Axiom KB Ltd v SMM Solomon Ltd [2012] SBCA 20; CAC 19 of 2012 (2 November 2012)

IN THE SOLOMON ISLANDS COURT OF APPEAL

NATURE OF JURISDICTION: Appeal from Judgment of the High Court Case 258 of 2011 of the High Court of Solomon Islands
(Chetwynd J)

COURT FILE NUMBER: Civil Appeal No. 19 of 2012
(On Appeal from High Court Civil
Case No: 258/11)

PARTIES:

AXIOM KB LIMITED
Appellant

AND:

SMM SOLOMON LIMITED
First Respondent

AND:

ALFRED JOLIO (representing the Trustees and members of the Anika Thai Clan)
Second Respondent

AND:

MARTIN TANGO (representing the trustees and members of the Thavia Clan
Third Respondent

AND:

JAMES UGURA (representing the trustees and members of the Vihuvanagi tribe)
Fourth Respondent

AND:

BEN SALUSU (representing the trustees and members of the Vihuvunagi Tribe in respect of the Chogea and Beajong land areas within Takata)
Fifth Respondent

AND:

MAFA PAGU (representing the Trustees and members of the Thogokama tribe)
Sixth Respondent

AND:

PAUL FOTAMANA (representing the trustees and members of the Veronica Lona clan)
Seventh Respondent

AND:

THE ATTORNEY GENERAL (representing the Minerals Board)
Eighth Respondent

AND:

THE ATTORNEY GENERAL (representing the Minister for Mines, Energy and Rural Electrification)
Ninth Respondent

AND:

THE COMMISSIONER OF LANDS
Tenth Respondent

AND:

THE REGISTRAR OF TITLES
Eleventh Respondent

AND:

PACIFIC INVESTMENTS AND DEVELOPMENT LIMITED
Twelfth Respondent

AND:

ROBERT MALO, FRANCIS SELO, LEONARD BAVA, REV. WILSON MAPURU AND ELLIOT CORTEZ
Thirteenth Respondent

AND:

BUGOTU MINERALS LIMITED
Fourteenth Respondent

AND:

THE ATTORNEY GENERAL (representing the Director of Mines)
Fifteenth Respondent

DATE OF HEARING: 23 October 2012

DATE OF JUDGMENT: 2 November 2012

THE COURT: Williams, JA.
Hansen, JA.
Apaniai, J.

ADVOCATES:

Appellant: N. Williams Q.C & A. Shearer, Appellant
& M. Pitakaka

Respondents: J. Sullivan Q.C. & R. Kingmele for First & Seventh
Respondents

S. Banuve for Eight to eleventh and fifteenth respondents

D. Nimepo for Thirteenth respondents.

T. Mathews & W. Togamae for Fourteenth respondents

KEY WORDS: Practice – Preliminary Questions – Competing mining interests – procedure inappropriate

EX TEMPORE/RESERVED:
ALLOWED/DISMISSED: APPEAL ALLOWED

PAGES: 1 – 11

JUDGMENT OF THE COURT

Before dealing with the particular issues before the Court of Appeal, it is necessary to say something about the background litigation.

SMM Solomon Limited ("SMMS") is the first claimant in Civil Claim 258 of 2011. Essentially, it claims it was granted a Letter of Intent ("LOI") by the relevant Minister of the Solomon Islands Government consequent upon it being the successful tenderer after an international tender process pursuant to the Mines and Minerals Act. SMMS alleges that LOI was wrongfully revoked and that it still has rights over the relevant areas of Takata, East San Jorge and Jejevo.

The second to seventh claimants in the action represent owners of the customary lands in question who support the first claimant SMMS.

The first to fourth defendants are respectively the Attorney General in two capacities, The Commissioner of Lands, and the Registrar of Titles. That group can conveniently be referred to as the "government parties".

The sixth defendant is Axiom KB Limited ("Axiom"). It was granted an LOI over much of the same area as had been the subject of the LOI granted to SMMS. The grant to Axiom was made shortly after the LOI given to SMMS was revoked and despite the fact, Axiom had not been a tenderer.

The seventh defendants represent persons alleging to be customary landowners supporting Axiom.

The action was then further complicated by Bugotu Minerals Ltd ("BML") making a cross claim against the Attorney General representing the Director of Mines and the Minerals Board, claiming that as a complying tenderer it was entitled to the grant of an LOI over the land in question.

The Statement of Claim as amended covers 46 pages and seeks 21 orders by way of relief. The various defences are also complex and raise a number of issues for determination.

SMMS obtained an interlocutory injunction restraining Axiom from exercising rights under the LOI granted to it until trial. Axiom appealed against that order and the Court of Appeal, for reasons delivered on 24 February 2012, dismissed the appeal.

In the course of its reasons that Court said:

Accordingly, the Court dismisses Axiom's appeal. In doing so we deprecate the manner in which the whole issue was put before the Court, with voluminous documentation, prolix and highly repetitive submissions, each descending in into a maze of legal and factual minutiae more appropriate, if at all, to conduct of the case at trial. The costs to the parties and the public are a sad reflection on the legal process. If this litigation is to continue, the Court repeats its suggestion made on the oral hearing of the appeal that the parties should attempt to agree a short list of preliminary and determinative issues for consideration and disposal of the matter at trial.

The parties then appeared before Chetwynd J. and presented him with 22 questions for preliminary determination. His Honour quite rightfully rejected that and directed that the parties should define a revised list of preliminary questions. Ultimately, the parties presented the Judge with the following preliminary questions and a hearing proceeded:

ISSUES FOR PRELIMINARY DETERMINATION

1. Was the letter to SMMS dated 23 November 2010 (CB 2/408) a valid and effective letter of intent for the purposes of the Mines and Minerals Act (cap 42) as amended?
   
2. Further to question 1, if it was a valid and effective letter of intent at the time of its issue, did it lapse because of SMMS's failure to lodge a Form 1 application within 30 days?
   
3. Assuming the additional facts stated in paragraphs A-C below, is the prospecting licence No. 74/11 in favour of Axiom KB (CB2/569) a valid prospecting licence under the Mines and Minerals Act as amended?
   

Assumed facts for the purposes of question 3

A The approval of the said surface access agreement was managed by the Director and was submitted by him to the Attorney General for approval prior to its being signed. The Director confirmed to Axiom KB that the Attorney General had approved the surface access agreement prior to it being signed.

B Prior to the signing of the purported surface access agreement on 15 April 2011, Axiom KB consulted with the Director in respect of that agreement.

C The Director (or a representative of the Director) was present at meetings held between the Seventh Defendants and Axiom KB in respect of the said surface access agreement prior to its signing and at its signing.

4 Was the "registration" of the Perpetual Estate in favour of the Seventh Defendants?

(a) null and void ab initio; or

(b) effective to vest the perpetual estate in the Seventh Defendants, subject to any question of rectification?

5 Was the "registration" of Axiom's lease effective to vest a leasehold interest in Axiom, subject to any question of rectification?

Questions 1 to 3 gave rise to what has been referred to throughout as the "mining issue" and questions 4 and 5 as the "land issue".

The parties also handed to Chetwynd J. a document containing 64 paragraphs and headed "Statement of Agreed Facts". But importantly the document then went on to say "The following facts are agreed by the parties for the purposes of the hearing of certain preliminary questions only". That qualification clearly indicated that answering the questions would not necessarily constitute a final and determinative decision for purposes of the action. Notwithstanding that, Chetwynd J. proceeded to hear submissions from all parties and gave written reasons for answering the questions as follows:

Q1 - Yes

Q2 - No

Q3 - No

Q4 - (a) null and void ab initio

(b) null and void ab initio

Q5 - No

From that decision, Axiom has appealed to this Court.

At an early stage in the hearing, this Court raised with Counsel its concern that it was essentially being asked to answer hypothetical questions, the answer to which would not be determinative if at trial facts contrary to, or in addition to, facts stated in the document headed "Statement of Agreed Facts" were asserted or led in evidence. Courts do not in general answer hypothetical questions.

But the Court raised an even greater concern when Senior Counsel for Axiom indicated that one of his submissions would be that the call for tenders was invalid as not being in conformity with governing provisions of the Mines and Minerals Act and the Mines and Minerals Regulations.

The pleadings of SMMS, the Government parties, and BML were all premised on there being a valid call for tenders pursuant to the Act and Regulations. That was also the position of those parties on the hearing before Chetwynd J. The stand taken by the government parties was that there was a valid call for tenders, but that the tender of SMMS should have been rejected because SMMS breached the "land banking" prohibition contained in the Act (s. 20 (5) (c).

That provided that the Director shall refuse to accept an application for a prospecting license if at the time of submission of the application, the applicant was currently holding three or more prospecting licenses over different prospecting areas and has not applied for a mining license or commenced mining in at least one prospecting area.

In its defence in paragraph 14 Axiom denied that the Director of Mines had power to waive the statutory requirements of s.20 of the Act and the prescribed procedures pursuant to the Act, but there was no allegation that the call was invalid and no relief was sought seeking a declaration the call was invalid.

Section 20 (4) of the Act relevantly provides that the Board may call for tenders for a "prospecting license over a specified area". Regulation 3 A includes a definition of "specified area": "an area specified under Regulation 3B for prospecting for purposes of Section 20 (4) of the Act". Then Regulation 3 B provides:

"For purposes of section 20(4), the Minister may, on the recommendation of the Board, specify an area as a proposed area for prospecting, by notice in the Gazette".

The expression "specified area" is then found in some of the consequential regulations.

Paragraph 19 of the Statement of Agreed Facts was as follows:

"In relation to the Tender Notice, neither before nor after the Board purported to issue the Tender Notice was any area of land specified by Gazette, nor was any recommendation made by the Board to the Minister as to the specification of an area".

In his reasons, Chetwynd J. noted that Axiom argued that "the tender notice was never effective because there was no specified area." The reasons indicate that SMMS attempted to meet that submission by emphasizing the word "may" in the Regulation and contending that the area could be Gazetted after the call for tenders. Those contentions appear to have been accepted by Chetwynd J and are the subject of the appeal.

But essentially all of the argument was directed to question 1 which concerned the validity and effectiveness of the LOI of 23 November 2010. Axiom's contention was the LOI was invalid because no area had been specified. That was far short of contending the whole tender process was invalid.

It became clear on the hearing of the appeal that neither SMMS, nor the government parties, nor BML appreciated that a consequence of a finding there was no area specified could be that the whole tender process was invalid. If the calling of tenders was invalid BML, as well as SMMS, expended money in preparing and lodging a tender which it was beyond the power of the Minister to accept. That may well have exposed the Solomon Islands Government to a claim for compensation.

Because of all that, the Court is of the view that it ought not, as part of reasoning in answering the question whether the LOI of 23 November 2010 was valid and effective, make findings which could support the conclusion the whole tender process was invalid when that important and fundamental question was not directly raised by the questions submitted to the Court for summary determination. Such an issue was of such importance, and had potentially such far reaching consequences, that the issue should have been clearly and precisely raised by the pleadings. If it was an issue, which the parties wanted determined as a preliminary issue it had to be clearly defined and all parties had to agree to it being so determined.

It also appeared to this Court that in relation to the "land issue" in particular the answers to the questions would not shorten any trial. Even given the answers propounded by Chetwynd J., the issue of rectification of the register would have to be litigated and that would effectively re-open facts relevant to questions 4 and 5 and evidence other than that set out in the agreed facts could become very relevant.

When all the foregoing was intimated to counsel, counsel for Axiom submitted that this Court should at least determine the validity and effectiveness of the LOI of 23 November 2010 in the light of s.20(5) (c) of the Act, the "land banking" provision, given the agreed fact that at "the time it lodged the SMMS tender, SMMS held more than 3 prospecting licenses over different prospecting areas in the Solomon Islands and did not hold and had not applied for a mining lease or commenced mining in at least one prospecting area." (paragraph 23 of Agreed Facts).

This Court does not accede to that request. Isolating out that precise question at this stage on appeal, particularly when the question itself was not directly asked at first instance (it was a subsidiary matter going to Question 1), may well prejudice SMMS and perhaps other parties. It is a matter, which should be considered in the overall context of the litigation. For example, it may be arguable the prohibition does not apply at the time of submitting a tender. That again highlights unsatisfactory aspects of the procedure followed in this case. Summary determination of preliminary issues often gives rise to more problems then are thereby solved. Appellate Courts in particular should be slow to embark on answering questions, which have not been clearly and properly raised at first instance.

In the circumstances the Court concludes that the slate should be wiped clean; that is, the appeal should be allowed, the answers to questions 1 to 5 set aside, and no answer given to those questions.

All matters raised by the pleadings, including any amendments, should be resolved at trial. Because of the general importance to all the parties of there being a speedy resolution, particularly because of the injunction, which is in place, the trial should take place as speedily as possible. The matter should be case managed by a High Court Judge in an endeavour to identify the critical issues for determination at trial.

Costs have been thrown away by the abortive attempt to have some preliminary questions determined, but all parties have been equally at fault. The costs of each party of and incidental to the hearing at first instance and the appeal should be that party's costs in the cause.

The Court therefore makes the following orders:

1. Appeal Allowed.
2. Set aside the answer to questions 1 to 5 inclusive.
3. Remit the matter to the High Court for trial.
4. Order that the costs of each party of and incidental to the hearing at first instance and appeal be that party's costs in the cause.
   

Justice Williams J.A.
Member

Justice Hansen J.A.
Member

Justice Apaniai, J
Member