Regina v Solomon Islands National Provident Fund [2001] SBHC 156; HC-CRC 092 of 2000 (30 November 2001)

HIGH COURT OF SOLOMON ISLANDS

Criminal Case Number 92 of 2000

REGINA

v.

SOLOMON ISLANDS NATIONAL PROVIDENT FUND BOARD & OTHERS

High Court of Solomon Islands
(Palmer ACJ)

Hearing: 12/11 – 16/11/2001, 19/11 – 23/11/2001, 26/11 – 27/11/2001

Judgment: 30/11/2001

Director of Public Prosecutions (F. Mwanesalua) for the Crown
R.V. Hanson QC and J. Sullivan (Sol-Law) for the First Defendant
J. Moti & Chris Hapa (Motis Pacific Lawyers) for the Second, Third and Fourth Defendants

PALMER ACJ: Learned Counsel Mr. Moti for the Second to Fourth Defendants submits a no case to answer in respect of the remaining counts 3, 5, 6, 8, and 9.

2nd Defendant (“SMI”) Counts 3, 5, and 6

Count 3: Statement of Offence

Transacting Insurance business without first being registered, contrary to Section 10(1) and (2) of the Insurance Act.

Particulars of offence:

Solomons Mutual Insurance Limited, on 5 June 1997 at Luxembourg, transacted Insurance business, to wit the classes of insurance business enumerated in clause 1 of the Excess of Loss Reinsurance Contract, it entered into and signed with Luxembourg Reinsurance S.A., without first being registered as an Insurer.

Count 5: Statement of Offence

Uttering forged document, contrary to section 343(1) of the Penal Code.

Particulars of Offence

Solomons Mutual Insurance Limited, on or about the 3rd day of September 1998 in Honiara, knowingly and with intent to defraud, uttered a forged document, to wit an Excess of Loss Reinsurance Contract purporting to be made and signed by it with Luxembourg European Reinsurance S.A.

Count 6: Statement of Offence

Uttering a forged document, contrary to section 343(1) of the Penal Code.

Particulars of Offence

Solomons Mutual Insurance Limited on or about the 20th day of October 1998 in Honiara, knowingly and with intent to defraud, uttered a forged document, to wit an Excess of Loss Reinsurance Contract purporting to be made or signed by it with Luxembourg European Reinsurance S.A.

The offence in COUNT 3 alleges that in executing the Excess of Loss Reinsurance Contract (“Reinsurance Contract”) in Luxembourg on 5th June 1997, SMI committed the offence of transacting insurance business prohibited by Section 10(1) and (2). Section 10(1) prohibits the transaction of any insurance business other than reinsurance business or insurance business exempted under section 11, outside Solomon Islands by an unincorporated unregistered company. Subsection 10(2) creates the offence for any such person transacting insurance business without having first been registered.

Insurance business (section 2) is defined as:

“(a) the business of undertaking liability by way of insurance (including reinsurance) in respect of lives, or any loss or damage, including liability to pay damages or compensation contingent upon the happening of a specified event”.

In my judgment delivered on 15 November 2001 in an application made under Section 251 of the Criminal Procedure Code objecting to the Information filed in respect of this count I said:

“Subsection 10(1) does give the impression that an unincorporated and unregistered body may transact reinsurance business without falling foul of the Act. Unfortunately, Subsection 10(2) that creates the offences does not confine the range of offences capable of being committed only to registered body corporates. It uses a more general word “Any person” to describe the scope of possible offenders, which might include an unincorporated body, like the Applicant, and the word “insurance business” without qualification. That implies the meaning intended for “insurance business” is the definition provided under Section 2 of the Insurance Act. The effect is that the Information described in Count 3 is capable of being caught within Subsection 10(2) of the Insurance Act.”

I then over-ruled on the objection. In his submissions in this application, Mr. Moti points out that whilst the words “Solomon Islands business” used in Section 10(1)(a) and (b), are not defined, the expression “Solomon Islands insurance business” is. I quote:

“means insurance business commenced, transacted or carried on by an insurer in respect of any person, human life, property or interest in Solomon Islands and includes insurance business in respect of any vessel or aircraft registered or ordinarily located in Solomon Islands.”

Mr. Moti submits the definition of insurance business envisaged by Section 10(1) and (2) should be confined to insurance business other than reinsurance business or insurance business exempted under section 11. The Reinsurance Contract executed on 5th June 1997 did not qualify as insurance business and therefore count 3 should be dismissed.

It is clear subsection 10(1) prohibits the transaction of insurance business other than reinsurance business or insurance business exempted under section 11, by an unincorporated and unregistered body. Having now had opportunity to consider in detail submissions of law of learned Counsel, I am satisfied the definition of “insurance business” and “Solomon Islands insurance business” in Section 2 must necessarily be confined to the transaction of insurance business other than reinsurance or insurance business exempted under section 11. Unless a body corporate is registered under the Insurance Act, it is not permitted to transact insurance business. SMI as an unregistered entity is prohibited under Subsection 10(1) from transacting any insurance business other than reinsurance business or insurance business exempted under section 11, outside Solomon Islands. The insurance business purportedly entered into by SMI on 5th June 1997 however is not insurance business as defined in Section 2, but reinsurance business. That is not expressly prohibited under subsection 10(1). Neither does it come within the purview of Subsection 10(2) as an insurance business. The Information filed respectfully has been misconceived. It assumes that on 5th June 1997, SMI, as an unregistered entity had purported to transact insurance business contrary to section 10(1) and (2). Unfortunately that is not correct. SMI did not transact reinsurance business on said date. It would have been different had SMI purported to act as the re-insurer, it would have been caught by the definition of insurance business in section 2. As a re-insured however, it escapes the net envisaged by Section 10. The Information filed accordingly is defective and ought to have been dismissed. I find no evidence in support of count 3 and acquit the Second Defendant of Count 3.

Count 5

Count 5 pertains to the uttering of the Reinsurance Contract on 3rd September 1998. Was the Reinsurance Contract a forged document? I have dealt extensively with this subject in my judgment of 28th November 2001 in the First Defendant’s submission of no case to answer. The same reasons apply here. The point to be noted in respect of this document is that it purports to be executed by SMI as an incorporated entity when it was not. There is a world of difference in an agreement by partners, shareholders or promoters as opposed to an incorporate entity; that is the case with this agreement. Insofar as the Reinsurance Contract was purported to have been executed by SMI it was invalid. LURECO cannot enforce the contract against SMI. It is arguable on the other hand whether LURECO may be able to enforce the contract personally against Milton Sibisopere and Napoleon Liosi in their joint representative capacities.

Is a copy of the original capable of amounting to a forged document? In my respectful view, this must be answered in the affirmative. The purpose in which the document purports to be used is relevant. It is immaterial as long as it is intended to be used as genuine whether it is a copy of the original or original material. The definition of “document” relied on in Section 16(1) does not confine its meaning to merely original material but is capable of including copies of originals. It includes “any publication and any matter written, expressed or described upon any substance by means of letters, figures or marks, or more than one of those means, which is intended to be used or may be used for the purpose of recording that matter.” It is my respectful view copies of original material are capable of falling within the definition of document (Snow v. Howthon [1969] NZLR 776 at 777 per Woodhour J).

Did the Second Defendant know the document was a forged document?

Learned Counsel Moti submits the 2nd Defendant did not have the requisite knowledge as the said document had been “ratified” in a meeting of its Board of Directors held on 6th July 1997 (T46, Ex. 17). This submission is based on the view that the Reinsurance Contract was executed by promoters of SMI and therefore capable of being ratified. Unfortunately, the document itself does not contain that expression. There is nothing wrong with agreements being made affecting a company about to be formed. Many agreements often are entered into before incorporation. The promoters of a company often do this. However, because a company does not possess the capacity to make contracts until it is incorporated, agreements cannot be made with a proposed company. Where agreements must be made before the incorporation of the company, they must be made by persons who declare themselves to be acting for the proposed company (“Introduction to Company Law 9th Edition JF Northey at page 31). The effect of this is crucial. Where there is failure, it means that a company when registered cannot ratify the agreement (Foley’s Creek Extended Co. v. Cutter & Faithful (1903) 22 NZLR 759). In order for a company to be bound it is essential a new agreement be made by the company after incorporation. It makes little difference even if after incorporation the company takes advantage of the contract and otherwise acts as if it were binding.

Insofar as the document executed on 5th June 1997 was invalid, on the ground that it purports to be signed by a proposed company yet non-existent, it does not bind SMI and cannot be enforced as such. LURECO however, may be able to enforce the agreement personally against Milton Sibisopere and Napoleon Liosi in their joint capacities as representatives of Solomon Islands National Provident Fund Board and Workers Mutual Insurance (PNG) Pty Ltd (“WMI”).

The Reinsurance Contract also contains an interesting clause, Article 10 which provided that the agreement was to become effective as from July 1st 1997. I acknowledge, Article 10 is consistent with the view that it seems all parties to the contract knew SMI was an unincorporated body at time of execution of the document on 5th June 1997. For that reason it was to be effective on 1st July 1997, in anticipation that SMI would have been incorporated. It is important however to ask, what was made effective on 1st July 1997? In my respectful view, in so far as the agreement could not have been entered into by SMI on 5th June 1997, it may be concluded an effective agreement existed between Milton Sibisopere and Napoleon Losi in their joint representative capacity of the one part and LURECO of the other part. Whilst LURECO would not be able to enforce the agreement against SMI, it may be able to do so as against Milton Sibisopere and Napoleon Losi in their joint representative capacities. Sibisopere and Losi however could not be construed as having signed the agreement on behalf of SMI. The only way they could do it was to expressly do so as promoters or possibly as trustees for and on behalf of SMI. They have not done that. The intention was there (Ex. 4); unfortunately it had not been translated onto the final document. The only way the agreement could have become binding on SMI would be to execute a new agreement in the same terms with LURECO after incorporation. Ratification would not do.

Knowledge to be imputed to the 2nd Defendant is thus based on an erroneous belief that because the Reinsurance Contract had been ratified it is valid and binds SMI. Unfortunately, company law on ratification on the face of the document does not support this contention. Ignorance of the law is no defence.

Was there intent to defraud?

There is evidence to support this contention that it was sent with the purpose of inducing the approval of the application for a composite licence on 3rd September 1998. Submission of no case to answer accordingly must be over-ruled. I find prima facie case against the 2nd Defendant.

Count 6.

The reasons given under Count 5 above apply, however with a crucial difference. In my respectful view, the amendment made by SMI on 9th October 1997 had the effect of turning the Reinsurance Contract right way up, back on its feet. The act of amending is capable of constituting evidence of a new contract between SMI and LURECO (see Official Assignee of Motion v. NZ Sero-Vaccines Ltd. [1935] NZGazLawRp 151; [1935] NZLR 856). It could not be effectively done in the absence of a valid and binding agreement. This means before the amendment could be done, the Reinsurance Contract would necessarily have to be construed as binding on the parties. The effect this has means that from 9th October 1998, the Reinsurance Contract could no longer be construed as a false document capable of being forged, Count 6 therefore must be dismissed. Submission of no case succeeds on that basis.

Count 8.

Statement of Offence

Uttering forged document, contrary to section 343(1) of the Penal Code as read with section 21(b) of the Penal Code.

Particulars of Offence

Sathasivam Sivakumaran, on 9 June 1997, in Honiara, knowingly and with intent to defraud, uttered a forged document, to wit a Feasibility Study Report purporting to be made by Pacific Actuarial Solutions Pty Limited.

Third Defendant (Sivakumaran) has been charged with uttering the Feasibility Study Report (“Feasibility Study”) by purporting that it had been made by Pacific Actuarial Solutions Pty Limited (“PASPL”). I have dealt extensively with the question whether the Feasibility Study was a forged document or not in my judgment delivered on 28th November 2001 in the submission of no case to answer by the First Defendant, in respect of the same document. I ruled it could not amount to a false document. Also on the question whether there was intent to defraud I ruled against that submission. Sivakumaran had been charged pursuant to the deeming provisions in Section 21 of the Act and not as a principal offender. Accordingly if the principal offender should be acquitted, the charges against Sivakumaran should also go. I find no reason to differ from that conclusion. The reasons given in my judgment of 28th November 2001 equally apply to Sivakumaran’s case. I allow submission of no case to answer and Sivakumaran is acquitted of count 8.

Count 9.

Statement of offence

Uttering forged document, contrary to section 343(1) of the Penal Code

Particulars of Offence

Subramaniam Sivanantham, on or about 3rd September 1998 in Honiara, knowingly and with intent to defraud, uttered a forged document, to wit an Excess of Loss Reinsurance Contract purporting to be made and signed by Solomons Mutual Insurance Limited with Luxembourg European Reinsurance S.A.

The charge against the Fourth Defendant (“Sivanantham”) is closely linked to count 5. The reasons given in respect of that count equally apply to this case and hence submission of no case to answer must also fail. I find prima facie case against the Fourth Defendant.

The effect of my ruling on Count 6 would appear to have direct impact on Count 10.

ORDERS OF THE COURT:

1. Acquit Solomons Mutual Insurance Limited of Counts 3 and 6
   
2. Acquit Sathasivam Sivakumaran of Count 8.
   

The Court.