowners. On the contrary, the right in question savours of a proprietary right in the customary lands. To the extent that the first plaintiffs’ claim is vindicated against the defendants, the rights of the landowners over their land are correspondingly diminished. In those circumstances it would be quite wrong for the Court to grant an injunction to restrain the defendants from exercising, or attempting to exercise, rights over the lands in old Ward 1, without first hearing the customary owners of these lands, or giving them an opportunity to be heard in relation to the relief sought by the plaintiffs. Although not directly bound by the injunction against the defendants, the landowners would be liable to committal for contempt if, knowing of the injunction, they encourage or assisted the defendants to act in breach of it: Seaward v. Paterson [1897] UKLawRpCh 22; [1897] 1 Ch. 545.

The customary landowners are not parties to the action as it is presently constituted. We were informed from the Bar table that steps are being taken to join them as parties in the immediate future. However, they were not represented in the proceedings in the court below, or on this appeal. So far as the evidence before us goes, they would not be bound by the estoppel which it is sought to raise against the defendants; yet their interests and their rights as proprietors would be directly affected by making an injunction in favour of the plaintiffs. In their absence as parties, we consider that as a matter of discretion the relief sought by the plaintiffs should not be granted either on the basis of the logging contract of 1990 or the estoppel put forward by the plaintiff.

We have considered whether if, in other respects, the plaintiffs were entitled to succeed, they should be protected by interim injunction until the customary landowners have been joined in the action and have had an opportunity of being heard on an application for an injunction binding them as well as the defendants. However, having regard to the concession that the defendants do not at present possess a valid timber rights agreement or timber licence under the Act, and that it will obviously take time for them to satisfy the requirements of Part IIA of the Act before they can procure such an agreement or licence, we do not consider that there is a perceptible risk that the defendants will attempt to log the area of old Ward 1 in competition with the plaintiffs. There is therefore no reason to apprehend a threat of injury that would justify granting an interlocutory injunction. To issue a permanent injunction would involve prejudging in favour of the plaintiffs an issue which, on their own case, can only be resolved at trial.

We were not specifically addressed on the issues raised by the second and third forms of relief claimed by the plaintiffs, which relate to interfering with the contract for the sale of shares to the third plaintiff, and interfering with contractual relations between the first plaintiff and the customary landowners. As to the latter, it is enough to say that it is subject to all the frailties referred to in the case of the primary injunction sought by the plaintiffs. The former (or second) form of relief claimed is dependent on the success of the plaintiffs in relation to the other two. It follows that it, too, ought not to be granted on this application.

The appeal against the order of the learned judge dismissing the plaintiffs’ motion on 16 August 1994 therefore fails, and must be dismissed with costs.

BY THE COURT