Hunn Commercial Expeditorial Enterprises Ltd v KLT Holding (SI) Ltd [2001] SBHC 110; HC-CC 056 of 2001 (3 May 2001)

HIGH COURT OF SOLOMON ISLANDS

CIVIL CASE NUMBER 56 OF 2001

HUNN COMMERCIAL EXPEDITORIAL ENTERPRISES LTD

-V-

K.L.T. HOLDING (SI) LTD, LING KOK WAH AND
MSI IMPORT & EXPORT COMPANY

HIGH COURT OF SOLOMON ISLANDS
(PALMER J.)

HEARING: 1ST MAY 2001
JUDGEMENT: 3RD MAY 2001

G. SURI FOR THE PLAINTIFF
A. NORI FOR THE FIRST DEFENDANT
L. KWAIGA FOR THE SECOND AND THIRD DEFENDANTS

PALMER J. Interim orders were granted on 20th April 2001 pursuant to an ex parte summons filed 19th April 2001. These included the delivery of logging machines and equipment (“the Machines”) to the possession of Plaintiff, and restraining orders for their preservation. The matter was adjourned for inter partes hearing on 1st May 2001. First Defendant (“KLT”) has filed a Notice of Motion to strike out on 30th April 2001 and was also heard on same date.

PLAINTIFF’S CLAIM AGAINST THE FIRST DEFENDANT

The Plaintiff is the holder of a Logging Licence No. 2/40 (Exhibit “EO2” annexed to the affidavit of Elijah Owa filed 10th April 2001) over customary land areas stretching from Kwaleunga River to Kwaifala River in Wards 27 and 28 in West Kwaio (hereinafter referred to as “the Concession Area”). On 2nd October 2000, the Plaintiff engaged KLT as Contractor under a Logging and Marketing Agreement (“the Agreement”) (see Exhibit “EO3”) to undertake logging operations within the Concession Area. Plaintiff relies on that Agreement and claims its terms had been breached (paragraph 21 of Statement of Claim filed 19th April 2001). In particular, the Machines have been removed from the Concession Area exposing about 3,000 m3 of harvested commercial logs and 400 logs in the forest to possible rot and deterioration in value, if not harvested and exported soon (paragraphs 17 - 21 of said affidavit of Elijah Owa). Plaintiff seeks specific performance and damages, for breach of contract.

In its defence, KLT claims it had not breached any terms of the Agreement, arguing essentially on the construction of the clauses relied on by the Plaintiff. For instance, that the right to deploy movement of the Machines remained with KLT, that the Agreement did not specify the list of equipment to be deployed by KLT, it did not specify any quota to be met within a specific period; and any requirements that the logs harvested must be exported within a set time. Unfortunately, the very arguments relied on for striking out support the Plaintiff’s claim that there are serious issues for determination. I am satisfied the question as to whether the terms of the Agreement had been breached is arguable. It is sufficient that Plaintiff has shown on the affidavit evidence so far that the Machines had been removed (para. 13 of affidavit of Elijah Owa). That is consistent with its claim that the Agreement had been breached and that KLT had failed to perform its part of the bargain, and thus entitling it to come to Court to seek orders for specific performance. The question of whether the Agreement had been terminated or not is also arguable. Plaintiff obviously takes the view that whilst Agreement had been breached it is not seeking to have the Agreement terminated rather to enforce it. I am satisfied in the circumstances there is triable issue between the parties.

CLAIM AGAINST THE SECOND AND THIRD DEFENDANTS

Plaintiffs claim against the Second and Third Defendants is for conversion of the Machines and / or inducement to breach the Agreement and / or for intentionally causing economic loss by unlawful means. On conversion, Plaintiff claims an immediate right to possession over the Machines. This claim can only arise from the terms of the Agreement whereby KLT was contracted to carry out the felling and harvesting of the logs in the Concession Area. Clause 2 of the Agreement required KLT to inter alia provide for “all management and sufficient machinery and expertise for the efficient logging operation”. It seems that the Plaintiff thereby claims it had rights of possession over the Machines. Unfortunately, the question of ownership of those Machines and possession is quite clear on the evidence before this Court. Ownership is vested in Kumpulan K.L.T Holdings (M) Sdn. Bhd. and possession in KLT by virtue of lease agreement dated 14th January 2000 (“Lease Agreement) (Exhibit “EO4”). At no time did Plaintiff acquire ownership rights or rights of possession over the said Machines. There is no evidence to show that KLT had at any time transferred possession to Plaintiff. Plaintiff’s right it seems arises from the licence TIM 2/40. That licence gave it right to fell, harvest and export logs in the Concession Area. But because it did not have the expertise and machinery to do this, it contracted this out to KLT. That did not give it any rights over the Machines deployed by KLT. Clause 2 of the Agreement is quite clear as to where responsibility and liability lies with regards to the provision, maintenance and repairs of the Machines. Further, Clause 2 of the Lease Agreement is clear as to the obligations of KLT over those Machines. I am satisfied possession and immediate right to possession over those Machines vested in KLT and none with Plaintiff, when the Machines were removed. The case of Glenwood Lumber Company Limited -v- Phillips [1904] UKLawRpAC 26; [1904] A.C. 405 can be distinguished. The House of Lords dealt with that case on the basis that the respondent had lawful possession of the logs on the land and those removed, by virtue of the fact that he had acquired title over the said land when appellant entered his land to remove the logs. Whilst it was true the respondent did not have licence prior to the felling of the logs by the appellant, that was not the determining issue. The crucial facts demonstrated that on the date (20th January 1899), when title passed from the Crown to the respondent, none of the logs felled by the appellant had yet been removed. The House of Lords held that possession vested on the respondent from that date. This was based on the principle that possession is good against a wrong-doer; the appellant having no right whatsoever from the beginning. Note, the licence respondent held at that time, gave it exclusive right of occupation over the said land.

The second case relied on, The Winkfield [1901] UKLawRpPro 52; [1902] P. 42 (C.A.) can also be distinguished. That case was cited in support of possession by a bailee. The Postmaster-General was placed in the position of a bailee, for mails lost in collision with another ship, where the owners admitted liability for negligence. It was held the Postmaster-General had right to sue the negligent owner for recovery of the loss of the mails. Again the principle that possession is good against a wrong-doer was applied in that case.

Both these cases are distinguishable from the facts in this case in that at no time can it be said the Plaintiff had immediate right of possession to those Machines. The licence it held was a timber licence. It did not include ownership or even any immediate right of possession to the Machines. That right vested at all times in KLT as the contractor engaged to harvest fell and haul logs, until removal of the Machines by the Second Defendant. With respect, I fail to see how the Plaintiff can assert an immediate right to possession over those Machines as a licence holder or as bailee. It is clear from the evidence before this Court that if anything happened to those Machines, KLT is the person solely responsible for any loss or damage, not the Plaintiff. The action for conversion against the Second and Third Defendants accordingly is without basis and ought to be dismissed.

The second and third grounds relied on are very vaguely pleaded. Particulars of any conspiracy to induce breach of contract and for intentionally causing economic loss ought to be separately pleaded. Rather than dismiss them outright, opportunity should be given to have those particulars pleaded, failing which those grounds too ought to be dismissed.

INTERIM ORDERS

In the circumstances there is no basis for continuation of the interim orders save orders (3) - (5) with some variations. The effect of those orders should basically be to require that the logs be marketed in accordance with Clause 5 of the Agreement. The only variation would be to require that all proceeds be paid into the trust account of Solicitors for the Plaintiff and KLT and to be disbursed only by consent of Plaintiff and KLT or by order of the Court.

ORDERS OF THE COURT:

1. Discharge orders 1 and 2 of Ex Parte Orders dated 20th April 2001.
   
2. Orders 3 and 5 of Ex Parte Orders to continue.
   
3. Order 4 to be varied to include KLT in arranging export and market of the logs in the Concession Area.
   
4. Order 6 to be varied so that all proceeds of logs exported to be paid into the Solicitors Trust Account of Counsels for the Plaintiff and KLT.
   
5. Refuse order sought in paragraph 1 of KLT’s Notice of Motion filed 30 April 2001.
   
6. Grant order sought in paragraph 2(a) for the return of the Machines removed on 7th April 2001.
   
7. Strike out claim for conversion against the Second and Third Defendants as failing to disclose any reasonable cause of action.
   
8. Require particulars of conspiracy to induce breach of contract and intentionally causing economic loss by unlawful means to be provided within 7 days. This would require Statement of Claim to be amended. This should be filed and served within 14 days.
   
9. Liberty to apply on 2 days notice.
   
10. Costs in the cause.
    

THE COURT.