Grace Logging Ltd v Takolu Timber Ltd [2024] SBCA 8; SICOA-CAC 24 of 2022 (31 May 2024)

IN THE SOLOMON ISLANDS COURT OF APPEAL

Case name:	Grace Logging Limited v Takolu Timber Ltd
Citation:
Decision date:	31 May 2024
Nature of Jurisdiction	Appeal from Judgment of the High Court of Solomon Islands (Faukona; DCJ)
Court File Number(s):	24 of 2022
Parties:	Grace Logging limited v Takolu Timbers Limited, Fred Toai, Anthony Limanisara, Commence Kauli and Serah Tumu, Koqu Dugo Re Enterprises (SI) Company Limited, New Ocean Limited, Attorney General
Hearing date(s):	27 May 2024
Place of delivery:
Judge(s):	Muria; P Gavara-Nanu JA Lawry; JA
Representation:	P Teddy for the Appellant S Kilua for the Respondent
Catchwords:
Words and phrases:
Legislation cited:
Cases cited:	Trendex Trading Corporation v Credit Suisse [1982] Ac 679,Wale v The Governor General [2019] SBHC 43, Lenga v Solomon Taiyo Ltd [1991] SBHC 9, Pegang Mining Co Ltd v Choong Sam [1969] UKPC 16, Bato v Boso [2013] SBHC n124, Amon v Raphael Tuck and Sons Ltd [1956] 1 AII ER 273
ExTempore/Reserved:	Reserved
Allowed/Dismissed:	Allowed
Pages:	1-8

JUDGMENT OF THE COURT

1. In the High Court in civil case number 156 of 2022, the First Respondent and the Second Respondent brought a claim against the Third, Fourth and Fifth Respondents.
2. The claim alleged trespass into Takiga customary land in the course of a logging operation. The First Respondent obtained an ex parte injunction against the Third and Fourth Respondents. The Third and Fourth Respondents filed an application to strike out the claim. That application was heard together with the inter partes hearing concerning the ex parte injunction. At that hearing the Third and Fourth Respondents argued that the undertaking as to damages given by the First Respondent was insufficient. They alleged that the First Respondent lacked the financial capacity to compensate the Third and Fourth Respondents if judgment was in their favour. On 24 July 2021 the High Court struck out the claim on the basis that the First Respondent could not have held a felling license because it was not a registered company. The effect of striking out the claim was to discharge the ex parte injunction order.
3. On 13 September 2021 the High Court made an order finding that the Appellant was behind the litigation and was guilty of maintenance and champerty. On 1 December 2021 the Appellants filed an application to set aside that order. On 23 August 2022 that application was dismissed. The present appeal is an appeal against that ruling.
4. The grounds of appeal are as follows:
   • “Ground 1 - the Learned Judge erred in law and/or fact and/or discretion when he dismissed the Appellant’s application to set aside orders dated 13 September 2021 and perfected on 7 October 2021, without considering the entire circumstances of the parties and court papers filed in support.
   • Ground 2 - the Learned Judge, erred in law and/or fact and/or his discretion and thereon miscarried when he dismissed the Appellant’s application to set aside orders dated 13 September 2021 and perfected on 7 October 2021 without considering that the Appellant was not a party to the proceeding.
   • Ground 3 – that the Learned Judge, erred in law and/or fact and thereon misdirected himself when he dismissed of the Appellant’s application to set aside orders dated 13 September 2021 and perfect it on 7 October 2021 without considering that there was no evidence establishing maintenance or champerty on the part of the Appellant.
   • Ground 4 - that the Learned Judge, erred in law and/or fact and miscarried when he dismissed the Appellant’s application to set aside orders dated 13 September 2021 and perfected on 7 October 2021 by failing to properly consider and apply the principles of law as enunciated in Trendex Trading Corporation v Credit Suisse [1982] AC 679 as it applied to the proceeding before him.
   • Ground 5 - that the Learned Judge erred in law and/or fact and miscarried when he dismissed the Appellant’s application to set aside orders dated 13 September 2021 and perfected on 7 October 2021, by failing to consider that the orders dated 13 September 2021, we significantly altered or amended without the knowledge of the parties by the orders of 7 October 2021 thereon ordering that the Appellant was liable by high maintenance, and champerty.”
5. It is not challenged that the Appellant was not a party to the proceedings in the High Court. The evidence of Steven Chien filed on 1 December 2021 in support of the application to set aside the judgment of the High Court provided evidence that the Appellant was not served with any court documents from the First and Second defendants, nor did they receive any notice of a hearing from the High Court. That evidence was not challenged.
6. For the Respondent, Ms Kilua submitted that the basis for seeking orders against the Appellant, notwithstanding the Appellant was not a party to the proceedings was based on a letter received from the Appellant, on the Appellant’s letterhead, dated 6 April 2020, addressed to the lawyers of the First Respondent. That letter read as follows:
   • “Sir,
   • Re: CONFIRMATION OF TAKOLU INCOME 5% FROM APRIL SHIPMENT
   • We reply to confirm to your office that Takolu Timber our licensee they have stable income from the current operation under their felling license A10800.
   • Currently they have around 2000 m³ export logs in the log pond waiting for export. Their average export cubic per month is about 2500 m³ for your kind reference. Normally for 2500 m³ of shipment, they are entitled to get about SBD80, 000 (approximately SBD $40.00/cubic meter).
   • I hope this letter serves its purpose it to you and the court case.”
7. It is clear that the letter was confirmation that the First Respondent was likely to receive about $64,000 in respect of logs that were waiting to be exported. The letter does not acknowledge, as submitted on behalf of the Respondent, that it was the Appellant funding the litigation that was commenced by the First Respondent.
8. Counsel was asked if there were any other documents upon which the Third and Fourth Respondents relied in making an allegation of maintenance and champerty. Counsel confirmed that they relied simply on that document. The question then common to all of the appeal points is whether the Appellant should have been made a party to the proceedings, so that representations could be made on its behalf concerning its liability for damages and costs. The trial judge clearly understood that the Appellant was not a party to the proceedings.
9. In Wale v The Governor General [2019] SBHC 43 the Chief Justice said:
   • “it is trite law, a third party cannot be the subject of any orders of the court, unless he had been joined as a party, and made subject to the jurisdiction (supervision and control) of the court. The court has no power save as expressly provided by law to compel anyone to abide by its orders, for, in the event of failure to comply, the court cannot enforce such orders.”
10. Counsel for the Appellants also referred to the comments made by Chief Justice Ward in Lenga v Solomon Taiyo Ltd [1991] SBHC 9:
    • “It was necessary for a third party notice on a co-defendant to be served under order 18 rule 11. There is a right to serve such a notice on a co-defendant without leave, but unless it is done, the court cannot make an order as between the defendants”
11. Counsel also referred to the words of Lord Diplock in Pegang Mining Co Limited v Choong Sam [1969] UKPC 16:
    • “The purpose of the rule was to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon the matter, in dispute in the action, without his being given an opportunity of being heard. That concern necessitated a broad and flexible test which was formulated as being: will the [third party’s] rights against or liabilities to any party to the action in respect of the subject matter of the action, be directly affected by any order which may be made in the action? The corollary of this is that an order which directly affects a third person’s rights against or liabilities to a party should not be made, unless the person is also joined as a party”
12. In Bato v Boso [2013] SBHC 124 the High Court referred to the reasoning of Kabui J as he applied the reasoning of Justice Devlin in Amon v Raphael Tuck and Sons Ltd [1956] 1 All ER 273:

“the only reason which makes it necessary to make a person party to an action is that he should be bound by the result of the action and the question to be settled, therefore must be a question in the action, which cannot effectively and completely settle, unless he was a party”

13. Counsel has referred to other decisions which come to the same conclusions. In the circumstances of this case it is clear that the orders made against the Appellant should not have been made without affording the Appellant to the opportunity to be heard. The basis of both Ground 1 and Ground 2 is that the Appellant was denied the opportunity of being heard in relation to the orders made against it. The situation was worse than that because the unchallenged evidence before the High Court was that the Appellant had not been served with any relevant documents relating to the claim, the defence, counterclaim, reply, or application to strikeout.
14. Concerning Ground 3 we accept that the letter relied on by the Respondent did not establish a basis for finding maintenance or champerty on the part of the Appellant. In these circumstances, it is not necessary to make further comments on Ground 4 or Ground 5. The appeal is allowed, the orders perfected on 7 October 2021 are quashed. The Third and Fourth Respondents should not have sought the order against the Appellant when the Appellant was not a party to the proceedings. The Appellant is entitled to costs on an indemnity basis, both in this court, and in the court below. If not agreed then to be assessed.

Orders

1. The appeal is allowed. The order of the High Court perfected on 7 October 2021 is set aside.
2. The Third and Fourth Respondents are to pay the costs of the appeal both in this Court and in the High Court on an indemnity basis

Muria P
Gavara-Nanu JA
Lawry JA