Tropical Forestry Ltd v Pou [2007] SBCA 18; CA-CAC 26 of 2006 (10 May 2007)

IN THE SOLOMON ISLANDS COURT OF APPEAL

NATURE OF JURISDICTION:	Appeal from a judgment of the High Court of Solomon Islands.
COURT FILE NUMBER:	Civil Appeal No. 26 of 2006
DATE OF HEARING:	Wednesday 28th March 2007
DATE OF JUDGMENT:	Thursday 10th May 2007
THE COURT:	Lord Slynn of Hadley P, Adams JA Salmon JA.
PARTIES:	Tropical Forestry Ltd (First Appellant) -v- Dalgro (SI) Limited [Second Appellant] -v- George Pou and Noel Salini (Respondents)
ADVOCATES:
Appellant: Respondent:	J Sullivan QC and T T Kama W H Rano
KEY WORDS:
RESERVED/DISMISSED:
PAGES:	1 - 4

JUDGMENT

This is an application for leave to appeal and a notice of appeal against a judgment of Brown J. dismissing a summons filed on behalf of the Appellants. The summons sought orders releasing from monies set aside in a trust account to abide the final decision of the court, the reasonable operating expenses of the Second Appellant arising from the harvesting of logs from an area the subject of dispute between the First Appellant and the Respondents. There was no opposition to the application for leave to appeal and leave was granted. This judgment therefore concerns the substantive appeal.

Background

In 1998 there was a dispute as to ownership of land between persons represented by George Pou (one of the respondents) and persons represented by Charles Soro. That dispute went before a House of Chiefs which found in favour of Mr Soro. Mr Pou referred the matter to a local court in 1999. A date has yet to be fixed for the hearing of that referral. Mr Soro authorised Tropical Forestry Limited to apply for timber rights over the disputed land. Application was duly made under the provisions of the Forest Resources and Timber Utilisation Act. A timber rights hearing was held at which the Respondents were not present. Rights were granted to the First Appellant. The Respondents appealed against that grant, but despite an appeal being lodged, a Certificate of No Appeal was given and a Timber Rights Agreement was signed between Mr Soro and Tropical Forestry Limited. A licence was issued to the First Appellant, who entered into an agreement with the Second Appellant for the removal of the logs. The Respondents obtained an injunction against further removal and an order requiring the proceeds of sale of the logs already felled to be held in trust.

A full account of the felled and exported logs has been filed in the Court. The Appellants have engaged an accountant to review the expenditure and he has certified an average production cost of $234.77 per cubic metre. The appeal against the grant of the timber rights has not yet been heard.

The Appellants’ case

The Appellants claim that there is a longstanding practice in the Solomon Islands to the effect that where there is a dispute over the ownership of logs, but log production has commenced, the Court will require either:

(a) royalties and damages to be paid in respect of disputed logs; or

(b) the gross proceeds of the sale of disputed logs, less duties and operating expenses, be paid into Court or a trust fund to abide final judgment.

The Appellants claim in accordance with the practice described above that the costs associated with the extraction of the logs should be paid to the Second Appellant. This was the issue which came before Brown J. in the High Court. In his oral ruling, he made no reference to the practice which the Appellants claim exists. Instead he referred to the agreement between the First and Second Appellants which provides for payment by the First Appellant to the Second Appellant of its costs of logging. He held that the question of payment was a matter for resolution between the Appellants and that there was no basis for him to interfere with the original order setting aside the proceeds of the sale of logs.

Mr Sullivan QC advised the Court that the gross amount obtained for the logs was almost 900,000 Solomon Islands dollars and that the expenses of extraction amounted to 600,000 Solomon Islands dollars. He said it would be unjust for the Appellants to be out-of-pocket for this sum pending resolution of the dispute over ownership of the land. He referred to two streams of authority, one of which favoured restraint of a percentage of the proceeds and the other favouring the calculation of actual costs and payment out of them to the logging company. He submitted that there was no evidence to suggest that the Appellants had acted other than entirely properly but said that, in any case, he was not aware of a decision where conduct had resulted in refusal to allow expenses. Mr Sullivan referred us to a number of cases where one or other of the above procedures had been followed by either the High Court or this Court.

The submissions for the Respondent

Mr Rano submits that the Appellants had full knowledge that title to the land was disputed at the time they embarked upon the extraction of the logs. It is not appropriate for us to make any findings in that respect at this interlocutory stage of the proceedings. However, we do note the Appellant’s submission that the Appellant had a House of Chiefs decision in its favour as well as the grant of a logging licence from the appropriate executive committee. It is true that the Respondent has a House of Chiefs’ decision in its favour too, but that was obtained after the logging rights were granted and was apparently at a hearing which the competing landowners did not attend. Mr Rano noted correctly the discretionary nature of the order made by the Judge and acknowledged that such a discretion cannot be exercised arbitrarily; it must be exercised judicially and on fixed principles dictated by reason and justice (see Ottway v. Jones [1955] 2ALL ER 585 at 591). Mr Rano analysed the cases where deductions had been made from the proceeds of the sale of logs and submitted that the Judge was not obliged to follow those cases if he considered that the facts of the case before him justified a different conclusion.

Consideration

Mr Rano is correct when he submits that the Judge’s discretion must be exercised on the basis of the facts of the particular case. There are, however other important considerations relating to the exercise of the discretion in matters of this nature. It should first be noted that generally speaking, in jurisdictions where the rules of procedure and the common law are similar to those which apply in the Solomon Islands, there will not normally be an order securing a fund pending the outcome of litigation unless there are special circumstances requiring that this course be taken. For example, it is not unusual for provision to be made for orders for the detention, custody or preservation of property in circumstances where it can be established that if such an order is not made a claim may be rendered nugatory. In general it is the case that the existence of property or a fund is not sufficient by itself there must, in addition, be a reason for the order. The risk of dissipation or destruction is always an important matter to be taken into account. The fundamental requirement of an application is the existence of property or a fund the right to which is in question.

In this jurisdiction Order 53 of the High Court Rules makes provision for interim orders for preservation of property. Common law remedies such as the Mareva injunctions have been developed in some jurisdictions to extend the area of protection.

Equally, a judge is not entitled to ignore the practice which has developed over a number of years in this jurisdiction. We understand the reasons why the practice of securing the funds has been adopted in the Solomon Islands, but each case must be looked at in the light of the particular factual situation. We are obliged to hold in this case that the Judge has not taken into account the relevant considerations referred to above and has, therefore, failed to adequately exercise his discretion. Accordingly, the appeal must be allowed. The issue is referred back to the High Court for reconsideration, taking into account the matters referred to above and the practice that has developed in this jurisdiction.

The Appellants are entitled to costs.

Lord Slynn of Hadley
President of the Court of Appeal

Adams JA
Member of the Court of Appeal

Salmon JA
Member of the Court of Appeal