Sosimo v Kwan [2018] SBCA 23; SICOA-CAC 08 of 2018 (12 October 2018)

IN THE SOLOMON ISLANDS COURT OF APPEAL

Case name:	Sosimo v Kwan
Citation:
Decision date:	12 October 2018
Nature of Jurisdiction	Appeal from Judgment of The High Court of Solomon Islands(Faukona J)
Court File Number(s):	CA 08 of 2018
Parties:	Ivy Sosimo v Denis Kwan, Debby Kwan, David Kwan, KCM Properties Limited, Winner Properties Limited
Hearing date(s):	4 October 2018
Place of delivery:	High Court Of Solomon Islands-Court Room Six (6)
Judge(s):	Goldsbrough President Ward JA Lunabek JA
Representation:	M. Tagini for the Appellant J. Sullivan QC. E. Soma
Catchwords:
Words and phrases:
Legislation cited:	Limitation Act, Civil Procedure Rule
Cases cited:	Taisol Investment Corporation SI Ltd, Herbert v Vaughan, Weldon v Neal, Austree Enterprises PTY Ltd v Guo
ExTempore/Reserved:	Reserved
Allowed/Dismissed:	The Appeal is dismissed
Pages:	1-12

JUDGMENT OF THE COURT

1. Introduction
1. This is an appeal dated 20^th March 2018 against the judgment and orders of Faukona J made in the High Court on 7^th March 2018 to the following effect that:
   • (a) The Claimant’s application for adjournment is refused.
   • (a) The claim (as amended) be struck out on the grounds that the claim is statute barred.
   • (a) The Claimant pay the Defendant’s costs of and incidental to the proceedings (including this application) with certification for Queen’s Counsel, to be assessed if not agreed.

II Background – Pleadings and application in the High Court

2. A claim was originally filed in the High Court on 21 October 2011 in the names of Samuel and Ivy Sosimo (the present Appellant). The claim sought declarations to the effect that the Claimants owned all the shares in each of the second and third Respondents (“KCM” and “Winner” respectively) and that the Claimants, and not the first Respondents, were the directors of KCM and Winner.
3. It is noted that the claim was amended on 21^st February 2017. Both the claim and the Amended claim rely on procedural non-compliance with both companies Articles of Association in and about the transfer of control of both KCM and Winner to the first Respondents after their incorporation by the Appellant and her husband. In essence, the allegations in the claim were to the effect that:-
   • (a) KCM and Winner were incorporated in 2001 and 2000 with the Appellant and her husband the initial shareholders and directors of each company (second and third Respondents),
   • (b) the Appellant and her husband were not involved in and had no knowledge of the transfer of the shares to the first Respondents,
   • (c) the Appellant and her husband did not resign and were not involved in the appointment of the first Respondents as directors,
   • (d) consequently, there was procedural non-compliance with the Articles of KCM and Winner amounting to illegality,
   • (e) the Appellant and her husband first became aware of the change in shareholders and directors on 11 June 2011.
4. The Respondents by their Amended Defence, pleaded among any other matters, the following:
   • (a) KCM and Winner had been incorporated by the Appellant and her husband in 2001 and 2000 respectively with them as the initial shareholders and directors.
   • (b) the Appellant and her husband held the shares on trust for the First Respondents,
   • (c) the shares were then transferred to the first Respondents on 31 August 2000 (Winner) and 25 June 2001 (KCM).
5. The Appellant and her husband filed a first reply to the Amended Defence and denied the shares were held on trust for the First Respondents and that the transfers were illegal for non-compliance with the Articles and as being effected without their knowledge.
6. It is noted that subsequently, the Appellant’s husband became incapacitated and she did not apply to prosecute the action as guardian ad litem, leaving her as the sole claimant. Hence the amended claim removing him from the action.
7. It is also noted that the amended claim filed on 21 February 2017, does not make any substantive amendments to the factual allegations, nor to the relief sought.
8. In essence, the claim relies on the illegality of the transfers based on procedural non-compliance with the Articles. At this stage, there is no allegation of fraud. Nor is there any claim to rectify the company registers of KCM and Winner. The sole relief sought is declaratory in nature.
9. The Respondents pleaded in detail the circumstances giving rise to the shares being held on trust and their subsequent transfer and that the proceedings are statute barred.
10. The Appellant filed a second reply to the further amended defence, alleged for the first time, that the share transfers were fraudulent and that the proceedings are not statute barred by reason of late discovery of the alleged fraud in June 2011. It is noted that these allegations of the share transfers have not been particularised.
11. In response to a request for particulars, the Appellant purported to provide particulars to the effect that;
    • (a) As to fraud – there was no trust and the share were transferred without her knowledge and/or there was no transfer.
    • (b) As to first discovery – she first became aware from reading public notice on 27 June 2011 and thereafter by inquiry of government departments.
12. It is noted there was no allegation of any wrong doing by any of the Defendants (Respondents).
13. It is the above pleadings which gave rise to the application the subject of the appeal.

III Reasons for judgment under appeal

14. The Judge in the court below refused an application from adjournment, which was sought on the basis that the Appellant’s preferred counsel was unavailable because of the overnight death of relative, although alternative counsel was available. He gave reasons both orally and in writing for refusing the adjournment.
15. After hearing submissions for the respondents and with the benefit of a written outline, the trial judge invited submissions on behalf of the Appellant, and when no submissions were made by the Appellant’s counsel present, the Judge accepted the Respondent’s submissions and struck out the proceedings as being statute barred.

IV. Appeal Grounds

16. The Appellant appealed against the said judgment and orders of 7 March 2018 on the following three (3) grounds:-
    • (a) That the judge erred in law by holding that the Appellant’s claim was statute barred whereas the cause of action began on 27^th March 2011 when fraud was discovered by the Appellant and not in 2001 or 2002 when the First Appellant fraudulently transferred shares and changed directorship in the second and third Respondents to themselves.
    • (b) The judge erred in law when he wrongfully applied section 5 of the Limitation Act in the court below and as a result struck out the claim whereas section 5 does not apply in cases of fraud. Fraud unravels everything and time starts to run from the date where fraud is discovered that is 2011, the same year where the Appellant filed her claim in the High Court hence it was not statute barred.
    • (c) The court erred in fact when he allowed the application to be heard ex parte whereas counsel for the Appellant had already informed the Respondents solicitor and the court of his predicament (a sudden death in the family the same morning) and the judge through his associate has confirmed to counsel that the matter be adjourned to another date. The court however proceeded to hear the application ex parte hence deny the right of the Applicant to be heard on the issue hence breached the principle of fair trial.

V. Submissions and Discussion on the appeal

17. Grounds 1 and 2 are joined and are considered together.
18. The question raised in grounds 1 and 2 is whether the proceedings are statute barred?
19. The Appellant submits that the trial judge erred in holding that the claim is statute barred and he has wrongly applied section 5 of the Limitation Act (“the Act”). She says the trial judge erred in law without considering the exceptions under section 32 (2) (a) (b) and (c) of the Act.
20. She says the claim is not statute barred and section 5 of the Act is not applicable in cases of fraud, concealment or mistake.
21. She contended that there is clear evidence of fraud in this case and section 32 (2) (a) of the Act is applicable against the first, second and third Respondents.
22. It is also said that the First Respondent gave false representation with full knowledge when transferring the shares and directorships in the 2^nd and 3^rd Respondents companies to themselves without the consent of the Appellant as shareholders and Director, or having transferred the shares and directorship without honest belief in its truth or recklessly doing it. Such action amounts to fraud.
23. The Appellant anticipates that the Respondent will argue that the Appellant failed to plead the particulars of fraud as alleged. The Appellant therefore submits that fraud was properly pleaded or particularized when the Appellant provided answers to further and better particulars as requested by the Respondents in the court below.
24. The Appellant submitted that in the circumstance of this case this court will exercise discretion to apply Rule 1.16 of the High Court Civil Procedure Rules 2007 rather than r.5.3 (a). It is finally said this is a case where evidence is clear that fraud, concealment or mistake is committed in the transfer of shares and change of directorship in the 2 companies.
25. The Appellant refers to the case of Taisol Investment Corporation SI Ltd, SBHC 38; HC-CC 301 of 1993 (12 April 1994) to assist her appeal.
26. The Appellant submitted that grounds 1 and 2 should be granted by this court.
27. The Respondents say that it is not in dispute that the impugned dealings (share transfers and appointments of directors) occurred in 2000 (Winner) and 2001 (KCM) (Save for the appointment of David Kwan as a director of each company in January 2005).
28. They say that the Amended claim, although filed in 2017, takes effect from the issue of the original claim on 21 October 2011. We note, therefore, that there is no cause of action alleging fraud in the claim as alleged. The only allegation of fraud is the unparticularised one in the second reply of 31 March 2017.
29. We agree with the Respondents submissions that the function of a reply is to answer matters raised in the defence and it is not permissible to raise a new cause of action other than by way of amended statement of claim. (See Herbert – v- Vaughan (1972) 3 All ER 122, 125-127 (GOFFJ).
30. In this case, the causes of actions relied upon in the amended claim relate to share transfers effected on 31 August 2000 (Winner) and 25 June 2001 (KCM) and directorial appointments in 2000, 2001 and January 2005, which are said to be “illegal” for procedural non-compliance with the relevant Articles of Association.
31. We agree with the Respondents that the allegation of “fraudulent” transfers in the second reply is inconsistent with the claim and should have been pleaded as an alternative in the claim.
32. We note that the claim was amended on 21 February 2017, when the Appellant had been aware of the facts for more than 5½ years. Nevertheless, fraud was still not pleaded.
33. In the circumstances, we accept and agree with the Respondents that any dishonest conduct by a defendant (i.e. the present First Respondent) must be pleaded, especially when the Appellant seeks to rely on S. 32 of the Limitation Act to set up an extended accrual of the cause of action. In that circumstance, it is plain from S.32 (1) that the relevant fraud which is required to enliven S.32 must necessarily involve dishonesty or blame-worthy conduct. S. 32 (2) (a) expressly makes it clear that such conduct must be that of the Defendant and no one else. It is noted that the only relief sought remained declaratory relief based on procedural non-compliance. There is no allegation whatsoever of any wrong doing by the Respondents.
34. In such a circumstance, leave would not now be given to further amend the claim to set up an entirely new cause of action to rectify the company registers based on the alleged fraudulent transfers.
35. On the pleadings, we note and accept that no adequate particulars of the fraud have been given, contrary to r.3 (e). If fraud were now raised in the claim based on discovery of the alleged fraud in June 2011, that new cause of action would itself now (and at the time of hearing) be statute barred under S. 32 (2) (a) of the Act because more than six years have elapsed since the cause of action accrued even on the claimant’s (Appellant) best cause (i.e. June 2011).
36. We note that the rule in Weldon –v- Neal [1887] UKLawRpKQB 161; [1887], 56 L.J.Q.B. 621, 19 Q, B.D. would mitigate against allowing any further amendment based on fraud. However, we accept and agree with the Respondents submissions that there are no peculiar circumstances to take this case outside the rule in Weldon –v- Neal, such as were found to exist in Austree Enterprises Pty Ltd v Guo [2018] SBCA 13.
37. We note the submissions of the Respondents to the effect that the true basis upon which Winner and KCM were incorporated is clear from the Appellant’s husband letter dated 21 February 2000 (which expressly shows that the Appellant was acting as trustees) and from the application as verified by the sworn statement of Kwan, to which the appellant chose not to respond in her sworn statement in reply. The Respondents say that what actually happened was what was always intended to happen.
38. In this case, it is noted that the requirement to amend the claim in time was imperative because, assuming reliance on S. 32 (2) (a) of the Act to extend the limitation period to commence from June 2011, the Respondents would be entitled to amend their defence to rely on S. 32 (4) and (5) (a), since no allegation of misconduct is made against them.
39. It is further observed that a timely amendment would also have permitted the Respondents to rely on the second limb of S. 32 (2) (a). The Appellant would with reasonable due diligence have discovered the alleged fraud much earlier had she been in any way concerned with the companies of which she was supposedly a director and shareholder throughout.
40. It follows that in this case, the limitation period was not extended pursuant to S. 32 (2) (a) and the cause of action based on illegality for procedural non-compliance was statute barred from August 2006 (Winner) and June 2007 (KCM) under S. 5 of the Act. The claim as amended is out of time.
41. We note further that there has been no application to the court to condone the Claimant’s delay under S. 39 of the Act. Nor could any application under S. 39 now be successful. Any such application should have been made in 2011 when the claim was filed, more than 6 years ago.
42. We have perused the judgment in the case of Taisol Investment Corporation SI Ltd, SBHC 38. We note that the issue of fraud and the alleged transfer of shares are properly pleaded and particularised in that case. The pleadings are filed with the time. The circumstances of the present case are different and Taisol case will be of no assistance to the Appellant’s case.
43. We agree with the Respondent submissions that the proceedings are statute barred. Faukona J was correct in striking out the claim on that basis.
44. We dismiss grounds 1 and 2 of the appeal.
45. We now consider ground 3. The question is whether or not the refusal to grant an adjournment is a wrong exercise of discretion by the judge in the circumstance of the case in the court below.
46. The Appellant submitted that by refusing to adjourn the application to another date despite the Appellants courtesy to inform the court and the Respondents solicitors of the Appellant solicitor’s predicaments, the Appellants is denied the right to be heard on the application.
47. The Appellant noted the overriding interests or objectives of the rules, submitted that a delay of a few days would not prejudice any of the parties.
48. He finally submitted that the court below should look at the circumstances of the Appellants solicitors at that point in time and grant the adjournment considering his customs and cultures. The Appellant seeks that this ground of appeal be granted.
49. This ground of appeal could not succeed for the reasons that follow.
50. The Appellant was represented by counsel throughout the hearing, although not by her preferred counsel who was absent due to the death overnight of his uncle.
51. The application was filed on 02 November 2017, and was listed for hearing some 4 months later on 7 March 2018.
52. Quite apart from the death that occurred in the earlier morning of 7 March 2018, the preferred counsel of the Appellant must have taken steps of having prepared submissions for the hearing and there was no reason why those submissions were not made available to the replacement counsel. That was not done in this case.
53. The grant of an adjournment is entirely a matter of the court’s discretion. The court is and must be guided by the overriding objectives of its rules, to deal with a matter justly with minimum delay and expense, and by the rules governing that objective.
54. In this case, the application was heard in the presence of a counsel representing the Appellant at the hearing. The Appellant’s counsel was offered an opportunity to make submissions on the substantive application but declined to do so. It is also noted that counsel for the Appellant when applying for a short adjournment did not offer to pay the wasted costs for the respondents as a normal cause of event either.
55. In the circumstance of this case, there is no miscarriage in the exercise of the discretion by the Judge in the court below.
56. A final matter we need to comment on is how to address or deal with the situation like in the present case where a matter is listed before the court and a death suddenly occurred involving the uncle of a counsel. There is first and foremost the duties and responsibilities of counsel to the clients and ultimately to the courts. It is also important to recognise the family relationships and obligations based on custom and cultures of counsel concerned. The balance between these completing interests will and must always be struck in favour of counsel’s obligations to the court. This should not be deviated from as a matter of principle. In order to do so, counsel must do more than just writing letters or sending emails to the Registrar. When the sudden event arises, counsel must seek an urgent audience with the judge through the Registrar; counsel may be ready to seek a short adjournment and ready to pay the wasted costs of the other parties; if a case is adjourned for some months like in the present case, counsel is to prepare submissions and get them delivered to a fellow counsel or in office solicitor to present them before the court.
57. We dismiss the third ground of appeal as well.

Result

1. The appeal is dismissed.
2. The Respondents are entitled to costs to be agreed or assessed on the standard basis.

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Goldsbrough P
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Ward JA
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Lunabek JA