Shell Company (Pacific Islands) Ltd v Daoga - Judgment 2 [2000] SBHC 39; HC-CC 018 of 2000 (17 October 2000)

HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 018 of 2000

SHELL COMPANY (PACIFIC ISLANDS) LTD

-V-

FRANK HARRY DAOGA

High Court of Solomon Islands
(LUNGOLE-AWICH, J)

Hearing: 12 October 2000
Judgment: 17 October 2000

Ms Loa Tepai for the Plaintiff

JUDGMENT

(LUNGOLE-AWICH, J):. This afternoon I handed down an order to show cause why court order charging a 50 years fixed term estate in land Parcel 191-001-164, of Frank Harry Daoga, a judgment debtor and respondent, should not be made on the application of Shell Company (Pacific Islands) Limited, the judgment creditor and applicant. An order to show cause why shares and stocks in public companies or estate in land, of a judgment debtor should not be charged is an order nisi; it operates as an interim injunction order restraining the judgment debtor from disposing of or dealing with his shares, stocks and estate in land in any way inconsistent with the charging order until the return date of the order nisi or unless the order has been discharged. The main effect of the order is that it puts the debtor on notice that unless on the return date he shows good reason, his property charged in the interim will be charged absolutely with the judgment debt. In the order I made, the Registrar of the High Court was to assign the return date of the order nisi. Following that, the applicant was to serve the judgment debtor as well as the Registrar of Titles with the order nisi and all the application papers. The Register of Fixed Term Estates showed that the fixed term estate of the debtor had been charged with sums lent by the Development Bank of Solomon Islands. I ordered that the order nisi be served on the Bank as well. It has legal interests which rank prior to the equitable interest created by the charging order nisi.

The applicant filed the application for charging order together with application for substituted service of the order to be made. The general rule is that a charging order nisi must be served on the debtor personally if he is a natural person, but may be served at an address nominated in the memorandum of appearance if appearance had been entered. In this case appearance was not entered, judgment was obtained because of the default to enter appearance. In view of the deposition that the respondent's house was under guard by armed men in uniform, I granted the application for substituted service and ordered that the order nisi to show cause may be served on the respondent by registered mail and by radio service message.

I have considered it necessary to write a full judgment because charging order is rarely used in the execution of judgment debt in this jurisdiction. This is only the second time I have made the order in six years, and I have seen only one other judgment about it, the detailed judgment dated 9.5.2000, of my learned brother, Kabui J, in Vanuatu Abattoirs Limited -v- Livestock Development Authority, HC-CC 184 of 1999. It will be of some assistance to the newer members of the bar to have an outline of the law regarding charging order and of the procedure to apply for the order. Of course more detailed judgments will come with time when occasions for them arise.

A charging order is made to charge shares or stocks in public companies or estate in land with a judgment debt so as to secure and subsequently collect the judgment debt in which the sum of money owed has been specified. No legislation in Solomon Islands has yet been made about charging order, so our law is, for now, in section 35 of the Administration of Justice Act, 1956, of England, which applies by authority of section 1 of Schedule 3 of the Constitution of Solomon Islands. The schedule is made under section 76 of the Constitution. The Administration of Justice Act 1956, of England, is an Act of general application and was in operation on 1.1.1961, the date of adoption in Solomon Islands of some laws from England.

Again the law about the procedure and practice in making application in our Court for a charging order has not been provided for in our High Court (Civil Procedure) Rules. By authority of Order 71 in our Rules, our Court is authorised to apply a particular law of procedure and practice in force for the time being in the Superior Courts in England when our Rules do not provide one. The rules and practice in England about making application for charging order is in their Order 46 of their Rules. Our Court applies the law in that Order. My learned brother Kabui J has stated the authority in great detail in the Vanuatu Abattoirs Limited -v- Livestock Development Authority case cited above.

A judgment creditor usually applies for a charging order to charge shares and stocks in public companies or estate in land of a judgment debtor because the creditor or sheriff on his behalf, will have failed to obtain payment from the debtor on the judgment debt and will have failed to identify moveable assets sufficient to satisfy the debt, and it has become known that the debtor has shares or stocks in public companies or an estate in land which the judgment creditor could have charged and if need be, could subsequently sell to satisfy the debt. It is important that the creditor acts quickly and before the debtor has been alerted so as to avoid the debtor disposing of his interest thereby avoiding the charging order and possible subsequent sale. That is the reason for allowing the creditor to come to Court ex parte in the first place, to obtain an order against the debtor to show cause why his interest in the shares, stocks or estate in land should not be charged with the debt, and to secure the interim injunction that attaches to the order to show cause. The shares and stocks chargeable are those in public companies, not in private companies. I suppose that is because shares in private companies almost always are subject to restrictions in transfer.

The debtor must of course be given the opportunity to put his case, if any, to the court, why the charging order should not be made. That opportunity is provided on the return date of the order to show cause when both the creditor and the debtor are heard inter partes after which the court decides to make the order absolute or to discharge the order nisi. It is therefore imperative that the debtor is served with the order to show cause and the application papers filed by the creditor. The papers are usually the summons application, the supporting affidavit and the judgment, the foundation of the charging order. The person holding the shares or stocks and the public company, and in the case of land, the Registrar of Titles, are also to be served, but their attendance at court on the return date is not necessary unless they are aware of other interests in the property or are aware of any reason which makes the granting of the charging order absolute unjust. If they chose to attend when there is no need, they are not entitled to costs.

In this application the affidavit filed has clearly identified the judgment debt in the judgment dated, 19.4.2000, entered by the Registrar, following default of the debtor to file memorandum of appearance. The judgment was for ascertained sums being: $35,183.74, the principal, $370.10 interest and $180 costs. The judgment creditor sued out a writ of fieri facias (fi fa) and instructed the Sheriff to collect the judgment debt. Despite demand by the Sheriff, the debtor did not pay on the writ and the debt remained owing on the date the application was presented to the Court, and still remains owing. The judgment debtor has identified a 50 years fixed term estate of the debtor in land Parcel 191-001-164, a certified copy of the relevant page of the Register of Estates has been exhibited in proof of the debtor's estate in the land. On the case file there was sufficient evidence to entitle the judgment creditor to an order nisi charging the fixed term estate in land of the debtor. I accordingly made the order nisi, charging the estate of the respondent in Parcel 191-001-164 in the meantime and restraining the respondent from disposing of or dealing with the estate in a way inconsistent with the charging order until the return date. I reserved costs to be considered on the return date when it will be decided whether the order nisi will be made absolute or discharged.

Pronounced this Tuesday the 17^th day of October 2000
At the High Court
Honiara

Sam Lungole-Awich
Judge