Kalena Timber Company Limited v Kidoe [2007] SBHC 85; HCSI CC 18 of 2005 (24 August 2007)

HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 18 of 2005

KALENA TIMBER COMPANY LIMITED
DONALD ODIKANA LEZUTINI
(Representing himself and majority of his tribe)

v.

EDDIE MAENA KIDOE,
MARVIN LEZUTUNI AND GWEN ABANA
(Trading or Holding themselves out as Reresare (Veala) Development, or
Veala Reresare Development Association or;
Reresare (Veala) Development Company)
COMMISSIONER OF FORESTS,
RERESARE DEVELOPMENT COMPANY LTD
AND JACK LAGOBE, DALCY TOZAKA,
TEDDY PAVO, EDDIE KIRIA, ALLAN GILAI AND MAKIVA OKAVAI

Date of Hearing: 31st July 2007
Date of Ruling: 24 August 2007

Mr. Gabriel K. Suri for 1st & 2nd Plaintiffs
Mrs. Tongarutu for 1st Defendant
Mr. Thomas Kama for 3rd and 4th Defendant

RULING on questions of law posed for the Courts answer

Brown, J:

[1]. This inter parte summons of the plaintiffs claims by Order 27 of the High Court Rules, rulings on points of law which the plaintiff says, will substantially dispose of the 1st defendants grounds of defence. The plaintiffs ask 4 questions of the court which the plaintiff argues should cause the court to find that a particular logging agreement, (having the 1st defendants as a party or "grantee"), should be declared null and void.

[2]. The questions asked may shortly be paraphrased as follows:-

2.1 Whether Reresare (Veala) Development Company has the contractual capacity or is competent in law to enter into the logging agreement dated 14 December 2004, when the entity was neither registered under the Business Names Act (Cap. 178) nor incorporated under the Companies Act (Cap. 175) at the time of the agreement on the 4 December 2004.

2.2 Whether the logging agreement dated 14 December 2004 between the Reresare (Veala) Development Company and some of the persons determined by the Provincial Executive in (accordance with the Certificate (Form 2) given under s. 9 of the Forest Resources and Timber Utilisation Act (Cap. 40) was valid and lawful in spite of the fact that the 2nd plaintiff, a determined "representative" did not sign the agreement.

2.3 Whether Veala, Reresare Development Association was legally competent as at 21 December 2004 to hold logging Licence No. A10236 issued by the Commissioner of Forests when the entity was neither registered under the Business Names Act nor incorporated under the Companies Act.

2.4 Whether the 1st defendants by their various names have contravened s. 3 of the Business Names Act by failing to register under the Act.

[3]. Mrs. Tongarutu for the 1st defendants says that pleadings are complete and the matter should proceed to trial in the normal course. Mr. Kama agrees with Mr. Suri that the court may grant leave to apply under O 27 since answers to the questions will shorten the trial.

Since hearing this matter on the 31 July Mrs. Tongarutu (who it should be remembered was the Acting Attorney-General for a period) on Thursday 16 August took without authority my notes of these proceedings from the court file in the Registry. They were subsequently returned the following day. There is an abrogation of the lawyer’s professional duly to the court. The clients interest should not be prejudiced that behaviour which has been exhibited. Nevertheless the 1st defendant has not availed itself of the opportunity to make submissions on the plaintiff’s summons within the time allowed. The legal representative of the 1st defendant was in court throughout the proceedings and was cognisant of the orders which I made granting time for written submissions. I accordingly propose to deal with the summons on the material before me.

[4]. I granted leave and allowed Mrs. Tongarutu (and the other respondents if necessary) to answer the plaintiffs argument.

[5]. The Rules do allow for points of law to be disposed of prior to trial "where in the opinion of the court, the decision of such point of law would substantially dispose of the action, or distinct cause of action, ground of defence etc" (O. 27 r. 3)

[6]. Whilst the questions to an extent require findings of fact (the actual parties to the logging agreement dated 14 December 2004; the persons nominated by the Provincial Executive (Form 2) as able to grant timber rights [the "representatives"] and the named identity as holder of the logging licence No. A10236) the facts in that regard are uncontroversial. It follows that I am of the opinion addressing these questions will substantially assist in resolution of issues of dispute. The pleadings, Mrs. Tongarutu says, have closed so that it would be fair to all parties to reduce if possible issues for trial (Carl Zeiss Stifting v Herbert Smith & Co. (1969) 1 Ch. 93)).

[7]. The first question has two parts. The strict legal issue is whether an unincorporated association, unregistered under the Business Names Act or unincorporated under the companies Act can validly enter into a contract in the nature of a logging agreement in terms of that purportedly executed on 14 December 2004.
The short answer is no, for the reasons Mr. Suri has argued from authorities collected in Australian Business Law 1989 edit (CCH Australia Ltd) at 635. As regards companies not incorporated, the common law adopted as part of the law of the Solomon Islands is clear and is that contracts entered into on behalf of a company not yet incorporated cannot be ratified by the company once in corporated. (Barron M L and Fletcher A J R., Fundamentals of Business Law (3rd Edit) p 100).

Mr. Suri’s reference to those authorities in the Australian Business Law brings me to the even more fundamental principle of agency law. "An agent’s actual authority is the creature of an arrangement between the principal and the agent; it is authority which the principal, expressly or impliedly, has given to the agent". In these instances, the principal is the lawfully determined "representative" found in terms of S. 8(3)(b) and the agent again in terms of the (Prescribed Forms) Regulations is the person (or persons) or Company duly made a party to the Form of Agreement for Timber Rights. Where those "persons" cannot readily be ascertained on the face of the Agreement or the Company has not been incorporated, then a necessary incident [the parties to be charged], of agency law is lacking. I expound on this aspect later in my reasons.

[8]. The second part is whether in terms of the logging Agreement dated 14 December 2004, the signatories may be said to have incurred legal liability directly as individuals.

[9]. By affidavit of search of Philip Kaukui filed 25 May 2005 it is plain neither Veala Reresare Development Association nor Reresare (Veala) Development Company was registered or incorporated to the 21 December 2004. There were then no entities by these names able to contract lawfully with the "representatives" or to accept a logging licence.

[10]. By paragraph 3 to the Form 11 (Certificate of Customary Ownership) the Provincial Executive determined;-

"(a) that the following persons are lawfully able and entitled to grant timber rights in the area shaded on the attached map being land held by the Veala Reresare Tribe Land Owning Group.

1. Eddie Maena Kidoe

2. Marvin Lezituni

3. Frank Ninamo

4. David Kute

5. Lewin Kidoe

6. Harry Luluku

7. Donald Odikana Lezituni

8. Gwen J Abana"

By its reasons the Court Appeal decision in Gandly Simbe v. East Choiseul Area Council determined that only those persons named are lawfully able and entitled to grant timber rights.

"Logging may not take place without obtaining their agreement to the entry, felling and removal of the timber. Authority to exercise rights of that kind is, as already mentioned, conferred not by the licence issued by the Commissioner under s. 5(1A) by only by an "approved agreement", which by s. 5A means an agreement approved under the provisions of Part 11A. See Qurusu v. Attorney-General CC4/93 [87]; and Cape Esperance Company Ltd. v. Emery and Sullivan (1995) (CA 7/19940. In practice, therefore, it is the customary landowners who are the persons entitled to grant timber rights over the land in question Qurusu v. Attorney-General CC4/93"

[11]. The Licence No. A10236 dated 21 December 2004 named Vela Reresare Development Association C/- Box 889 Honiara as the licencee able to:

- "cut fell and take away timber from:-

Veala Reresare Customary Land, Vella La Vella, Western Province"

The Licence should post date both the Agreement envisaged by s. 12 of the Act and the Certificate of the Provincial Executive.

[12]. The Form II given on the 20 July 2004 was affirmed by the Premier’s letter of the 10 December 2004 addressed to the Commissioner of Forests. On the 17 November 2004 an "Agreement to Acquire Timber Rights" was entered in to by 15 named Trustees Representatives or Landowners of Veala Reresare (Tribe) Customary Land with Kalena Timber Co. Ltd. Amongst the 15 who executed the agreement were Frank Ninamo David Kute Harry Luluki, and Donald Odikana; only 4 of the 8 named in the Form II able to grant timber rights.

[13]. The "representatives" or "land trustees" are "principals" then in terms of the law governing agency and the Agreement sets out the arrangement between the parties to the Agreement. This Agreement supercedes any implied customary obligations between these parties for the Agreement is part of "System made" law designed, in terms of the Act, to obviate the problems which are illustrated in the appendix to this judgment.

[14]. It should be mentioned that this "approved agreement" need be in form corresponding to that "Form of Agreement for Timber Rights" in the (Prescribed Forms) Regulations under the Forestry Act. By virtue of clause (i) of the prescribed form:- "The agreement shall be signed by all persons specified in paragraph 3 of Form 2 of the Schedule to the ... (Prescribed Forms) Regulations". Those persons are the named "representatives" in paragraph 10 hereof.

[15]. By judgment of the Court of Appeal given in Gandly Simbe v East Choiseul Area Council; Eagon Resources Development Co. anors (unreported Appeal 8 of 1997 delivered 21 October 1998), the court at 15 deals with inconsistencies or departures from the terms of the model Agreement for Timber Rights under the Regulations. The Court said:- "The consequences of failing to comply with the provisions of failing to comply with the provisions of the Form and Regulations is not expressly stated in the Act or Regulations, but it can scarcely be doubted that it results in the invalidity of the timber agreement". In this instance the agreement of the 17 November 2004 clearly did not follow the imperative in clause (i) of the model Agreement, for not all "representatives" have been shown to have signed the agreement. That agreement then is fatally flawed.

[16]. On the 14 December 2004 a logging agreement between "Reresare (Veala) Development Company and persons signed for and on behalf of the Veala Reresare Tribe" was executed at Gizo. It was again called a "Standard Logging Agreement for the Acquisition of Timber Rights over Veala Reresare Customary Land (Section 12-FRTUA)". Those who signed on behalf of the Tribe were:-

1.	Eddie Maena Kidoe
2.	Marvin Lezituni
3.	Gwen J Abana
4.	Leon Kidoe
5.	Frank Minamo
6.	Daive Kute
7.	Harry Luluku

The only signature of the "representatives" or land trustees [in para 10 above] not affixed to the agreement was that of Donald Odikana Lezituni. Again the Agreement falls foul of clause (i) in the model Form of Agreement, for that it fails to have all persons named in the Form II as "representatives" or "land trustees" joining in the agreement to grant timber rights.

[17]. The other party, the Reresare (Veala) Development Company had adjacent, a signature of its chairman. That signature appeared to be that of Eddie Maena Kidoe one of the "representatives". The model Form of Agreement speaks of:-

"The Company or person seeking to purchase the timber rights shall be referred to as ‘the Purchaser" or "the Grantee (s)". I have found that no company had been incorporated in that name at this time. No persons were named as comprising the entity, the Reresare (Veala) Development Company. I am satisfied then failure to incorporate before purporting to execute the Agreement or to name the individuals seeking to purchase, are failures of such substance and not merely form, as to invalidate the purported Agreement for it has not been shown to be "duly completed in the prescribed form and manner..." (s. 11(c) of the Forestry Act).

[18]. What is readily apparent is that of those persons whom I have named in para. 15 above, Frank Ninamo, David Kute and Harry Luluku, also executed the Agreement to grant timber rights earlier to Kalena Timber Company Ltd, on the 17 November 2004, about a month before the second purported Agreement. The Court may be excused from wondering whether the purported "representatives" of the Veala Reresare Tribe had not fallen out amongst themselves over the issue of the logger. The named "purchaser" or "grantee", Reresare (Veala) Development Company was not a the time, on the 14 December 2004, an incorporated company as required by the model regulations (for that "the Company" in para c of the model requires that incorporated entity) and whilst "the Chairman" has signed purportedly for the Reresare (Veala) Development Company, no individuals are named, individuals comprising a group.

[19]. It stands to reasons, then that the group or entity, "the Reresare (Veala) Development Company" is not recognised by law, as capable of entering into contractual relations. "System made" law requires compliance with its rules for its efficacy. [see appendix]

[20]. There is no Associations Act (similar to an Act by that name in Papua New Guinea) regulating Associations in the Solomon Islands. That does not inhibit persons associating for whatever purpose but if specific (such as the business of granting a logging licence) a document or deed giving particulars of the purpose, responsibilities and liabilities of any such association may be expected to be executed by those seeking to be bound, but such document or deed is absent in this case. In any event, the contractual ability of any such association by deed for instance, must remain one for argument on the deed and does not arise here.

[20]. I have sought to illuminate the relevant facts which go to documents. There is no logical analysis required of the parties’ statement of facts or intentions. The documents on which I rely speak for themselves. Where evidence of search of registration of incorporation of a company is relevant, again I am able to rely on document. So the evidence on which I rely is contained in the documents which I have described.

[21]. In the course of my enquiry on the documents, I have applied the principles of law relevant so that the conclusion is, in answer to those questions posed in paragraph 2:-

2.1	No
2.2	No
2.3	No
2.4	Not necessary to answer

[22]. Since parties in these proceedings have acted both as to their benefit and detriment as a consequent of varying states of affairs brought about by their acts over time, it is plain that equitable principles may affect the outcome of these proceedings after my findings on the questions.

I recommend the parties seek to resolve this imbroglio for it may be that costs of continuity litigation will negate the benefit of any orders available especially if the court were to determine that the losses and benefits, if any, should remain where they lie.

The matter shall stand adjourned pending resolution or a certificate of readiness for trial.

THE COURT

Appendix

Quote from Derham, Maker and Waller (1991); "What then is law"
An Introduction to Law, 3rd Edit.
Law Book Co. Ltd.

"All goes well for the first two months. Then, in the third month when group A has the truck the battery ceases to function. It is replaced with a new battery purchased by some of the members of group A. When the truck is handed over to group B at the end of the third month, it is delivered with the original and now useless battery in place. The new battery is retained by group A. Members of group B, so as to use the truck, buy a new battery which they retain when the truck is again handed over. In the course of the following eight months, springs, tyres, the generator, all spark plus, the water pump, the radiator, the starter motor, the universal joints, the differential, the clutch, and the steering box, are all broken or worn out and replaced in turn by members of both groups. At this point each group has a nearly complete set of essential spare parts and the truck which is handed over at the month’s end is little more than useless wreck. Even more complicating is the fact that the cost of each spare part purchased for each group was contributed to by different members of each group and in differing amounts.

At this time, for reasons which may have nothing to do with the enterprise itself, the arrangement breaks down and both groups want to bring it to an end. Each group demands its money back and each member of each group voices similar demands. A meeting of both groups together and meetings of each group separately; find the problem too complicated to resolve to the satisfaction of all and no conclusion is reached. Representatives of both groups approach an official of the industrialised community which has been providing the market for the groups’ products. They ask the official to resolve their problem for them; and they explain that there is danger of violence and bloodshed not only between group A and group B, but also between the members of each group, unless a satisfactory solution is found fairly quickly.9

The official, in turn, is unable to unravel the complications of the situation. In any case there is not the time to deal separately with the 104 individuals concerned nor to establish the truth or otherwise of their varying assertions about past events and transactions. The official explains that in the law of the industrialised community the arrangements described would be illegal and those members of such groups as A and B would be denied recourse to legal institutions to resolve their problems. This answer, no doubt, gives little comfort to those seeking help and the official is aware of having failed. Somewhat ruefully, the official understands, perhaps for the first time, why it is that the law of that other community has a clear rule which limits the number of persons who may join in a common enterprise as partners, and why there is a body of quite detailed rules which regulate relations between partners themselves and between partners and persons with whom they transact business.

We have taken two quite simple problems as illustrations. From them however, that inquiring mind may start exploring the nature, the function, and the purposes of law in much more complicated situations and much more complicated societies.

CONCLUSION

At the risk of repetition, we wish to conclude by stressing three things: first, the relationship of law to all other knowledge: secondly, the "system-made" aspects of any law which has gone beyond the needs of the very simple communities; and thirdly, the basic need for law to rest upon justice.

9. This is the account, only slightly distorted and over-generalised, of an actual case which arose in New Britain in 1959 and was told to one of the authors-the late Sir David Derham-by a local magistrate who had been asked to resolve the problem. Similar problems have arisen in other communities brought, sometimes sharply, into contact with a legal system introduced into the country by settlers from the United Kingdom, or by the United Kingdom as a colonising or mandatory power. A part of the Australian experience has been examined by the Australian Law Reform Commission in its monumental report No. 31. The Recognition of Aboriginal Customary Laws (1986).