Mbaeroko Timbers Ltd v Islands Construction Management Ltd [1997] SBHC 94; HCSI-CC 100 of 1997 (25 August 1997)

IN THE HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 100 of 1997

MBAEROKO TIMBERS LIMITED

v

ISLANDS CONSTRUCTION MANAGEMENT LTD AND NATIONAL BANK OF SOLOMON ISLANDS

High Court of Solomon Islands
(Lungole-Awich, J)
Civil Case No.100 of 1997

Hearing: 11 August 1997
Judgment: 25 August 1997

C Ashley for the Plaintiff
A Radclyffe for the 1st Defendant
S Patrick for the 2nd Defendant

JUDGMENT

(LUNGOLE-AWICH, J): There are three applications to be decided at this stage in this action. The plaintiff is Mbaeroko Timbers Limited. I shall refer to it as Mbaeroko. The first defendant is Islands Construction Management Limited. I shall refer to it as ICML. The second defendant is National Bank of Solomon Islands. I shall refer to it as NBSI.

Mbaeroko commenced action by writ of summons filed on 30.4.97. It claimed payments of specific sums, $1,581,833.61 and $533,188.25, account to be rendered of purchase price of timber logs, damages and injunction over certain letters of credit. The statement of claim was amended; the amendment was filed on 13.7.1997. Cause of action has been stated therein as fraud by the defendants in selling and receiving proceeds of about 3000m³ of timber logs belonging to the defendant. Conversion of the logs was averred as alternative cause of action, and a further alternative of negligence was averred against NBSI alone.

On the same day that the writ of summons was filed, Mbaeroko took out summons, applying for 8 interlocutory orders to be granted while the main case proceeds. I quote here the interlocutory orders applied for:

"1. That the First Defendant pay into the parties joint IBD solicitors' trust account the amount of SBD1, 833.60 within days (7) or seven or alternatively.

That the First Defendant provide an undertaking or security to the amount of SBD1, 581,883.60 within seven (7) days.

2. That the Second Defendant pay into the parties joint IBD solicitors' trust account the amount of SBD533,188.25 within seven (7) days or alternatively.

That the Second Defendant provide an undertaking or security to the amount of SBD533, 883.60 within seven (7) days.

3. That the First Defendant provide within seven (7) days the details of the buyers' purchase price and account of the proceeds the subject of the second shipment.

4. That the Second Defendant provide within seven (7) days the details of the LC issued by the lling Seng Bank, Hong Kong and an account of the SBD533,188.25, the value of the said LC.

5. That the Central Bank of Solomon Islands be ordered to provide within fourteen (14) days, the details of the two LC s referred to by the Second Defendant which are the subject of the second shipment.

6. That the First Defendant provide an undertaking or security for damages to the amount of S8D533, 188.25 within fourteen (14) days.

7. Cost be made against the First and Second Defendant either jointly or severally.

8. Any further order the court deems just.”

The application was only heard on 11.8.1997. The reasons for the delay are not material to the determination of the application. In the meantime both defendants had filed defences and applications for order to strike out the statement of claim on the grounds that it did not disclose cause of action. NBSI also applied for leave to amend its defence.

I set out here the two applications:

By ICML

“1. that time be abridged for the hearing of this application;

2. that the plaintiff's claim be struck out for failing to disclose a cause of action namely fraud or conversion against the First Defendant.

3. that the plaintiff pay the costs."

By NBSI

"1. That the Second Defendant have leave to amend its defence in the form of the amended defence filed on 1 August 1997 and served on all parties.

2. The amended defence already having been filed and served, the Second Defendant is not required to file and serve the amended defence again.

3 .The plaintiff's statement of claim insofar as it relates to the Second Defendant be struck out.”

4. The plaintiff pay the Second Defendant's costs of and in connection with the action including this application on an indemnity basis.

5. Such further or other order as to the Honourable Chamber Judge may seem meet."

The case of Mbaeroko, stated very briefly, is that Mbaeroko and IMCL had joint venture to harvest and export timber logs. When some 3,000m3 of timber logs were ready to be shipped, Mbaeroko and IMCL had disagreement as to which of them had the duty and therefore the right to sell harvested logs. Because of that IMCL filed action, Civil Case No. 244 of 1996 and immediately applied for and obtained, on 15.10.1996, interlocutory order to sell the 3000m3 of logs. The order was to prevent further deterioration of the logs. The proceeds were to be paid into joint interest bearing trust account of solicitors for the parties. Security for damages or undertaking as to damages was not ordered. ICML sold the logs, but has not paid the proceeds into joint interest bearing account of solicitors. Part of the proceeds was used to pay the sum of US$377,000 (which would be about $1,370,000), advanced to the ICML by NBSI. It was alleged that letters of credit opened in NBSI bank naming Mbaeroko as the payee was intentionally amended by NBSI so that ICML became the payee. The effect was that NBSI would then be able to recover the advance it had made to ICML. NBSI did not ask for permission from Mbaeroko to change the payee in the letter of credit from Mbaeroko to ICML. Mbaeroko has brought this action, Civil Case No.100 of 1997, against ICML and NBSI, alleging fraud or conversion. It has further alleged negligence in the alternative against NBSI.

Order No.5 sought by Mbaeroko, must be refused straight away. It is sought against Central Bank of Solomon Islands, to produce details of 2 letters of credit in this case. Central Bank of Solomon Islands is not a party to the action nor in the application, and there is no application to join it in the action. I do not think the Central Bank has been served with the application papers. It has not attended and there is no need to order costs.

Orders Nos. 3 and 4 sought by Mbaeroko, are irregularly sought. They are for the purpose of obtaining the sale price and certain letters of credit from the defendants. The informations asked for are obtainable by pleading in the usual way and in the normal course, in accordance with the High Court (Civil Procedure) Rules. If defendants resist, refuse or neglect to respond then and only then can application be made to court. Applications for orders Nos.3 and 4 are dismissed.

Mbaeroko has no basis whatsoever in asking at interlocutory stage, for proposed orders, Nos. 1 (a), 1 (b), 2 (a) and 2 (b), that the defendants each pay $1,581,833.60 into solicitors' joint trust account and $533,188.25 as security for damages, or provide undertaking in like sums. There is simply no status quo to be preserved while this case, Civil Case No.100 of 1997 proceeds. The application is not brought under Order 34 rule 6 for judgment and therefore payment of the sums or part thereof, based on admission of liability or of facts warranting payment by the defendants. It is not brought under order 53 rule 2, on allegation that the defendants, with intent to delay or obstruct execution of judgment that may be obtained, is about to dispose of its property or remove it from the jurisdiction of the court, nor was the application made under Order 53 rule 6 under which the court may grant order of mandamus or injunction or appoint a receiver, "in all cases in which it appears to the court to be just or convenient so to do. It is under provision in England similar to our rule 6 that the courts in England in 1975 reaffirmed their jurisdiction to impose interim or interlocutory injunction over assets of defendants. The application is made ex parte. Their power was said to have been originally conferred by section 25 (8) of the Supreme Court of Judicature, 1873 of England, re-enacted in section 45 (I) of the Supreme Court of Judicature Act, 1925, and now in section 37 of the Supreme Court Act, 1981, in which are provisions similar to provisions in rules 2 and 6 of Order 53 of Solomon Islands High Court (Civil Procedure) Rules, 1964. The two well known cases that led to the frequent use in England, of the injunction, now commonly referred to as Mareva injunction, are Nippon Yusen Kaisha -v- Karageogis [1975] 3 All ER 282 or [1975] IWLR 1093 and Mareva Compania Naviera SA -v- International Bulk Carries SA [1975] 2 Lloyds Rep. 509 CA. The two applications were brought ex parte and were refused at first instance. On appeal they were granted. There was evidence amounting to prima facie and arguable cases. In Nippon there was very strong prima facie case that the debt, the hire in charterparty was due, and that the defendants' whereabouts was not known. There was also evidence that they had money in bank in London within the jurisdiction of the court. Very detailed examination of the law are in the judgments of Mustill J. at first instance and Denning MR on appeal in the case of Third Chadris Shipping Corporation -v- Unimarine SA [1979] 2 All ER 972, another charterparty case.

If the application of Mbaeroko was intended to enforce payment into trust account, of the proceeds of the 3000m3 sold by authority of the order of court made on 15.10.1996 and continued by order made on 28.10.1996 then the proper proceeding would be to compel compliance by making application for that purpose in case file No. CC244 of 1996. Learned counsel Mr. Radclyffe submitted so and I agree with him.

It would appear that Mbaeroko is asking for execution in advance in this case in the expection and belief that it will win the case. That is not available in the law of Solomon Islands as contained in statutes or adopted in the form of the Common Law from England. The general assumption in the Common Law is that however strong the plaintiff's case may be, the court cannot order the defendant to pay money or give security while the plaintiff proceeds to obtain judgment. That has been clarified a long time ago. I quote here two dicta of Cotton L.J. in judgment on appeal in the case of Lister & Company -v- Stubbs [1890] 45 Ch D1 CA:

On pages 12 over to 13:

"But in my opinion the moneys which under this corrupt bargain were paid by Messrs Varley to the defendant cannot be said to be the money of the plaintiffs before any judgment or decree in some such action has been made. I know of no case where, because it was highly probable that if the action were brought to hearing the plaintiff could establish that a debt was due to him from the defendant, the defendant has been ordered to give security until that has been established by the judgment or decree."

And on page 14:

“But here if the money sought to be recovered is not the money of the plaintiffs, we should simply be ordering the defendant to pay into court a sum of money in his possession because there is a prima facie case against him that at the hearing it will be established that he owes the money to the plaintiff. In my opinion, that would be wrong in principle."

In their case, Their Lordships said that different consideration applied when application is based on admissions of the defendant. The above statements of the Common Law are of course modified to the extent that the rules in Orders 34 and 53 of the Solomon Islands' High Court (Civil Procedure) Rules allow and by circumstances developed for the grant of Mareva injunction.

It appears to me, with due respect to Mr. Ashley, learned counsel for Mbaeroko that he hurried to file the application for the interlocutory orders. Costs for the application must, in any event, be awarded against Mbaeroko in favour of ICML and NBSI.

Applications of both defendants for order to strike out statement of claim are, in my view misconceived. There are sufficient averments of facts to disclose fraud and in the alternative, conversion and negligence.

Mbaeroko has averred, among other facts, the following facts. That it owned the timber logs that were sold by ICML by authority of court orders which required that the proceeds be paid into joint interest bearing trust accounts of solicitors of Mbaeroko and ICML. That both defendants knew that and further knew when ICML shipped the logs that the proceeds would not be available to be paid into the joint trust account of the solicitors, but to pay for money that had been advanced by NBSI to ICML. That NBSI amended the letters of credit in which Mbaeroko was named as payee and stated that ICML was the payee; NBSI did not get permission of Mbaeroko. The whole text discloses knowledge and deliberate action on the part of the two defendants aimed at selling the logs in circumstances that the proceeds would not be available to Mbaeroko, and in particular to discharge the debt that ICML owed to NBSI. Fraud and conversion have been disclosed. On the alternative of negligence, Mbaeroko has averred that it was a customer of NBSI and that NBSI owed duty to ensure that Mbaeroko received the proceeds of sale of the consignment of logs or that NBSI consulted Mbaeroko before it deleted its name from letter of credit, NBSI made amendment to remove Mbaeroko as payee in letter of credit without permission or notification to Mbaeroko. The averments disclose negligence as cause of action. The rest is a matter of evidence at trial. Mbaeroko will have to prove the averment by evidence. The statement of claim may be too wordy, but it discloses in bits here and there, the necessary causes of action. Learned counsel Mr. Patrick for NBSI made excellent submission on the law of particularising fraud, but the facts averred by Mbaeroko do meet the requirements of the law that Mr. Patrick elaborated. Both applications of ICML and NBSI to strike out the statement of claim are dismissed. Costs of those applications are awarded to the plaintiff in any event.

The application of NBSI to amend defence was not opposed, it is granted. Costs of it to be in the cause.

It is necessary to get back pleadings on track. I think the great numbers of affidavits and exhibits attached to them will unnecessarily increase the volume of what are necessary in the pleadings and that will be included in the bundle of pleadings for trial. It is ordered that all papers filed in support of the three applications be excluded from the pleadings, which must now proceed in the normal course in accordance with the Rules. The 3 summonses and this judgment may be included in the bundle for trial.

Dated this 25th day of August 1997
At the High Court
Honiara.

Sam Lungole-Awich
Judge