Islands Construction Management Ltd v Mbaeroko Timber Ltd [1996] SBHC 57; HC-CC 244 of 1996 (28 October 1996)

HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 244 of 1996

ISLANDS CONSTRUCTION MANAGEMENT LIMITED

-v-

MBAEROKO TIMBER ED

&

Before: Awich, J

Hearing: 28 October 1996 - Judgment: 28 October 1996

Counsel: A Radclyffe for the plaintiff; C Ashley for the defendant

INTERLOCUTORY JNT

p>AWICH, J:

The plaintiff, Islands Construction Management Limited, commenced action by writ of summons filed on 23/8/96 in which it claimed that it was engaged in a logging business with the defendant, Mbaeroko Timber Limited, on joint venture basis. It alleged breach of the terms of the contract by the defendant and claimed for that breach, damages, a specified sum of US$353,544.33, order for specific performance of the contract and injunction to restrain the defendant, "from disposing of round logs otherwise than in accordance with the contract."

Three days after filing the writ of summons, the plaintiff applied to court for interlocutory injunction to restrain certain actions of the defendant. The orders proposed in the application were stated in these words:

"1. the Defendant, its servants or agents to be restrained from disposing of or otherwise interfering with the export of the consignment of round logs at Enoghae otherwise than in accordance with the terms of the contract dated 1st December 1995 made between the Plaintiff and the Defendant;

2. an injunction to restrain the Defendant from disposing any of the proceeds of sale of the second shipment of round logs pending the outcome of this action;

3. costs in the cause."

The application was heard by me on 10/9/96, but I was not able for various reasons to deliver judgment soon after. While I was away in Australia, certain urgency arose which required the immediate sale of some 3000 cubic metres of round logs which apparently were in the possession of the plaintiff. The Chief Justice granted limited order to sell the logs so as to preserve their value. He deliberately declined to deal with the question, of injunction, of the right to the proceeds and of costs. The order made by the Chief Justice was a timeous one and if carried out, the proceeds of the sale would now be in the joint bank account of the solicitors for the plaintiff and defendant. I understand that the sale has not yet taken place. It must be understood that the order granted by the Chief Justice was only aimed at preserving the value of the logs. It is not a declaration that the plaintiff was the party entitled to conduct sale of the logs in the present facts of the case. It does not absolve the plaintiff from liability should it be found that under the contract, the plaintiff was not the party entitled to conduct sale. Now that order to sell has been granted it leaves in the main to be decided, only the proposed order in paragraph 2, that seeks to restrain the defendant from disposing of the proceeds. The order in paragraph 3 seeks only costs.

The defendant entered appearance on 3/9/96 and filed its defence on 30.9.1996. The next step in the pleading should have been taken by the plaintiff. If it had reply to file, the plaintiff was required to deliver it within 14 days - see Order 25. If it took the view that pleadings had closed, it was to apply for direction within 14 days - see Order 32.

While parties are entitled to bring interlocutory applications, it must be remembered that those applications are founded on the underlying substantive case. That is why it is a requirement in granting interlocutory injunction that there ought to be triable issue in the substantive case - see John Wesley Talasasa -v- Attorney General and Others, Civil Case No.43/1995. In this case there are obvious triable issues. The plaintiff alleges a contract of joint venture, the defendant contends that the agreement which is in writing, is a management agreement only. The plaintiff claims that under the agreement, it alone can sell the logs harvested, the defendant contends that, it being the licencee it is entitled to sell. The plaintiff alleges breach on the part of the defendant, but the defendant denies and counterclaims breach on the part of the plaintiff, alleging that the plaintiff engaged another company to do the logging, which was not in accordance with the agreement. There are also differences about sharing of costs and may be about sharing of profits.

Once the applicant has established triable issue, it must show that an injunction is necessary to preserve the status quo, which if not preserved will result in the applicant suffering uncompensateable loss, should it win the case. At this stage the only injunction now left to be decided is that to restrain the defendant from, "disposing of any of the proceeds of sale of the second shipment The reason for the plaintiff now seeking that order is said to be that the defendant would not be able to satisfy any judgment debt awarded to the plaintiff against the defendant should the plaintiff win the case. That is merely a statement of conclusion drawn; no facts from which the conclusion was drawn have been made available to the court. To the contrary, it has been stated that the plaintiff has recently received the sum of US$754,846.48 from what was described as first shipment of logs. That in fact is some evidence of ability to be able to satisfy a judgment, although open to proof otherwise.

An important consideration in granting interlocutory injunction is that the applicant furnish security for damages or give undertaking that minimises loss, in the event that the respondent wins the substantive case. Justice Palmer, in Civil Case No. 110/93, Toshio Hashimoto and David Hayward -v- John Sullivan and Robert Emery at page 14 puts it as high as to be a prerequisite. In this application, the applicant has not made any attempt to furnish such security or to offer undertaking of any sort. It seems the applicant takes it for granted that it will not be required to furnish such security. I think it will be a dangerous development to generally disregard security for damages especially when no undertaking is given by the applicant. The only situation I know of in this jurisdiction whereby the court will not insist on security for damages is where a customary landowner, usually, without means, seeks injunction against the usually large logging company - see Hitukera -v- Hyundai Timber Company Limited and Maepaza Civil Case No. CC132 of 1992. In that case the applicant was aided in his case by public solicitor. The plaintiff in this case is not such an applicant. The case may be looked at in another way: The plaintiff sought urgent interlocutory order to sell the logs, notwithstanding the defendant's reservation about the deal the plaintiff had struck. Because of the need to preserve the value of the logs, that order has been granted. Now the plaintiff would like to restrain the defendant from using any part of the proceeds. The plaintiff does not offer any security for damages or undertaking to secure any loss that may result to the defendant. Is there not something to be said about the plaintiffs inability to compensate the defendant in the event of the defendant winning the case finally? That question becomes important when one notes that even by the plaintiff's case the defendant is entitled to some share of the proceeds, yet the plaintiff in paragraph 3 seeks to restrain the whole proceeds without even offering undertaking to safeguard the defendant against loss.

It appears to me that this is a case very close to that in which a plaintiff would like to use interlocutory injunction as a means of executing its claim as if the claim has already been made order of court in a judgment in its favour. I refuse the application for interlocutory injunction restraining the whole proceeds thereby denying the defendant the use of even that part of the proceeds it would be entitled to.

The state of transaction has moved forward nonetheless and the order I make must take into account the reality of that state as exists now. In the first place the order made on 11/10/1996 must be incorporated. The order I make are:

1. The order made on 11/10/1996 authorising the plaintiff to sell certain logs, the subject of what is described as second shipment, is to continue. It is noted that the order does not absolve the plaintiff from liability for a claim by the defendant based on allegation of poor price that the plaintiff may have sold the logs at.

2. Should the plaintiff be unable to sell as authorised by the above order, the logs are to be sold in accordance with the contract.

3. The proceeds are to be paid into the joint interest bearing account of the solicitors for parties. If letters of credit has been drawn in favour of the plaintiff or the defendant, that party is required to pay the whole into the joint account of the solicitors stated herein.

4. Parties are to endeavour to agree as to the meaning of the terms of the contract as to sharing of the proceeds. In the event of them not agreeing, the proceeds will be paid out in equal shares, that is 50% to the plaintiff and 50% to the defendant. Any claim as to more than a 50% share shall be resolved at the final determination of the substantive case. This paragraph of the order does not absolve a party from liability for the use of a share more than a share he is found to be entitled to when the case is finally determined.

5. The plaintiff is to take the next step in the proceedings within seven days of today and the rest of the pleadings are to follow in due compliance with the Rules.

6. Costs are reserved.

Delivered on the 28he 28th day of October 1996

At the High Court Honiara.

Sam Lungole-Awich
Judge

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