Isabel Timber Company Ltd v Huhurangi Enterprises [2001] SBHC 100; HC-CC 019 of 2001 (21 March 2001)

HIGH COURT OF SOLOMON ISLANDS

CIVIL CASE NUMBER 19 OF 2001

ISABEL TIMBER COMPANY LIMITED

-V-

HUHURANGI ENTERPRISES & MARVIN BROS TIMBER COMPANY LIMITED

HIGH COURT OF SOLOMON ISLANDS
(PALMER J.)

HEARING: 16th March 2001
JUDGMENT: 21st March 2001

A & H Lawyers for the Plaintiff
G. SuriI for the Defendants

PALMER J. There are two applications for consideration before me. One is an application by the Plaintiff, by Amended Notice of Motion filed 13th March 2001, for inter alia, restraining orders against the First and Second Defendants (hereinafter referred to as “the Defendants”); the other is a Notice of Motion by the Defendants filed 2nd March 2001, for orders inter alia, that the Plaintiff’s Writ and Statement of Claim be struck out as disclosing no reasonable cause of action and or is frivolous or vexatious. Both applications are somewhat interrelated and hence have been heard together. In dealing with the application of the Plaintiff, this Court indirectly will also be dealing with the application of the Defendants.

Plaintiff’s Notice of Motion:

It is crucial in this application and a fortiori, because of the Defendant’s counter application, that the Plaintiff establish as triable issue, that there are legal or equitable rights which have been infringed or threatened to be invaded by the Defendants. This is what is termed as “serious or triable issues” in the oft-quoted case, American Cyanamid Co. v. Ethicon Ltd [1975] UKHL 1; [1975] AC 396. Once that question is answered in the affirmative, the question of validity or invalidity of those rights is a matter, which normally would be considered at trial.

So what right or rights is the Plaintiff seeking to rely on? According to the two affidavits in support of Teo Siak Kui (“Teo”), filed on 26th February, (hereinafter referred to as “Teo’s first affidavit”) and 14th March 2001 (hereinafter referred to as “Teo’s second affidavit”), the Plaintiff relies on a Timber Rights Agreement executed on 2nd August 1991 (hereinafter referred to as “the TRA”), and a Timber Licence No. TIM 2/32 (“the Licence”), issued on 29th October 1991 (see Exhibit “TSK 3” of Teo’s first affidavit) as granting it exclusive timber rights over the land described as Lot LR 689 (“LR 689”) in the Havulei/Kokota Ward, Isabel Province, for logging purposes (felling, extraction and export of timber) (see also paragraph 2 of Teo’s first affidavit).

In paragraph 3 of same affidavit, Teo identifies the names of persons who signed as “trustees and representatives” of LR 689. These were: Simon Haile, Edmond Fina, Peter Kodere, Edmond Mare, Veronica Judy, and Allan Rerena. Their names and signatures can also be seen at pages 14 and 15 of the TRA. Interestingly though, the very next page after that TRA, is a list of names of “Landowners, Representatives of Landowners or Trustees of Landowners” identified as the persons it seems, entitled to grant timber rights over LR 689. That list however differs from those who signed the TRA, in so far as only Simon Haile is listed as one of those landowners. The other three, Ellison Tena, Hugo Turabela and Ben Bao did not sign. The timber licence relied on also did not mention LR 689 specifically, but did give a general licence which covered the area in which said land is situated, described as “Hograno, Havilei/Kokota and Kia/Katova”. The Plaintiff claims, that licence is inclusive of LR 689.

In the Amended Statement of Claim filed on 13th March 2001, at paragraph 7, the Plaintiff further alleges that the TRA was signed for and on behalf of the registered trustees of LR 689, or in the alternative, as authorized agents of the said trustees. At paragraphs 10 - 14 of same Amended Statement of Claim, further claims of customary delegation of power are pleaded.

At paragraphs 16 - 17, it is further pleaded that the Harvesting Licence issued by the Commissioner of Forests (“Commissioner”) and relied on by the Defendants is void in law. In the alternative, the Commissioner was negligent in issuing a conflicting licence, knowing full well, the existence of the Plaintiff’s Timber Licence.

THE DEFENDANTS SUBMISSIONS

In contrast, the Defendants filed two affidavits, one by Ling Chung Kok (“Ling”), filed 1st March 2001, and the other by Baddeley Gada and Jason Maro, filed 15th March 2001. The Defendants have sought not merely to oppose the application for interlocutory injunction, but have gone further to assert inter alia, that there is no reasonable cause of action disclosed in the pleadings. In Ling’s affidavit, he points out that LR 689 is registered land and had been registered under the Land and Titles Act (Cap. 133) as Parcel No. 089-002-2 (see Exhibit “LCK 1” annexed to the affidavit of Ling). Current registered joint owners of the Perpetual Esate in said Parcel are James Tikani, Deborah Turapago, Ben Bao, Simon Haile and Edmond Mare. Prior to this, at entry no. 2 of said land register, persons registered as joint owners were Ellison Tena, Hugo Turabela, Ben Bao and Simon Haile. The Defendants claim competing landowner agreement dated 16th May 2000 (see Exhibit “LCK 3”) and Harvesting Licence No. A10023, issued on 24th August 2000 (see Exhibit “LCK 4”).

The Defendants basic assertion, is that, the TRA relied on by the Plaintiff is invalid by virtue of section 200(2)(a) of the Land and Titles Act. They allege that at time of signing of the TRA on 2nd August 1991, there were only two surviving joint owners, Ben Bao and Simon Haile (not disputed it seems). The affidavit material adduced by the Plaintiff showed that only one joint owner signed. According to section 200(2)(a), this would be insufficient to dispose of any interest vested in both joint owners. That TRA accordingly was fatally flawed and the licence subsequently issued suffering the same fate.

SERIOUS ISSUE

Is there a serious issue to be tried? How serious is serious? In Mother-care Ltd v. Robson Books Ltd. [1979] F.S.R. 466 at 474, Sir Robert Megarry V.-C said:

“The prospects of the plaintiff’s success are to be investigated to a limited extent, but they are not to be weighed against his prospects of failure. All that has to be seen is whether the plaintiff has prospects of success which, in substance and reality, exist. Odds against success no longer defeat the plaintiff, unless they are so long that the plaintiff can have no expectation of success, but only a hope. If his prospects of success are so small that they lack substance and reality, then the plaintiff fails, for he can point to no question to be tried which can be called ‘serious’ and no prospect of success which can be called ‘real’.

Also in Alfred Dunhill Ltd v. Sunoptics S.A. [1979] F.S.R 337 at 373, Megaw L.J. said:

“It is irrelevant whether the court thinks that the plaintiff’s chances of success in establishing liability are 90 percent or 20 percent.”

Is the Plaintiff’s case hopeless, his prospects of success so small that they lack substance and reality; that it can be said he can have no expectation of success, but only a hope? Is the Plaintiff’s case more than weak, as sought to be submitted, by learned Counsel, Mr Suri for the Defendants?

What has the Plaintiff to show for its cause of action? It has demonstrated on the affidavit material before this Court that it holds a current timber rights agreement purportedly signed, or made on behalf of the joint owners of LR 689 and a current timber licence issued by the Commissioner of Forests (“Commissioner”) over same land. It has demonstrated on evidence that the rights it purports to hold in respect of its Licence had been violated and continue to be threatened by the actions of the Defendants. In contrast, the Defendants have sought to attack the validity of that TRA and consequentially the validity of the Licence under section 200(2)(a) of the Land and Titles Act (Cap. 133). Their argument is based on the ground that at the time of signing of the TRA, being 2nd August 1991, there were two joint owners, Simon Haile and Ben Bao, living and able to dispose of the timber rights over LR 689. Unfortunately, only one, Simon Haile signed. Mr Suri submits the TRA accordingly was defective. In answer to that contention, the Plaintiff had pleaded in its Amended Statement of Claim issues of trusteeship or representation in custom and issues on agency. How these will affect or relate to the issues of law under section 200(2)(a) raised by the Defendants are matters which normally would be argued at trial after all relevant evidentiary material had been produced. Whether the execution of the TRA by other members of the Makara Tribe apart from Ben Bao and whether such action would be sufficient to divest timber rights over LR 689, a registered land are arguable matters. I cannot say at this stage that those issues of law are hopeless, and have no expectation of success. It is not the case where the Plaintiff holds and is relying on a worthless piece of TRA and Licence. That question will be decided at the appropriate time. The maxim “omnia praesumuntur rite et solemniter esse acta” [all acts are presumed to have been done rightly and regularly] applies to the TRA and Licence relied on by the Plaintiff at this stage. What this simply means is that they are valid until declared invalid. Whether his chances of success at this stage are not good is immaterial. That will be determined at trial. It is sufficient that the Plaintiff demonstrates on the pleadings and affidavit material filed to date that it has an arguable case before this Court. The test is triable issue with prospects of success, not prospects of failure. The fact there is a high prospect of failure in view of the effect of section 200(2)(a) is insufficient for striking out the Plaintiff’s claim as not disclosing any reasonable cause of action. I note also that at paragraphs 16-18 of its Amended Statement of Claim, the Plaintiff seeks to attack the validity of the Defendants Harvesting Licence. It is not merely the Plaintiff’s licence therefore that is at stake in this claim but that of the Defendants. Clearly these show that there are serious issues to be tried before this Court. The issue of law raised by the Defendants is not only one of the issues which this Court would have to address at the end of the day, but also reinforces the existence of a serious issue for determination before this Court. The Plaintiff has demonstrated it holds a current licence, which if upheld by this Court would be to the exclusion of the Defendants. Even if it is weak, it is still an arguable case and to that extent, I am satisfied the test of serious issue or triable issue, had been fulfilled by the Plaintiff.

THE DEFENDANTS’ NOTICE OF MOTION.

What implication does this have on the application of the Defendants? In my respectful view, the above finding must result in a denial of the Defendant’s application at this stage of the proceedings. What the Defendants are in fact asking the Court to do at this stage of proceedings, without full and proper legal arguments, is to make findings on important issues of law and making consequential orders which would have wide ramifications. Mr Keniapisia, Counsel representing the Commissioner, has not been able even at this stage to present any submissions on the issues of law raised by learned Counsels in these applications. I am satisfied the Plaintiff’s claim discloses reasonable cause of action and that it is not frivolous or vexatious.

Defendants had also sought to argue on grounds of privity that there is no cause against the Defendants. Unfortunately, that is not entirely correct. The rights, which the First Defendants claim, are the very rights, which the Plaintiff claims had been transferred to it and therefore the First Defendant cannot transfer what it does not have to the Second Defendant. These raise arguable issues of law. If the Plaintiff’s claim should be upheld at the end of the day, it will have direct impact on the First Defendant’s agreement and Second Defendant’s licence. Orders sought in the Defendants Notice of Motion declined.

DAMAGES AN ADEQUATE REMEDY.

The question normally asked is whether, if the Plaintiff were to succeed at trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant’s continuing to do what was sought to be restrained between the time of application and time of trial. If damages in the measure recoverable at common law would be adequate and the Defendants would be in a financial position to pay, no interlocutory injunction should normally be granted, however strong the plaintiff’s claim might appear to be at that stage.

As against the First Defendant, the Plaintiff sues for specific performance and damages for breach of contract. On one hand, the Plaintiff is entitled to ask this Court for an order for specific performance in the case of a grant of timber rights. On the other hand, it must be borne in mind, that specific performance will not necessarily be granted because damages are not an adequate compensation. Specific performance is a discretionary remedy. I also note that it would seem that the First Defendant would not have the financial means to be able to meet even any claim for damages that the Plaintiff may at the end of the day, be entitled to if it should win its case. The scale would seem to tilt slightly in favour of the Plaintiff.

As against the Second Defendant, the Plaintiff claims permanent injunction and damages for trespass. The reason for that permanent injunction, is to seek to protect the right to fell, extract and export logs from LR 689. Its’ worth, is the value of the Licence it holds. Is this quantifiable in damages, should it win its case at the end of the day, if no injunction is granted? The answer, with respect must be in the affirmative.

Would the Second Defendant be in a financial position to meet that loss; again I must answer this in the affirmative. I find insufficient grounds to conclude otherwise, at this point of time. The scale here tilts in favour of the Second Defendant.

The second question to be considered is if, on the other hand, damages would not provide adequate remedy for the plaintiff in the event of his succeeding at the trial, whether any losses to be sustained by the Defendants if they should be restrained, and they win their case at the end of the day, be adequately compensated under the undertaking for damages of the Plaintiff and that it would be in a financial position to pay them. If so, no interlocutory injunction should be refused. The first part I’ve dealt with in the first question. The second part I accept would have to be answered in the affirmative. However, I do not find that this takes the matter on injunction any further.

The third criterion for consideration, is the question of balance of convenience, more correctly, the ‘balance of the risk of doing an injustice’ or ‘the balance of justice’ (see Cayne v. Global Natural Resources plc [1984] 1 All E.R.225 at 237; Francome v. Mirror Group Newspapers [1984] 1 W.L.R. 892 at 898). This is not an easy task for any Court at this point of time because of the opposing claims and views. One of the factors courts consider under this criterion is the question of status quo. But again this also differs between the parties. The Plaintiff places the status quo at the time prior to the invasion of its rights, whilst the Defendants place it at the time of its operations, and that to restrain it now would cause so much more inconvenience and loss. I find little assistance here in tipping the scale either way.

The criterion of last resort is the relative strength of each party’s case on the affidavit evidence before me. Here I find the scale tipping in favour of the Defendants and thus ultimately assisting, in making the final decision in refusing the application for interlocutory injunction against restraining the logging activities of the Defendants. This of-course is based on what is before this Court and the submissions of learned Counsels at this point of time. It might turn out otherwise, at the end of the day, when full and proper argument and evidence is heard. Orders 1, 2, and 3 sought in the Amended Notice of Motion of the Plaintiff, are denied. Under paragraph 4 of the same Motion, I direct that 20% of the gross proceeds of each log shipment to be restrained and paid into an interest bearing deposit account in the joint names of Counsels for the Plaintiff and Defendants at the National Bank of Solomon Islands Limited. I am satisfied the interests of justice in this case will be served and maintained pending determination of the outstanding issues in this case with such an order.

The First, Second and Third Defendants to file their defences within 8 days. Pleadings to continue in the normal way thereafter. Counsels may also wish to take advantage of the provisions of Order 27 Rule 2 and consider whether any points of law can be determined by this Court before trial, which would hasten the disposal of this case.

ORDERS OF THE COURT:

1. Refuse orders sought in paragraphs 1, 2, and 3 of the Amended Notice of Motion filed 13th March 2001.
   
2. Order that 20% of the gross proceeds of all log shipments from LR 689 to be restrained and paid into an interest bearing deposit account at National Bank of Solomon Islands Limited in joint names of Counsels for the Plaintiff and the First and Second Defendants.
   
3. Grant leave to First and Second Defendants to proceed with application for striking out of the Plaintiff’s Writ of Summons and Statement of Claim.
   
4. Dismiss application for striking out of the Plaintiff’s Writ and Statement of Claim.
   
5. Costs in both applications to be costs in the cause.
   

THE COURT