Earthmovers Group of Companies v Premier of Isabel Province [2005] SBHC 41; HCSI-CC 048 of 2004 (2 March 2005)

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EARTHMOVERS GROUP OF COMPANIES
(Trading as Eastern Development Company Limited)

THE PREMIER OF ISABEL PROVINCE
(representing the Isabel Provincial Executive of the Isabel Provincial Assembly)

Provincial legislation- Ordinances-Isabel Business Licence (Amendment) Ordinance 1994 (as amended by Ordinance LN: of 2003)-Interpretation-to be read down subject to State legislation dealing with Forestry and Taxation- absence of devolution of powers under forestry or taxation to provincial legislature.

Practice and procedure-Declaratory orders-jurisdiction to make-discretionary nature guided by precedent.

The Provincial Government sought interlocutory injunctive orders seizing property of the logging companies which had licenses to log on Isabel Island. The Province had already effectively prevented loading for a time by the expedient use of the Royal Solomon Islands Constabulary. The plaintiff seeks declaratory orders that the business licences relating to logging, shipping and stevedore services claimed of the plaintiff were void as beyond powers of the Provincial legislature.

Held: 1. Particular parts of the 3^rd schedule of the Isabel Business Licence (amendment) Ordinance as purport to affect the plaintiff are void and of no effect for they are beyond powers of the Province.

2. It is appropriate to make declarations of voidness which are binding statements of an existing legal situation, not a constitutive legal act. Consequently the plaintiff’s rights may spring from a mistake of fact (in payment of earlier business fees for instance).

3. In the absence of any basis for interlocutory orders consistent with the practice and procedure for such orders, the court cannot exercise a discretion which it does not have in the circumstances of this case.

4. In the absence of any apparent Forest Management powers divested by the Central Government under the Forestry Act or the Provincial Government Act, in the circumstances these business license fees complained of have the indicia of a “tax” rather than any “service rendered” in consideration for such charge. There has been no discernible provincial service to be afforded the plaintiff loggers, relating to these business licenses. The apparently excessive charges or “fees” may be seen as a “tax” in terms understood in the circumstances of Air Caledonie International v The Commonwealth [1988] HCA 61; (1988) 165 CLR 462, 467

Air Caledonie International v The Commonwealth [1988] HCA 61; (1988) 165 CLR 462, 467
Solomon Motors Limited -v- Honiara Town Council Civil Appeal 11 of 1994 (unreported); 5 September 1995.
Harper -v- Minister for Sea Fisheries [1989] HCA 47; (1989) 168 CLR 314, 325.
Allardyce Lumber Co. Ltd & ORS -v- The Premier of Western Province (Unreported, High Court, Muria C.J. in CC 234 of 1994 delivered on 14.3.95)
Allardyce Lumber Co. Ltd. & ORS -v- The Premier of Western Province (Unreported, High Court Awich J. in CC 616 of 1996)
Allardyce Lumber Co. Ltd & ORS -v- The Premier of Western Province (Unreported, Court of Appeal, Mason P., McPherson and Casey J.A.) in c.a. 10 and 12 of 1996 delivered on 27 February, 1998 (at pps. 9 to 12)
Dorney -v- Commissioner of Taxation (1980) 1 NSWLR 404

Brown J. On the 13 February 2004 the plaintiff by originating summons, sought various declarations denying the Provincial Governments entitlements to business licence fees from the plaintiff relating to the plaintiff’s logging businesses on Isabel Island. Soon afterwards, since factual matters over a number of years had given rise to arguments between the parties about the moneys actually paid by the companies to the Provincial Government and the purposes in the act of payment, intended by the plaintiff, a statement of claim setting out a chronology of correspondence, discussions, payments, actual and planned logging operations, discrepancies and falsity on the defendant’s part, was filed. (A statement of claim should be filed; a) where a claim is made for damages for breach of duty, whether under contract or in this case legislation of the Provincial Assembly or b) where claim is based on allegations of fraud, falsity or official misconduct). This caused the defendant to file an appearance and defence in about May 2004, supported by answering affidavits.

On the 26 August 2004, a motion seeking this courts injunctive order preventing further logging by the plaintiff companies and prohibiting the removal of the plaintiffs plant and equipment from the Island was filed, based on the material in the defendant’s affidavits in which the Provincial Government claims large arrears of business licence fees payable by the plaintiff over a number of years and which remain outstanding and consequently give rise to an offence in terms of the Business Licence Ordinance. The fact of the continuing offence is the basis, then for the motion seeking such injunctions.

In July 2004 the plaintiff changed legal representatives and leave was subsequently sought by this Court to amend the Summons and Statement of Claim. On the 14/15 October 1004, this application came on for hearing when Mr. Katahanas appeared for the plaintiff, Mr. Manetoali representing the Provincial Government.

The defendants did not object to the proposed substitution of the amended statement of claim (which named the defendant as “the Premier, Isabel Province, representing the Isabel Executive of the Isabel Provincial Assembly”. Accordingly I ordered the substitution of the Writ and Statement of Claim, cost to be costs of the cause.

In the course of supporting the plaintiff’s summons to amend, Mr. Katahanas forewarned that the plaintiff’s claim may not be confined to the material before the court. He said the plaintiff had licenses to log from the Central Government pursuant to the Forest Resources Management Act, in Isabel Island. The plaintiff had applied for business licences from the Provincial authorities under various earlier ordinances but that despite paying significant sums of money over a number of years, the Province, as evidenced by its motion, still seeks some $9m in fees for the 2000 – 2004 years. The plaintiffs’ view is now that such claims for payment are unlawful and that earlier payments should not bind the plaintiff in terms of the business ordinance legislation for since more recent legislation in particular discriminatory parts of the Schedule 3, is void, for it amounts to indirect "taxation", and hence that part of the legislation complained of should be struck down as "ultra vires" for the reasons argued later.

Mr. Katahanas says the Province’s claim amounts to a tax, not a business licence fee and a tax in these circumstances is ultra vires the power of the Province legislature.

As a consequence Mr. Katahanas says, despite placing this issue before the Court, the Province has had the RSIP constabulary stop lawful logging operations of the plaintiff and that action is not a function of the police in this civil suit, in absence of lawful order.

He further pointed to the absence of the shield of the Crown, or protection of members of the executive from suit for unlawful interference with commercial relations between the plaintiff for instance and parties to its logging contract, and indicated the plaintiff was considering its position with a view to individually suing the executive for damages for unlawful interference with the logging contract business about Isabel.

I refused leave to join members of the provincial executive in this cause for clearly damages will need to be strictly pleaded in tort, contract or for ultra vires acts and should be the subject of separate proceedings.

The court then passed to consideration of the respondent’s motion filed on the 26 August in which the Provincial Government sought to stop the plaintiff from logging further and an order that its logging machinery and logs be seized. Mr. Katahanas sought to cross examine the two deponents to the affidavits read by the defendant in support.

The first was that of Mathias Padarongo Simata the Deputy Premier and Minister of Finance. The crux of the affidavit related to:

(a) the failure of the plaintiff to have business licences of the Provincial Government under the Business Licence Ordinance;

(c) the practice of the Province to treat separate concession logging areas in a business fee register with a schedule of the plaintiff’s fees paid and unpaid;

(d) named the concession areas in a business fee register with a schedule of the plaintiff’s fees paid and unpaid;

(e) the reason for increasing the business licence fees to meet increased costs;

(f) the actual monetary fee per concession, from 1994 of $56,000 to 2003 fee of $100,000.00;

Mr. Katahanas cross examined and satisfied me Mr. Simata was conversant with the plaintiff’s register of business licences annexed to his affidavit but that his denials of the application for licences before 2003 by the company was wrong.

Ordinance	Relevant Business	Annual Fee Imposed
Isabel Province Business Licence Ordinance 1994	Timber felling: permanent logging for export of round logs	$56,000.00
Isabel Province Business Licence (Amendment) Ordinance 1995	Timber felling: permanent logging for export of round logs	$80,000.00
Isabel Province Business Licence (Amendment) Ordinance 2003	Timber felling: logging contractor Timber felling: sub-contractor Stevedore Service	$100,000.00 per concession $30,000.00 per concession $2,000.00

There is no explanation or rationale for license fees in the Ordinance, apart from the introductory; “An ordinance to provide for the regulation, control and licensing of business carried on in Isabel Province”.

Schedule 3-Business License Fees are prescribed by categories-and fees listed adjacent to such categories.

On their face these fees are discriminatory. From the evidence given in cross-examination the huge differential between, for instance, the fee for Timber milling-Wakabaot/local and Contractor-per concession area, satisfies me that the Province seeks to raise revenue by attaching large license fees to categories which attract large business interests. The fact that the plaintiff companies have sought to renew business license in the past relates more to the “cost of doing business” in these regions than to any justifiable charge for a licence, it would seem on the evidence. Such earlier payments cannot bind, as it were, the plaintiff as a matter of law, to continuing liability under the ordinance if the fees are subsequently shown to be void as ultra vires the power of the Province. This is clearly raised by the pleadings and must be faced.

Counsel for the Province has not shown the rationale in the legislation or in argument, to a legal basis in the Ordinance for the discrimination shown in fees relating to Logging contractor or sub-contractor; apart from the admissions in evidence to an avowed revenue raising purpose. In the absence of any apparent Forest Management powers divested by the Central Government under the Forestry Act or the Provincial Government Act, in the circumstances these business license fees complained of have the indicia of a “tax” rather than any “service rendered” in consideration for such charge. There has been no discernible provincial service to be afforded the plaintiff loggers, relating to these business licenses. The apparently excessive charges or “fees” may be seen as a “tax” in terms understood in the circumstances of Air Caledonie International v The Commonwealth [1988] HCA 61; (1988) 165 CLR 462, 467 and there is little doubt the Province so intends when I read the evidence.

In 2000/2001 financial year by letter from the Province a receipt for payment of fees of $13,000.00 was acknowledged. Again the schedule claimed fees for 2001 despite the payment of a fee of $13,000.00. The schedule of the defendant is wrong in fact.

Further, Mr. Simata conceded that while the company in the period 2000/2004 may have paid fees approximating $597.834, in Mr. Simata’s view it was not enough for it did not accord with the company liability. He further agreed that the earning of Government revenue, was largely pegged to how much it collected in logging business license fees. The manner of collating the fee payable changed from a province wide licence to concession areas and the individual concession area business licence fees increased in 2003 to $100,000.00 per contractor per concession and to $30,000.00 per subcontractor per concession. This is the basis for revenue raised.

The concession, if including various parcels of land would be charged separately per parcel. He denied that the company had a business licence for its concessions but could not answer whether a payment of $6.9m would rectify that. This amount appears to be the sum of the various license fees claimed outstanding by the defendant in its schedule.

There is a clear issue to be resolved in relation to the alleged amount of fees outstanding for the schedule acknowledges no credits yet the Minister recognizes the payment of at least $13,000.00 for licence fees. The evidence given in cross examination did not rest there, but for my purposes, today, I need not particularize further.

Mr. Mana’lo’alie then read the affidavit of Ivan Rotu the Provincial Minister for Natural Resources. No objection was made to that affidavit.

In answer to the motion, Mr. Katahanas read the affidavit of Alex Wong, the assistant General Manager of the plaintiff group of companies. Clearly numerous licence fees were paid over time as evidence by copy letters from the Isabel Provincial office.

The defendant’s motion relies upon the Isabel Province Business Licence (amendment) ordinance 2003 (and preceding ordinances) for that:

(a) S.3 provides no person shall operate a business unless granted a business licence; (b) no licence shall be issued until the whole fee has been paid;

(e) the evidence of both Provincial Ministers shows that the company was operating in breach of the ordinance for it did not have appropriate licences.

The fact that the company has felling licences from the Commissioner of Forests does not absolve the company from the obligation to obtain necessary business licences under the Provincial Ordinance. To operate without a business licence is a prescribed offence and if this court is satisfied that is the case, here then orders should be made in terms of the motion.

In support of this argument Mr. Manetoali referred to the decision of my brother Judge Kabui J in Sau’eha Joses Tahua –v- Premier of Rennell and Bellona Province (unreported civil case 107 of 20-00 given on 30 May 2000) but the only reliance, really is the fact that the provinces licence to operate harvest marine products may have been in the “preserve of the Provincial Executive, not the treasurer” but the case must be distinguished on its facts which are not analogous to this case. Here management of forest products is the preserve of the Central Government under the Forestry Act.

I am satisfied however that the Isabel Provincial Ordinance 2003, Business Licence has been validly promulgated. But that is not the issue.

Mr. Katahanas says that the Province has no proprietary or other interest in the property the subject of the motion. It claims money for business licence fees but has not instituted proceedings or counter claimed for that money.

Clearly then there can be no argument as to ownership of the property used by the plaintiff for its logging operations. They belong to the company. Where there is clearly a dispute over the amount of the money claim, to seize the assets of the plaintiff in this fashion is plainly illegal and ignores general principles for interlocutory injunctions (see American Cyanamid [1975] UKHL 1; (1975) AC 396, 408); these general principles have application here. The plaintiff says in any event the licence fees claimed are ultra vires the power of the Provincial Government for they are an unlawful tax.

Mr. Katahanas was at pains to develop this argument. He referred to S. 106 of the Constitution; “s.106- no taxation shall be imposed or altered except by or under an Act of Parliament”.

The Parliament is the central parliament. To make the differentiation clear in relation to the taxing power, S. 33(5) of the Provincial Government Act (cap 118) says:

"S33(5) A provincial Assembly (Government) has no power to make laws imposing altering or abolishing tax, except where power to do so is expressly conferred on the Provincial Assembly (Government) by or under this Act".

But revenue may be raised by Provinces in accordance with Schedule 4 of the Act.

(c) fees for services performed or licences issued by or on behalf of the Provincial Executive (other than services performed or licences issued by them as agent of another)"

S.67 (3) of the Interpretation and General Provisions Act (Cap 85) deals with such “fees for services” by providing they shall “as far as practicable be within a range properly chargeable in respect of the services provided and shall not be excessive or unreasonable". There has been no devolution order made in relation to the Forest Management Act

The plaintiff relied on the judgment addressing this issue of "fees for services" given by Kirby P in the unreported Civil Appeal 11 of 1994; 5 September 1995 of Solomon Motors Limited –v- Honiara Town Council.

"It can be seen that, both for the arguments addressed to constitutional validity and those concerning the reasonableness of the fees charged by the respondent (province) for the licensing of businesses, an important, even crucial, question may be the establishment of the relationship (if any) between the fees actually charged by the respondent to licence particular businesses and the activities performed by the respondent in relation to such licensing. If all that the respondent were to do was to provide a piece of paper, called a “licence” to any business applicant, conducting no investigations, inspections or enquiries and providing no services at all, clearly the “licence” fees would be revealed as nothing more than the raising of revenue for the respondent. This would then raise the three objections tendered by the appellant in the appeal. If however there were services provided which bore some arguable relationship between the fees charges and the services provided, the Court would not involve itself in the precise ratio between charges and services. It would then be enough for the Court to note that an arguable relationship was established. This would meet the contention that the purported licence fees were actually illicit taxation, beyond power or otherwise not reasonable in the relevant sense".

Just as the Court of Appeal was obliged to objectively view the material before it to seek to resolve the points raised eg. the activities performed by the defendant Province in relation to such licensing and if apparent, the relationship of such services to the charges made, so must this court seek to identify those points. There is the faint suggestion of claims to resource protection in the evidence, by imposing such hefty fees perhaps so as to effectively prevent continued logging (certainly the Province seeks to seize the plaintiff’s assets and machinery although it bases its right on the offence of unpaid fees; not any claim to resource protection for the forestry resource belongs to the landowners or usufructory owners) and I have had regard to Harper v Minister for Sea Fisheries [1989] HCA 47; (1989) 168 CLR 314,325. In this country the legislative framework for logging is to be found in the Forestry Act, logging licenses are issued under that Act so assertion of perhaps faint claims to resource protection in itself, cannot make the imposition of yet another level of logging fees called business license fees in this provincial ordinance intra vires the powers of the provincial legislature for there has been no devolution of powers under the Forestry Act or Taxation Act to my knowledge to justify this manifest attempt to raise revenue in this fashion.

A distinguishing factor between these two cases is that touched on earlier; the manner in which logging licence are granted fall completely within the Forestry Act and that Act allows no recourse to common law, practice or other legislation (unless specifically mentioned) in its interpretation for it is a code dealing with forestry and logging.

Where the Province is involved by calling meetings of interested landowners under the Forestry Act, the evidence here is clear that such costs associated are paid by the loggers and do not relate in any way, to business licences.

A reading of Ivan Rotu’s affidavit does not help for it is silent on services provided by the Province although in para 3 it presumes a power which falls within the Forestry Act, a power to be exercised by the Commissioner of Forests.

"3. It is the Isabel Provincial Government’s policy that logging activities in the Province must be properly monitored and that logging companies comply with Provincial Laws".

I must presume the provincial laws to which he refers are those about “business licenses” for no other laws are discussed. Again on a reading of Mathias Padarongo Simata’s affidavit, the tone of the affidavit presumes the right to business licence registration, but again is silent on the type or extent of services provided. In the cross examination carried out by Mr. Katahanas it was clear the province pursued the plaintiff to pay these charges, but that cannot be the underlying service or purpose for such fees. Mr. Simata said that underlying purpose was revenue.

"Q (The Ordinance) also introduced "timber felling subcontractor" in Province, who also needed a concession area licence?

On such cross examination, I am satisfied the principle purpose of these licence fees, to raise revenue, was illicit taxation and beyond power in the terminology of the Appeal Court.

Nowhere does the Province show type of services given the business in satisfaction, rather the emphasis is wholly directed towards separating the business into categories of the provinces own choosing, imposing a fee on such categories and increasing such fee to such an extent that some $9.6m would appear to be claimed.

Again there is no evidence the plaintiff carries on business as shipper’s; freighters or stevedores but again those charges suffer from the same deficiency as those for the other logging business licence, and those charges also have that indicia of illicit taxation.

A series of cases about the time of the Solomon Motors matter also illustrate the ultra vires nature of such fees levied by the Western Province in similar circumstances:

Allardyce Lumber Co. Ltd & ORS –v- The Premier of Western Province (Unreported, High Court, Muria C.J. in cc 234 of 1994 delivered on 14.3.95)

Allardyce Lumber Co. Ltd. & ORS –v- The Premier of Western Province (Unreported, High Court Awich J. in cc 616 of 1996)

Allardyce Lumber Co. Ltd & ORS –v- The Premier of Western Province (Unreported, Court of Appeal, Mason P., McPherson and Casey J.A.) in c.a. 10 and 12 of 1996 delivered on 27 February, 1998 (at pps. 9 to 12)

Of course, the Court’s power to make declarations sought in the endorsement, page 2 of the amended Writ of Summons seem not in issue; the breadth of the declaratory relief power is wide. Those powers derive from the Court of Chancery post 1883 and I have described the historical basis elsewhere.

To realize the effect of declarations in the terms sought, I’m minded to refer to Hutley J A’s comments in Dorney -v- Commissioner of Taxation (1980) 1 NSWLR 404 at 409 where he said:

A decision (administrative or judicial, if the court is an inferior one) may be void if ultra vires, and a declaration to that effect may have an apparent nullifying effect, but it does not really have it. The declaration of voidness is like any other declaration, a binding statement of an existing legal situation, not a constitutive legal act. This distinction was recognized by the plaintiffs, whose submissions were based on the proposition that the assessments and notices of assessment were, if the facts alleged were made out, void, not merely voidable, so that the court’s power to grant declarations could operate, and the declarations, if made, would not be mere theoretical exercises.

This was accepted by the plaintiffs, who assented to the proposition that, only if the assessment or the notice of assessment could be shown to be void, could the declaration sought be made. It was suggested faintly that the decision of the House of Lords in Anisminic Ltd -v- Foreign Compensation Commission (1) was inconsistent with this. I do not agree. The House of Lords expanded the circumstances under which a decision of a tribunal could be declared to be void, but did not turn a declaration into a constitutive remedy.

I am satisfied the schedule of fees 3 in the Ordinance purporting to impose license fees on Loggers; Shipping services and Stevedore services are void for they are ultra vires the legislatures power and consequently the declarations sought may be made.

It follows that an account of moneys paid by the plaintiff would be appropriate but before so ordering I will hear argument from counsel.

In any event I am not satisfied the Province has any right whatsoever to interfere with the logging business of the plaintiff, and am bemused that the RSIP should succumb to the wishes of the Province in this matter, when there are no orders of this Court or any court of competent jurisdiction so directing the Force. It is this abuse of process which causes such confusion and conflict in the country. The motion is struck out with costs.

I make orders in terms of para 1 to 7 of the amended Writ of Summons. I direct that the matter be stood down so that the counsel may address me on the continued conduct of the matter.

High Court of Solomon Islands

Earthmovers Group of Companies v Premier of Isabel Province [2005] SBHC 41; HCSI-CC 048 of 2004 (2 March 2005)