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High Court of Solomon Islands |
HIGH COURT OF SOLOMON ISLANDS
Criminal Case Number 92 of 2000
REGINA
–V-
SOLOMONS MUTUAL INSURANCE LIMITED
AND SUBRAMANIAM SIVANANTHAM
High Court of Solomon Islands
(Palmer J.)
Hearing: 25th September 2002, 26th September, 27th September and 1st October 2002
Judgment: 14th October 2002
Director of Public Prosecutions (Mr. Mwanesalua) for the Crown
Pacific Lawyers (Mr. Moti and Mr. Pitakaka) for both Defendants
Palmer J.: The second and fourth Defendants (hereinafter referred to as “the Defendants”), Solomons Mutual Insurance Limited (hereinafter referred to as “SMI”) and Subramaniam Sivanantham (“Sivanantham”) respectively, are both charged with the offence of uttering a forged document, contrary to section 343(1) of the Penal Code Act (Cap. 26). The particulars read as follows:
For SMI: “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.” and
For Sivanantham: “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.”
Background facts
The factual circumstances from which it is alleged the offences had been committed arise from the same transaction. Prosecution alleges that on or about 3rd September 1998, Sivanantham in his capacity as General Manager of SMI lodged an application to the Controller of Insurance (“the Controller”) for a Composite licence (see Exhibit 34/1). Attached to his letter of application were a number of documents including an Excess of Loss Reinsurance Contract between SMI and Luxembourg European Reinsurance S. A. (“LURECO”) dated 5th June 1997 (hereinafter referred to as “the Reinsurance Contract”). Prosecution alleges the Reinsurance Contract was a “forged document” in that at the time of making (5th June 1997), SMI had not been incorporated and therefore could not have entered into any binding and valid agreement with LURECO. To that extent, any use of the said contract by SMI and Sivanantham for the purposes of obtaining a composite licence amounted to an offence under section 343(1) of the Penal Code.
The Law
The offence of uttering which both Defendants have been charged with is contained in section 343(1) of the Penal Code. I quote:
“Any person who knowingly and with intent to deceive or defraud utters any forged document, seal or die is guilty of an offence of the like degree (whether felony or misdemeanour) and shall be liable to the same punishment as if he himself had forged the document, seal or die.”
The offence of uttering is directly linked to the existence of a forged document. If there is no forged document, no offence of uttering can be committed. A forged document however is not defined in the Penal Code. What is defined though is the word “forgery” in section 333(1) of the Penal Code. I quote:
“Forgery is the making of a false document in order that it may used as genuine....”
A false document in turn is defined in section 334(1):
“A document is false if the whole or any material part thereof purports to be made by or on behalf or on account of a person who did not make it nor authorize its making; or if, though made by or on behalf or on account of the person by whom or whose authority it purports to have been made, the time or place of making, where either is material, or, in the case of a document identified by number or mark, the number of any distinguishing mark identifying the document is falsely stated therein; and in particular a document is false-
(a) [Not applicable]
(b) if the whole or some material part of it purports to be made by or on behalf of a fictitious or deceased person; or
(c) [Not applicable].”
In order to establish that the Reinsurance Contract was a forged document, it is necessary for Prosecution to prove that it is a false document within the meaning of section 334(1).
In Regina v. Solomon Islands National Provident Fund Board and Others[1] Judgment delivered 28th November 2001, I set out at page 4 of the judgment, the elements, which Prosecution is required to prove. I set these out again for convenience:
(1) there must be a forged document – section 343(1);
(2) the offending document (Reinsurance Contract) is a false document in that the whole or a material part thereof purports to be made by a person who did not make it nor authorize its making or that the whole or a material part thereof purports to have been made by a “fictitious person” – section 334(1);
(3) the offending document was made in order that it may used as genuine – section 333(1);
(4) the Defendant uttered or used it by dealing with or using it – section 343(1);
(5) the Defendant did so knowing that the document was a forged document – section 343(1); and
(6) the Defendant did so with intent to defraud – section 343(1).
Submissions of the parties - false document
The thrust of the submissions of Mr. Mwanesalua is that the said document is a false document in that the whole or material part of it purports to have been made by a person who did not make it nor authorize its making or that it purports to have been made by a “fictitious person”.
At the time the Reinsurance Contract was executed (5th June 1997), SMI was non-existent; it was yet to be incorporated. It did not have legal capacity to make contracts. It was incorporated later on 26th June 1997 (Exhibit 37). SMI thus did not have capacity to execute any contract on 5th June 1997 neither did it have capacity to authorize the making of such document (see New Borne v. Sensolid (Great Britain) Ltd[2], and Principles of Company Law[3]. In the alternative, Mr. Mwanesalua submits the Reinsurance Contract was purported to have been made by a fictitious person. To that extent it was a false document.
Mr. Moti for the Defendants on the other hand submit that the Reinsurance Contract is not a false document. Mr. Moti advances two reasons for this contention. First that the parties to the agreement including the Controller were aware SMI was not yet incorporated. They were awaiting approval from the Investment Board and expected that SMI would be incorporated shortly. They also believed that the Reinsurance Contract would become operative from its effective date and that they intended to be bound by it. Viewed from the perspective of the respective parties and having due regard to its operative provisions and the existing background and circumstances surrounding its creation, there can be no basis for asserting that it was a false document.
Secondly, the said contract was never intended to be governed by the laws of Solomon Islands (Article 9 of the Reinsurance Contract). Viewed from that perspective, applying Luxembourg law, such contract was valid and effectively binding upon SMI notwithstanding SMI was not incorporated at the time of its conclusion (see the unchallenged expert testimony of Messrs Elvinger, Hoss & Prussen that “under Luxembourg l[ ]aw, the Contract was valid and binding on nd enforceable by and against) SMI since the date as of which it was stipulated to enter into force, i.e. 1st July 1997”: Exhibit 87, p 11; Ex 88/1 – 88/15; and T 348 – 356). According to the evidence of Prussen, Luxembourg law looks to the substance rather than the form (T 361, 365) and it matters not that SMI lacked contractual capacity to enter into the Reinsurance Contract at the time it was concluded by its signatories but rather that the clear intent of all parties (as expressed in Article 10) was that it would commence operation with effect from 1st July 1997 when ratified by SMI’s board of directors: T 350, 351, 354, 355, 356, 359 – 365. According to the evidence of Leslie Teama (“Teama”), Thomas Kama (“Kama”), James Apaniai (“Apaniai”) and Milton Sibisopere (“Sibisopere”) the Reinsurance Contract was ratified on 6th July 1997 (Exhibit 17) and became operative with retroactive effect from 1st July 1997: T 361. To the extent that the “document” can be relied on by SMI to enforce a claim against LURECO in Luxembourg, it can hardly be labeled a “false document”.
Is the Reinsurance Contract a false document
The status of pre-incorporation agreements in Solomon Islands is governed by common law principles (Paragraph 2 of Schedule 3 to the Constitution of Solomon Islands). Under common law, a company is not bound by a pre-incorporation agreement, as it is not a legal entity with capacity to enter into contracts before it was registered. This is so even if the person acting was a promoter. A promoter cannot bind a non-existent company. The agreement also cannot be ratified by the company after incorporation as the doctrine of ratification requires the ratifying principal to be in a position where it can enter into the contract at the time the ‘agent’ (promoter) acted Foley’s Creek Extended Co.v. Cutter & Faithful[4]; Kelner v. Baxter[5]; Re Northumberland Avenue Hotel Co.[6]). The only way that a company may be bound by a pre-incorporation agreement is by entering into a new agreement to the effect of the previous agreement (Melhado v. Porto Alegre Rail. Co[7]. Re Hereford and South Wales Waggon and Engineering Co.[8].; Re Empress Engineering Co.[9];.
The effect of this in essence can be summed up as follows:
(1) that the company is not bound by the pre-incorporation agreement when it is registered (Re English & Colonial Produce Co. Ltd[10]; Official Assignee of Motion v. New Zealand Sero-Vaccines Ltd).[11]
(2) that the company, when registered, cannot ratify the agreement (Principles of Company Law[12]; Foley’s Creek Extended Co.v. Cutter & Faithful[13]; Kelner v. Baxter[14]; Re Northumberland Avenue Hotel Co.[15]).
(3) that the company cannot enforce the pre-incorporation agreement (Natal Land & Colonisation Co. Ltd v. Pauline Colliery & Development Syndicate Ltd.[16]).
According to common law principles therefore, the Reinsurance Contract, purportedly entered into by SMI would have been a worthless piece of document insofar as SMI as a corporate body is concerned. SMI is not bound by it, cannot enforce it, and LURECO too has no right of action against SMI. But does this necessarily mean that the document is worthless per se and therefore a false document?
Knowledge by the parties that SMI was not yet incorporated
Does knowledge by LURECO, Sibisopere, Napoleon Liosi (“Liosi”), Apaniai, Kama, Teama and Kevis Harry (“Harry”) who was the Controller of Insurance at the relevant time, that SMI was not yet incorporated, affect the status of the Reinsurance Contract as a false document? The answer in my respectful view would be relevant to the determination of the question whether this was a false document or not.
There is authority for the proposition that where the parties are aware of the non-existence of the company, the court could take the approach that the parties to the commercial arrangement must be taken, in the absence of evidence to the contrary (see Summergreene v. Parker[17]) to have intended an effective contract. Since the company could not be made a party, the only way that intention could have been implemented would have been to construe the contract as binding on parties personally (Kelner v. Baxter[18]; Rita Joan Dairies Ltd v. Thomson[19]; Marblestone Industries Ltd v. Fairchild[20]; Stott land Development Ltd v. Dean[21]).
Evidence in support of a binding contract
The evidence in support of the view that the parties (whoever they were at the time of execution) intended to enter into a binding agreement, with respect is simply overwhelming in this particular case. LURECO was aware that SMI was not yet incorporated at the time of execution. They knew it was in the process of incorporation and expressly provided for this contingency in the Reinsurance Contract itself (see Article 10). Evidence has been led by SMI and not contradicted that LURECO was aware that shortly after incorporation SMI would ratify the contract. This was duly performed by SMI.
Liosi and Sibisopere, the two signatories who purportedly signed on behalf of SMI knew it was yet to be incorporated. Sibisopere was of the view that he was signing as a promoter for SMI. Mr. Apaniai the legal advisor and secretary to the Solomon Islands National Provident Fund Board (hereinafter referred to as “the NPF Board”) and also Assistant General Manager (Administration) to the Solomon Islands National Provident Fund, who accompanied Sibisopere to Luxembourg knew that SMI was yet to be incorporated. In its Special Board Meeting of 23rd May 1997, the NPF Board had expressly authorized Apaniai and Sibisopere to represent the NPF Board at the negotiations and signing of the Reinsurance Contract (see paragraphs 1.1[d] and [e] of the Minutes of the Special Board Meeting No. SBM 97/04 held on 23rd May 1997 – Exhibit 4). Liosi who represented Workers Mutual Insurance (PNG) Pty. Ltd. (“WMI”) also must be deemed to have been aware of the fact that SMI was yet to be incorporated. WMI was the other majority shareholder in the proposed formation of SMI. The other shareholders were to be Satnasivam Sivakumaran and the NPF Board.
I have carefully considered the evidence of Teama, Kama, Sibisopere and Apaniai on this matter and come to only one conclusion; that the NPF Board as one of the major shareholders had intended from the beginning that the Reinsurance Contract was to be a binding contract. To that extent the said contract must necessarily be construed by this court as a binding agreement between LURECO and WMI and the NPF Board. There is no alternative construction. Since SMI cannot ratify the contract and therefore is not bound by it or able to enforce it, the only other party to the agreement who may be successfully sued by LURECO should the issue ever arise were WMI and the NPF Board.
The evidence is patently clear that the parties intended from the beginning to make an effective agreement. Whilst Sibisopere, Teama, Kama and Apaniai may have been misled in law as to the ability of SMI to ratify the Reinsurance Contract, it was never intended by them, LURECO or Liosi, to make a bogus contract. Had any issue arisen as to the effectiveness of that agreement, I do not think for one moment that WMI or the NPF Board would have denied their liability under the agreement. This manifest intention of the parties gives a completely different picture on the status of the Reinsurance Contract. It translates the contract from a worthless piece of agreement and therefore a false document per se, to an effective and binding document. In other words, it is not a false document insofar as it relates to the relationship between LURECO and WMI and the NPF Board.
Illegal Contract?
One of the submissions raised by Mr. Mwanesalua regarding the status of the Reinsurance Contract was that of illegality; that it contravenes the provisions (section 10(1), (2) and (3) of the Insurance Act) and amounted insofar as it sought to apply the law of Luxembourg to the said contract to an attempt to evade the provisions of the Insurance Act [Cap. 82]. The result would be a bogus contract and which should then be viewed by this court as a false document.
Before 26th June 1997
It is important to appreciate the status of SMI before incorporation, 26th June 1997 (Exhibit 37). That is the cut off point as to what it could or could not do. Prior to 26th June 1997, SMI was an unincorporated body and so incapable of transacting any insurance business per se. It is simply a legal impossibility and so no offence is capable of being committed by SMI before 26th June 1997 under the Insurance Act. It follows no offence can be committed by SMI in regards to the Reinsurance Contract under the Insurance Act. In the same token SMI could not be guilty of acting illegally or entering into an illegal contract before 26th June 1997.
LURECO
Some submissions have been made regarding LURECO’s part and involvement in the execution of the Reinsurance Contract. It has been submitted by Mr. Mwanesalua that LURECO had contravened the provisions of section 10(1) and (2) of the Insurance Act by not being registered as an insurer. Further, by expressly stating that the law of Luxembourg was to apply to the Reinsurance Contract, LURECO and “SMI” were evading the mandatory provisions of the Insurance Act.
Unfortunately LURECO has never been charged for transacting any insurance business in Solomon Islands contrary to sections 10(1) or (2) of the Insurance Act. The charges in counts 5 and 9 of the Information are confined expressly to the alleged uttering of a forged document by SMI. Any attempt to consider whether LURECO has committed any offence in my respectful view is but an academic exercise. If there had been reason to consider that LURECO had committed an offence, appropriate charges should have been drawn up.
Secondly, the provisions of section 10(1) and (3) of the Insurance Act expressly exclude requirement for registration of a reinsurer (LURECO’s position). Accordingly it follows that the offence envisaged by subsection 10(2) should necessarily be confined to that of transacting insurance business other than reinsurance business in Solomon Islands, otherwise it makes the said subsection nonsensical. If there is no requirement under section 10(1) of the Insurance Act for a body corporate in Solomon Islands to be registered for purposes of carrying out reinsurance business, how much more should one expect that LURECO be registered?
Thirdly, it has been established in evidence before this court that there are no reinsurers registered in Solomon Islands or gazetted to be exempt from registration under section 11. Mr. Harry conceded in evidence that LURECO was not required to be registered under section 10(1) of the Insurance Act. It is not open therefore to seek to suggest now that an illegal contract had been entered into by virtue of the fact that LURECO was not registered as a reinsurer in Solomon Islands and that by making the law of Luxembourg to apply to the Reinsurance Contract it was evading the mandatory provisions of the Insurance Act. It is a fundamental principle of common law that parties are at liberty to choose the law, which should govern their contract [see Rule 175 (1), Dicey and Morris on The Conflict of Laws[22]].
Fourthly, if there was a requirement that LURECO as a reinsurer is required to be registered Mr. Harry could have refused registration on that basis. This was never done, again supporting the conclusion that there was no requirement for LURECO as the reinsurer to be registered.
Any suggestions therefore now sought to be made that LURECO not being registered as a reinsurer in Solomon Islands renders the Reinsurance Contract a false document must be dismissed. Equally any suggestions that LURECO and “SMI” were acting illegally or trying to evade the provisions of the Insurance Act must also be dismissed.
The NPF Board
What about the NPF Board? Did it commit an offence under section 10(1), (2) or (3) of the Insurance Act as an unregistered entity? First under subsection 10(1) of the Insurance Act, the NPF Board would commit an offence if it sought to commence, transact or carry on any insurance business other than reinsurance business in Solomon Islands or outside of Solomon Islands. There is no evidence to suggest that the NPF Board did carry out any such insurance business under subsection 10(1). I accept the NPF Board did enter into a reinsurance agreement with LURECO but apart from that document there is no evidence to show that it commenced, transacted or carried out any insurance business before 26th June 1997 as an unregistered entity. Further the NPF Board has never been charged for any offence of commencing, transacting or carrying on insurance business contrary to subsection 10(1) of the Insurance Act.
Under subsection 10(2), the NPF Board would commit an offence if it sought to transact reinsurance business. Again there is no evidence to suggest that the NPF Board carried out any reinsurance business. It did enter into a reinsurance agreement with LURECO as the reinsured but not as the reinsurer. No submission has been made to say that this amounted to transacting reinsurance business and is an offence under subsection 10(2). Further, the NPF Board has never been charged for transacting, commencing or carrying on reinsurance business under subsection 10(2).
Under subsection 10(3), the NPF Board could not be guilty of an offence in terms of the Reinsurance Contract as the definition of an “insurer” under the said subsection expressly excludes a reinsurer like LURECO. The only offence perhaps the NPF Board could be charged with is in using an agent (Article 12 of the Reinsurance Contract) that is not registered in Solomon Islands. The NPF Board however has never been charged for this offence.
The net result therefore is that the NPF Board did not enter into an illegal contract or acted illegally when they executed the reinsurance agreement with LURECO and accordingly there is no evidence to support any suggestion that the said document is a false document.
Between 26th June 1997 and 7th July 1997
On 26th June 1997, (Exhibit 37) SMI was incorporated as a limited liability company under the Companies Act (Cap. 175). It acquired corporate status thereafter. On 7th July 1997 it was granted permission by the Controller of Insurance to commence, transact and carry on insurance business (Exhibit 29).
In that period, did it commence, transact or carry on any insurance business other than reinsurance business? Respectfully, no evidence has been adduced to suggest that this is so. The attempt by SMI in its first Board Meeting of 6th July 1997 (see copy of minutes in Exhibit 17) to ratify the Reinsurance Contract was a legal failure in any event as it could not ratify a document which it was not in a position to ratify at the time of execution by Liosi and Sibisopere. No insurance business or reinsurance business therefore was transacted by SMI before or on 6th July 1997. As at 6th July 1997 and up to 7th July 1997, SMI was never a party to the Reinsurance Contract. The contract could not be enforced against SMI and SMI was not bound by it. The purported ratification on 6th July 1997 did not change the status of the Reinsurance Contract in law.
SMI therefore could not be accused of acting illegally or entering into an illegal contract in that period as well.
After 7th July 1997
SMI was registered as an Insurer (Exhibit 29) to transact insurance business on 7th July 1997. On 30th December 1997 its certificate of registration was renewed (Exhibit 26/2). No offence thereafter could be committed in respect of section 10(1), (2) and (3) of the Insurance Act.
Conclusion on the submission of illegality
The simple conclusion to be reached in respect of the submission that SMI was engaging in an illegal activity and trying to evade the mandatory laws of Solomon Islands is therefore without basis. Prior to 26th June 1997 (date of incorporation of SMI as a corporate body having legal capacity or existence), SMI could not transact any valid contract. It is simply a legal impossibility.
After 26th June 1997 and before 7th July 1997, there was a purported attempt (I accept an honest attempt) to adopt by ratification the Reinsurance Contract as a binding agreement between LURECO and SMI. Unfortunately, that was a futile exercise in law (based on a mistaken advice in law). SMI could not ratify such agreement. The only way it could be done was to enter into a new agreement in exactly the same terms. The Reinsurance Contract therefore cannot be enforced against SMI and SMI is not bound by its terms. SMI thus did not transact any insurance business including reinsurance business between 26th June and 7th July 1997 and therefore could not have entered into any illegal contract or acted illegally! The case Victorian Daylesford Syndicate, Limited v. Dott[23] (“Dott’s Case”) relied on by Mr. Mwanesalua is distinguishable on its own facts. The comments of his Lordship Buckley J. at page 630 would have been relevant had there been evidence to show that SMI was involved in the transaction of insurance or reinsurance business prior to registration as an insurer. Unfortunately there is simply no evidence and so the issue does not arise or apply.
The same reasons would also apply to the case of Bedford Insurance Co. Ltd v. Institute de Resseguros do Brasil[24] (“Brasil’s Case”) relied on by Mr. Mwanesalua. That case is also distinguishable on its facts. In Brasil’s Case, the Plaintiff who was a Hong Kong insurance company had acted contrary to section 2(1) of the Insurance Companies Act 1974 (“the 1974 Act”) as read with section 83(4) by authorizing a London based broker, both of whom were not authorized under the 1974 Act to write and reinsure marine insurance contracts. It was held by the court that since the making and performance of any contract of insurance of an unauthorized class by way of business was expressly prohibited by the 1974 Act, it followed that such contract was illegal and void ab initio. To that extent, the court also held that even if it was possible for the Plaintiffs to ratify the contracts after the time they commenced, any such ratification would have had no effect as it would have related back, both in terms of time and place, to the original contracts which were illegal and void (pages 771 j, 772 c d f to j, 776 a to c e f, post).
SMI’s case however is distinguishable in that in terms of time and place [whether it be the date of execution of the Reinsurance Contract (5th June 1997) or the date of commencement (1st July 1997)], SMI was not and did not transact any insurance or reinsurance contract! SMI therefore was not (in fact could not be) party to any original contracts that were illegal and void. In the same vein, SMI and LURECO could not be accused of trying to evade the Insurance Act when Luxembourg Law was made the proper law of the Reinsurance Contract as there was no valid, binding or enforceable contract in law in existence between the parties. SMI did not and could not in law be accused as well of having entered into an illegal contract.
The submissions of extra-territorial operation or application of section 10(2) do not apply to the facts of this case as in law there is no issue for determination. The submissions have been misconstrued. It may have been a different scenario if SMI was in existence on 5th June 1997. Issues of illegality must necessarily arise from the existence of a legal person. In the absence of that, there is no issue for determination.
A valid document in Luxembourg law
The second argument raised by Mr. Moti against the submission that the Reinsurance Contract was a false document was based on the view that the parties had expressly intended that the contract be governed by Luxembourg law. It is important to keep in mind that when referring to the “parties” to the Reinsurance Contract, it is clearly understood who is being referred to in law. I have already explained in this judgment who the effective parties to the Reinsurance Contract are, that is LURECO of the one part and WMI and the NPF Board of the other part.
I note that the Defendants have called expert opinion evidence on the law of Luxembourg as it pertains to corporate and incorporate entities to support their submission that the document is a valid document according to Luxembourg law. That unchallenged expert evidence was given by Messrs Elvinger, Hoss & Prussen. I have no reason to doubt or to find fault with that expert opinion. I am satisfied the evidence before me does support the submission that the intention to have Luxembourg law govern the Reinsurance Contract is inconsistent with any suggestions that the said document was a false document or intended to be such.
Insofar as the Reinsurance Contract however applies to and is relevant to Solomon Islands, it must be construed according to Solomon Islands law. To that extent, the position of the NPF Board needs to be noted. As a party to the contract, the NPF Board’s position is slightly different. I have already dealt with the NPF Board’s position regarding whether it is in breach of section 10(1), (2) or (3) and found no evidence to support any such proposition. I also noted that the NPF Board had not been charged for any such offences in these proceedings. The most crucial and significant contribution of the NPF Board’s direct participation and involvement in the establishment and execution of the Reinsurance Contract and which has been made crystal clear in the evidence of Teama, Kama, Sibisopere and Apaniai is that the Reinsurance Contract was never intended to be anything other than a genuine, valid, binding and enforceable agreement from its commencement date.
Uttering a forged document
The charge against the Defendants is that of uttering a forged document on or about 3rd September 1998. It is important to be appraised of the context in which that document was presented to the Controller on said date. The details are contained in the letter of 3rd September 1998 addressed to the Controller (Exhibit 34/1). That letter was the covering letter, which contained annexures for an application for a composite licence accompanied by a cheque for payment of the fee of $2,500-00. The annexures consist of at least six documents (Exhibit 34/2) one of which was the copy of the Reinsurance Contract. The alleged offence of uttering arose from that transaction.
What happened after 6th and 7th July 1997 in relation to the actions and conduct of SMI is pertinent to understanding the events, which occurred on or about 3rd September 1998 in respect of which both Defendants had been charged. It is not disputed that on 6th July 1997 in its first board meeting, the Board of Directors of SMI (Exhibit 17 at paragraph 3.1) attempted to adopt the Reinsurance Contract by ratification. I have pointed out that this was based on an honest but mistaken advice by the legal advisor to the NPF Board that this was a valid act of the said Board. I have heard clear evidence from Teama (Director) and Sibisopere (Deputy Chairman) that they had no reason to doubt the advice given in respect of this action. They also confirmed the evidence of Kama (a Barrister and Solicitor of the legal firm Sol-Law and Director of the NPF Board as well as an alternate director for the SMI Board) that he was in total agreement with the advice. Evidence was also led that another lawyer Messrs. Rose working for the Solomon Islands National Provident Fund was also of the same view.
The evidence therefore is quite clear that the Board of SMI were of the mistaken belief that the Reinsurance Contract had been validly adopted and binding on it. That was the legal position taken by SMI and obviously acted upon by Sivanantham on or about 3rd September 1998.
On the other hand, the document that was being submitted as a valid agreement was in fact invalid and unenforceable. Unless a new agreement had been entered into by SMI with LURECO, it is only enforceable against WMI and the NPF Board. The situation is now different, because by this time, SMI was a corporate entity and registered as an insurer although it did not have a composite licence. On 3rd September 1998 it was applying for one.
What it did on said date was to lodge inter alia, the Reinsurance Contract on the erroneous belief it was a valid reinsurance contract with LURECO, when it was not. This raises the crucial question, whether this amounted to the offence of uttering a forged document. What is now the status of the said document insofar as it was being used by SMI as a valid agreement when it was not? Does that now convert the said document into a false document?
I have already found in this judgment that the document per se is not a false document. Rather it is the use in which it is being put to that is in issue. It is the action of SMI in saying that this is my reinsurance contract when it is not that is wrong. In my respectful view, that does not convert that valid document into a false document. It may be false pretence on the part of SMI (though it must be noted there is no evidence of such and SMI has never been charged with false pretence) to attempt to use such document as its own, but that does not convert the said document overnight into a false or forged document (see R. v. Dodge[25]).
In Archbold Criminal Pleading Evidence & Practice[26], the learned authors state:
“The falsity must be of the purport of the document, not of its contents. In other words, the document must tell a lie about itself:”
Also in Kenny, Outlines of Criminal Law[27], the learned author says:
“A writing is not a forgery when it merely contains statements which are false, but only when it falsely purports to be itself that which it is not (R. v. Ritson (1860) I C.C.R. 200 (T.A.C.)). The simplest and the most effective phrase by which to express this rule is to state that for the purposes of the law of forgery the writing must tell a lie about itself.”
The Reinsurance Contract did not tell a lie about itself. What was false, wrong or incorrect was the use made of it by SMI as its own document when it was not.
But even if I am wrong on that, Prosecution still has the difficult task of proving to the requisite standard that the Defendants knowingly and with intent to defraud uttered the said ‘forged document’.
Uttering with intent to defraud
It is for Prosecution to prove beyond reasonable doubt that there was an intent to defraud. In Archbold Criminal Pleading Evidence & Practice, the learned authors state:
“For forgery to constitute an offence there must be an intent to defraud or deceive.”
This was further expounded upon at paragraph 2186 quoting Re London and Globe Finance Corporation[28]:
“To deceive is to induce a man to believe that a thing is true which is false, and which the person practicing the deceit knows or believes to be false. To Defraud is to deprive by deceit; it is by deceit to induce a man to act to his injury. More tersely it may be put, that to deceive is by falsehood to induce a state of mind; to defraud is by deceit to induce a course of action.”
The learned authors went on to explain the decision of the House of Lords in Welham v. D.P.P.[29] as follows:
“The ‘intent to defraud’ referred to in this subsection (section 4(1) of the Forgery Act, 1913) and other places in the Act is an intent to practice a fraud on someone, it being sufficient if anyone may be prejudiced by the fraud. If therefore there is an intent to deprive another person of a right, or to cause him to act in any way to his detriment or prejudice or contrary to what otherwise would be his duty, an intent to defraud is established, notwithstanding that there is no intention to cause pecuniary or economic loss. ... It is sufficient to prove generally an intent to defraud or deceive without proving intent to defraud a particular person.” [Words in bracket added)
In Black’s Law Dictionary[30], the word “defraud” is defined as:
“To make a misrepresentation of an existing material fact, knowing it to be false or making it recklessly without regard to whether it is true or false, intending one to rely and under circumstances in which such person does rely to his damage. To practice fraud; to cheat or trick. To deprive a person of property or any interest, estate, or right by fraud, deceit, or artifice.”
“Intent to defraud means an intention to deceive another person, and to induce such other person, in reliance upon such deception, to assume, create, transfer, alter or terminate a right, obligation or power with reference to property.”
It must be borne in minds at all times that the elements of knowledge and intention to be proved to the requisite standard are those of the Defendants; that they intended to deceive and thereby defraud the Controller into issuing the licence sought.
I have listened carefully to the evidence adduced by Prosecution. The case for the Prosecution essentially as I can gather was that the Defendants knew or ought to have known that the Reinsurance Contract was invalid and unenforceable and accordingly ought not to have lodged the said document as part of the application for a composite licence. To the extent that they have done that, it was deceitful and fraudulent. Ignorance is no defence.
Unfortunately, the Defendants do not have to prove their innocence in this case. It is for the Plaintiff to prove beyond reasonable doubt that the Defendants had the requisite intent. If they fail, then the Defendants must be acquitted. The Defendants are entitled in law to adduce such evidence in their favour as to their state of mind which may raise a reasonable doubt in the mind of the court. This is exactly what they have done in this case. They have adduced evidence which show that the Defendants believed, albeit mistakenly that the said document was a valid document in company law and that it was presented on that basis. They have produced unchallenged evidence in which they have showed to this court what their state of mind was based on the legal advice of their lawyer.
Such evidence is capable of displacing any elements of doubt as to their state of mind (see Criminal Defences[31], and the case of R v. Dodsworth[32] cited by Mr. Moti for the Defence. Prosecution has not adduced evidence which displaces that state of mind to the point where I am satisfied that they had the necessary intent. The offence of uttering is not a strict liability offence.
Further it was not the first time for Mr. Harry to sight the contract. He had seen it previously. He first sighted the document way back on 9th June 1997 (some fifteen months earlier). There is clear evidence that when it was submitted it was done so on the basis that it was a genuine document. There is no evidence of any intention to deceive, conceal or deliberately mislead anyone on the part of the Defendants.
With regards to the fourth Defendant, he came into the scene as the first General Manager of SMI on appointment. He was not privy to the previous discussions as to the execution of the Reinsurance Contract. Although he was present at the Board Meeting of 6th July 1997, when the Reinsurance Contract was purportedly ratified he testified this was done “mechanically”. There was no discussion on the subject. His evidence has been corroborated by all other witnesses who were present at that meeting (Sibisopere, T 304 – 306; Kama 388 – 390; and Teama T 431 – 433). He had been invited primarily for the purpose of being introduced as the “General Manager (designate)” of SMI. He was not asked and there was no requirement that he take part in the discussions or deliberations. He had no reason to suspect that the contract was invalid or unenforceable and even if it could be argued he had knowledge of the events leading to the tendering of legal advice on the question of ratification he would have had no reason to doubt the validity and legitimacy of that advice.
I am not satisfied it had been established on the evidence before me that Sivanantham or SMI intended to practise fraud on the Controller or to deprive him of any right or to cause him to act in any way to his detriment, or prejudice or contrary to his duty. I am not satisfied it had been established beyond reasonable doubt that they had the requisite intention to defraud the Controller.
Knowledge that the document was forged
Section 4 of the Penal Code defines “knowingly” as:
“used in connection with any term denoting uttering or using, implies knowledge of the character of the thing uttered or used;”
In the context of the offence of uttering a forged document, Prosecution is required to prove beyond reasonable doubt that each Defendant had the requisite knowledge of its forged character.
I have considered carefully the unchallenged evidence of Teama, Kama, Sibisopere, Apaniai and Sivanantham and can only come to one conclusion. That at all material time, they denied knowledge of the fact that the document they were carting around was a forgery or that it was a false document. They may have been mistaken in law as to its legal status, but that in my respectful view is not evidence of knowledge that the document was forged. They did not even know that they were mistaken. This was the same view adhered to by Apaniai and Kama. They were always under the impression that SMI could ratify the Reinsurance Contract after incorporation and thereby become legally bound by it from date of commencement. A person may be mistaken about something in law but that does not necessarily impute guilty knowledge or mind about the thing uttered. That mistaken view however did not result in the document amounting to a false document. I have found that the document nevertheless was a valid document. In applying the element of knowledge to the context of this case, it must necessarily relate to knowledge of the falsity of the document; that the Defendants knew that the document was a false document. Unfortunately, I am not satisfied Prosecution has also proved this element to the required standard.
CONCLUSION
In the circumstances, only one verdict is open to this court, acquittal. Both Defendants are acquitted of both charges.
THE COURT.
[1] CRC No. 92 of 2000
[2] [1953] 2 W.L.R. 596
[3] By Haj Ford, 5th Edition, Butterworths, at paragraph 545
[ ]
[4] (1903) 22 N.Z.L.R. 759
[5] (1866) L.R. 2 C. P. 174
[6] (1886) 33 Ch. D. 234, 249, C.A.
[7] (1874) L.R. 9 C. P. 503;
[8] [1876] UKLawRpCh 120; (1876), 2 Ch. D. 621, C. A.
[9] [1880] UKLawRpCh 217; (1880), 16 Ch. D. 125, C.A., at p.128
[10] [1906] 2 Ch. 435.
[11] [1935] N.Z.L.R. 856, 858.
[12] By Haj Ford, 5th Edition, Butterworths, paragraph 545.
[13] (1903) 22 N.Z.L.R. 759.
[14] (1866) L.R. 2 C. P. 174.
[15] (1886) 33 Ch. D. 234, 249, C.A.
[16] [1904] A. C. 120.
[17] [1950] HCA 13; (1950) 80 CLR 304 at 314, 326.
[18] (1866) LR 2 CP 174.
[19] [1974] 1 NZLR 285.
[20] [1975] 1 NZLR 529.
[21] [1967] WAR 86 at 93.
[22] (12th edn, 1993) pp 1211 – 1218.
[23] [1905] UKLawRpCh 106; [1905] 2 Ch. 624 at 630.
[24] [1984] 3 All ER 766.
[25] (1972) 1 Q B 416.
[26] 38th edition by Butler and Mitchell, at paragraph 2150.
[27] 17th edition, edited by J.W.C. Turner at paragraph 387.
[28] [1903] UKLawRpCh 47; [1903] 1 Ch. 728, 732:
[29] [1961] A.C. 103; 44 Cr. App. R. 124.
[30] By H. C. Black sixth edition.
[31] (1985, Butterworths, Sydney) D O’Connor and P Fairall
[32] [1837] EngR 1166; (1873) 8 Car & P 218, 173 ER 467.
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