Eastern Development Enterprises Ltd v Isabel Timber Company Ltd [1999] SBHC 78; HC-CAC 005 of 1999 (12 August 1999)

lass="MsoNormaNormal" align="center" style="text-align: center; margin-top: 1; margin-bottom: 1"> HIGH COURT OF SOLOMSOLOMON ISLANDS

Civil App. No. 005 of 1999

EASTERN DEVELOPMENT ENTERPRISES LIMITED

v

p clas class="MsoNormal" align="center" style="text-align: center; margin-top: 1; margin-bottom: 1"> ISABEL TIMBER COER COMPANY LIMITED

In the High Court of Solomon Islands
(FRANK KABUI, J.)
Civil App. No. 005 of 1999

ring: 11^th August 1999
Judgment: 12t: 12^th August 1999

ass="Mss="MsoNormal" style="margin-top: 1; margin-bottom: 1"> G. Suri for the Appellant
P. Tegavota for the Respondent

RULING

(Frank Kabui J.):- The Notice of Motion filed by the Applicant on 20^th July 1999 sought a Court Order that the execution and further proceedings on the interlocutory injunction Order of the High Court dated 10^th June 1999 be stayed pending the Applicant’s appeal to the Court of Appeal. The Notice of Appeal was dated 15^th June 1999. An Amended Notice of Motion was later filed by the Applicant on 5^th August 1999 amending the first Notice of Motion. The Amended Notice of Motion sought as an alternative to the requested Order sought in the first Notice of Motion a Court Order that the undertaking as the condition for the granting of the interlocutory injunction referred to above, be varied to the extent that the undertaking be in the form of a bank guarantee for the payment of the sum of $5 million in lieu of a bare undertaking. The Amended Notice of Motion contains all the Orders sought by the Applicant. They are as follows:-

“1. “1. that the execution and all further proceedings on the interlocutory injunction order of the High Court dated the 10^th day of June 1999 be stayed until the appeal therefrom of which the Applicant/Defendant has given notice of appeal dated 15 June 1999 shall have been heard and decided.

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2. th2. that alternatively, the order for undertaking be varied so that the First Defendant provides bank guarantee as security in the amount of $5 million dollars in lieu of a bare undertaking.

3. And an order that that the costs of this application abide the result of the appeal.

4. Further or other orders aers as the Court deems meet.”

Stay of execution of the iocutory injunction

class="Mss="MsoNormal" style="margin-top: 1; margin-bottom: 1"> Mri, Counsel for the Applicant, argued that because of the efhe effect of rule 11(5) of the Court of Appeal Rules 1983 (L.N. N. 66183), it was necessary for his client to apply for a stay of the interlocutory injunction Order made by Pal J, on 10^th June 1999 as an appeal was pending against that Order. Mr. Suri argued that in the absence of a staying Order as requested, his client would suffer enormous loss in terms of costs that would be incurred up until the appeal was heard. In support of this argument, Mr. Suri referred to Exhibit “RT3”, attached to Mr. Tiang’s affidavit filed on 20^th July 1999 which stated the monthly cost of maintaining machinery, buildings, roads and the camp site was $842,143.94. However, Mr. Suri qualified this figure as being an estimate only but maintained that whatever the cost would be, it would be substantial indeed against his client. Mr. Suri further argued that should his client succeed in its appeal, any cost incurred up to that time would not be recoverable although his client would be mindful of mitigating its losses. Mr. Suri pointed out that there was no evidence to show that the Respondent would be capable of meeting such costs in the event that his client should win its appeal. Also, Mr. Suri argued that in any event, the Order made by Palmer, J. on 10^th June 1999 did authorise the payment of 10% of FOB value of log proceeds to be paid into an interest bearing deposit account in the names of the solicitors of the parties an automatic benefit to the Respondent without any sweat. Mr. Suri concluded on this point by suggesting to the Court that in the event that the Court should rule against him on this point, the Court should however vary the undertaking provided by the Respondent to the satisfaction of his client.

r. Tegavota’s response on behalf of the Respondent was simp simple and straight forward. He argued that the fact was that both the Applicant and the Respondent had valid licences and competing with each other. He therefore argued that their rights must be preserved. That is to say, the status quo must be maintained for the benefit of both parties. Mr. Tegavota then argued that the provisions of the Court of Appeal Act (Cap. 6) as read with rule 11(5) of the Court of Appeal Rules above would seem to suggest that only a single judge of the Court of Appeal could order a stay of execution and not a High Court Judge. He concluded that because of this, I as a High Court judge would not be able to order a stay of execution of the interlocutory injunction order made by Palmer, J. on 10^th June 1999.

lass="Mss="MsoNormal" style="margin-top: 1; margin-bottom: 1"> g on the stay of execution requested by the Applicant

In my view, Rule 11 of the Court of Appeal Rules above governs erns the application for special conditions at any time after filing the notice of appeal. Rule 11 states:-

lass="Mss="MsoNormal" style="margin-left: 36.0pt; margin-top: 1; margin-bottom: 1"> “(1) At any time after the filing of the notice of appeal or application, any party may apply to the Registrar to impose such special conditions precedent, whether as to giving deposit, or security for damages with the Court or for staying execution, or giving undertakings to the Court or making such other interim orders to prevent prejudice to the claims of any party pending the determination of the appeal or otherwise.

(2) An application under this rule shall be made by notice of motion supported by affidavit and the notice shall be served not less than two days before the return date.

(3) The Registrar may impose such such special conditions.

(4) Notwithstathstanding the generality of the foregoing, the Court or a judge may at any time impose such conditions precedent on an appeal or the continuation thereof as the Court sees fit, in the interests of justice, to impose.

(5) Except so faso far as is otherwise ordered under this rule or by the Court or a judge:-a) an appeal shall not operate as a stay of execution or a stay of any proceedings pursuant to a decision of the High Court; andb) no intermediate act or proceeding shall be invalidated by an appeal.

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(6) .......................................................”

It can therefore be seen that because of the effect of sub-rule 5, an application for special conditions such as for stay of execution must be made to the Registrar of the Court of Appeal under sub-rule 1 by notice of motion. By virtue of section 8 of the Court of Appeal Act (Cap. 6), the Registrar of the High Court of Solomon Islands shall be the Registrar of the Court of Appeal. However, sub-rule 4 does not seem to exclude any application under sub-rule 1 being made to a Judge of the Court of Appeal. Both sub-rules 4 and 5 do seem to me to permit any staying order being made by a judge of the Court of Appeal under rule 11 or independently of it. In terms of section 85(2)(b) of the Constitution, a puisne judge of the High Court of Solomon Islands shall be a judge of the court of Appeal ex officio. That being so, I am entitled to hear any application such as this present application. As correctly pointed out by Mr. Suri, judges of the High Court of Solomon Islands have sat on many occasions as members of the Court of Appeal to hear applications pertaining to appeals to the Court of Appeal. Turning now to the point to be decided in this case. The question is can an interlocutory injunction be stayed pending an appeal? The principle in general is that a Court would not deprive a litigant who succeeds the fruits of his or her litigation and thus lock up moneys due to the litigant pending appeal (See The Annet Lyle [1886] UKLawRpPro 31; (1886) 11 P.D. 114 at 116). As against this principle is the opposing principle that when a party appeals, that is an exercise of a right to do so and a Court ought to order a stay of proceedings even if the appeal, if successful, would be pointless in the absence of a stay of proceedings. (See Wilson v Church (No. 2) (1879)12 Ch. D.454 at 458). The weighing scale is therefore the discretion of the Court, the weights being the evidence on both sides (See Solomon Islands Plantations Ltd v Commissioner of Inland Revenue Civil Case No. 12 of 1998 (unreported). Whilst these opposing principles have been discussed in the context of tax appeal cases elsewhere and in this jurisdiction as above, they have not been so discussed and applied in any appeal cases against interlocutory injunction Orders. I believe this is the first time, this point has arisen in this jurisdiction in the context of an Order being sought to stay an interlocutory injunction pending an appeal. In this case, the injunction was conditional upon the undertaking by the Respondent to abide by any Order the Court makes as to damages. The undertaking was filed in the High Court on 6^th July 1999 twenty-nine days after Palmer, J. made the Order on 10^th June1999. The interlocutory injunction took effect from that date. The injunction remains in force until it is earlier lifted or until the trial to determine the rights of the parties has been concluded by the entry of a judgment against one of the parties to the dispute. As a matter of fact, I do not understand the effect a staying order would have on an injunction that is already in force. It continues in force until lifted by the Court. It is a self-executing interlocutory injunction that needs no further execution. It cannot be stayed. It can however be lifted, spent or set aside. The purpose of the imposition of the interlocutory injunction was to maintain the status quo between the parties pending the trial of the issues between them. In practical terms, it makes no sense to-ask the Court for an Order to stay the execution of the interlocutory injunction in this case. I can find no authority which supports the Applicant on this point.

t is to say an authority which says that an injunction can can be stayed pending an appeal if the circumstances of the case should permit it. I therefore refuse to make the order sought by the Applicant.

Variation of the Undertaking

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Mr. Suri’s position in this matter was that if the Court should refuse to make an Order to stay the execution of the interlocutory injunction then the Court should vary the undertaking provided by the Respondent. Mr. Suri however conceded that the sum of $5 million mentioned in paragraph 7 of Mr. Tiang’s affidavit filed on 20^thJuly 1999 was an estimate only and the Court was at liberty to choose a lesser sum at the Court’s discretion. The sum was based upon a calculation of the sum of $842,142.94 in Exhibit “RT3” referred to above against 6 months, the period it takes the appeal to be heard and emerging with the figure of $5 million. Mr. Tegavota, Counsel for the Respondent, in opposition, argued that whilst the Court was permitted to set aside any judgment under Order 13, rule 8 of the High Court (Civil Procedure Rule) 1964, the Court should be mindful of the fact that the costs enumerated in Mr. Tiang’s affidavit above in Exhibit “RT3” were only rough estimates. Mr. Tegavota further pointed out that the sum of $842,143.94 in Exhibit “RT3” was maintenance cost per month which was unnecessary and was a poor guide in this case. He argued that the Applicant must mitigate its losses in a situation such as this.

Ruling on the requested Variation

It is clear from the content of Exhibit “RT1” to Mr. Tiang’s affidavit above, being a letter written by Mr. Suri, addressed to the General Manager of the Respondent that the undertaking filed on 6^th July 1999 by the Respondent was inadequate or simply put, a “bare undertaking” and therefore was not acceptable to the Applicant. The Respondent’s response was that Exhibit “RT2” attached to Mr. Tiang’s affidavit above wherein the Assistant General Manager of the Respondent said that the undertaking was a valid one was signed by the General Manager of the Respondent. As stated at pages 436 - 437 in EQUITABLE REMEDIES Injunctions and Specific Performance, I.C.F. Spry, First Edition, 1971.

As regards the matter of sufficiency or otherwise wise of an undertaking, the author at page 438 - 440 says

“.......If, moreover, the, there is a substantial doubt whether the defendant will be sufficiently protected by the undertaking of the plaintiff himself, the court may see fit to require that it be given by some other person. Thus although generally an undertaking by a company or by its liquidator, as the case may be, will be regarded as sufficient, yet in exceptional circumstances, such as where the company does not satisfy the court as to the sufficiency of its assets, the undertaking of an officer of the company or of some other responsible person may be required. On principle, indeed, there is no reason why a similar requirement should not be made, if the court considers it appropriate, wherever the plaintiff, although not a company, is shown to be in such circumstances that his personal undertaking may not sufficiently protect the defendant. Thus, for example, where a plaintiff is outside the jurisdiction an undertaking will generally be required to be provided by a person within the jurisdiction, such as by his solicitor. Indeed, the preferable view appears to be that as to the sufficiency of particular undertakings the court does not consider itself to be bound by definite rules, and that in every case it will require the particular undertaking which appears to be most appropriate by reference to the balance of justice between the parties and the probability with which it appears that the plaintiff will ultimately succeed at the final hearing, and especially with a view to enabling adequate final relief to be given.

as class="MsoNormal" style="margin-left: 36.0pt; margin-top: 1; margin-bottom: 1"> The general considerations whic which govern the giving of an undertaking as to damages where appropriate often lead to the imposition of other conditions upon the plaintiff. Thus a question may arise whether he should be required, not only to make an appropriate undertaking as to damages, but also to lodge an amount as security, or to undertake to do so, in order that the satisfaction of any order as to damages or otherwise may be ensured.

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Indeed, it apit appears that wherever there is a substantial doubt as to the ability of the plaintiff to provide the amount of damages that he may be obliged to pay pursuant to his undertaking he may, if it appears to be desirable to do so, be required to lodge security as a condition of the grant of relief, either because on the balance of convenience no other order in his favour would be fair and reasonable, or else because the court regards it as in any case desirable that it should be enabled to do justice recompensing the defendant should the case so require.

…Indeed, the power of the court, whether in its exclusive or auxiliary jurisdiction, to require an undertaking of any kind from the plaintiff or to impose any condition before granting an interlocutory injunction is very wide, and is not limited to particular classes of undertakings or conditions; and as has been seen already, it may be exercised, not only wherever the balance of convenience would otherwise be found to incline against the grant of relief, but also if the giving of an undertaking or the imposing of a condition of the kind in question is of material effect in enabling the court more easily to do justice between the parties in subsequent proceedings. Thus the precise conditions or undertakings which will be considered appropriate in any particular case depend upon the circumstances in question and, especially, upon the balance of convenience as between the parties.”

What then is the position in this case? The basis of the Applicant’s doubt over the credibility of the undertaking was clearly explained in Exhibit “RT1” attached to Mr. Tiang’s affidavit above. That is to say, the undertaking had not been signed by the Respondent’s Solicitor, the identity of the person who signed it was not clear as to whether or not it was a personal undertaking or the Respondent’s undertaking and that it was a bare undertaking on behalf of the Respondent. As I have said, these points were answered in Exhibit “RT2” attached to Mr. Tiang’s affidavit above. That is to say, the Court Order stated clearly that the undertaking was to be provided by the Respondent, that it had been signed by the General Manager of the Respondent and that the Applicant’s allegation that the undertaking was a bare undertaking was not consistent with the Court Order made by Palmer J. on 10^th June 1999. It should however be noted that the Applicant had never said why the undertaking was inadequate and insecure. There was no evidence to suggest that the Respondent had no financial ability to meet its undertaking at the relevant time. It was obviously an allegation based upon the $5 million estimate in Exhibit “RT3” attached to Mr. Tiang’s affidavit above. The items of cost and their stated costs in Exhibit “RT3” were estimates only. The details of these costing and their supporting documents were lacking. They were vague and imprecise. Also, these costings were not the assessment of damages envisaged by the undertaking on the interlocutory injunction. The true assessment of damages will be done at the end of the trial of the issues between the parties if necessary. In my view, the Applicant’s allegation that the undertaking was inadequate was premised on its estimation of cost set out Exhibit “RT3” referred to above. The allegation had a punitive element in it for obvious reasons. If there was any ring of truth in the allegation, why had it not been raised by the Applicant before Palmer, J. on 10^th June 1999? That would have been the appropriate time to raise it. It is now too late to do so when the whole of the Order made by Palmer J. is being appealed by the Applicant. If the Applicant succeeds in its appeal, the whole of the Order would be set aside and disappears. What the Applicant should now do is to speed up the trial of the issues between the parties so that the interlocutory injunction can be spent as soon as possible and minimise any costs to the Applicant. I therefore refuse to make the alternative order requested by the Applicant. Even if I were to decide this point alone on the evidence before me, I would still refuse the Application on the ground that there was no evidence of the Respondent’s inability to honour its undertaking filed on 6^th July 1999 thus calling for a variation. The Application is therefore refused.

Cost be cost in the appeal.

F.O. Kabui
Judge