Success Company Ltd v Tropical Forestry Ltd [2011] SBHC 128; HCSI-CC 226 of 2011 (27 October 2011)

IN THE HIGH COURT OF SOLOMON ISLANDS.
(Faukona, J).

Civil Case No. 226 of 2011.

BETWEEN:

SUCCESS COMPANY LIMITED
Claimant

AND:

TROPICAL FORESTRY LIMITED
First Defendant

AND:

GENERAL CAPITAL INVESTMENT (SI) Ltd
Second Defendant

Date of Hearing: 21st October 2011.

Date of Ruling: 27th October 2011.

Mr. G. Suri for the Claimant
Mr. T. Kama and Mr. Lepe for the First Defendant
No one for the Second Defendant.

RULING.

Faukona, J: Paragraph 3 of the Orders perfected, signed and sealed on 28th July 2011, admonishes the party's consent, pursuant to Rule 12.11, for determination of the question whether the "Deed of option to buy shares and assignment of rights", dated 30th August, is valid.

2. The parties have taken counsel that by hearing of the preliminary issue, that if the issues are resolved, the proceeding or part of the proceeding will be resolved without trial, or that will pave a way for gradual resolution of the substantive issue.

3. The claimant is a company registered in Solomon Islands under the Companies Act and carries on the business of logging. The first defendant is a company incorporated under the laws of Solomon Islands and carries on logging operations. Previously it held a Felling Licence No. A10308 (former Licence) in respect of various customary lands in Ngella Islands, which had expired on 3rd December, 2008. Later, on 5th May 2010 it was granted another Felling Licence No. A10308A in respect of kirigi and binu customary lands in Ngella Island.

4. The second defendant was a contractor engaged by the first defendant to do logging on its behalf on the customary lands authorised under the first defendant's Felling Licence No.A10308.

5. Under the former Licence the first defendant commenced logging operations in the concession areas specifically under that Licence. It did not progress as expected because there were disruptions by various land disputes and interference from another licensee with competing interest. To sort out the indifferences and to enable the company benefit financially Mr Charles Bisa, the Managing Director of the first defendant reached an amicable settlement with the claimant Company; and that included execution of the "Deed of option to buy shares and assignment of rights". The "Deed" was finally executed on 30th August 2005. Clause 11 of the "Deed" specifically stated that it shall remain in full force, without revision, amendment, cancellation, termination or revocation, until full completion of logging on Ngella and execution of certificate of completion issued in accordance with the Forestry Act.

6. The issue before this Court is whether the "Deed" is valid and whether it covers Felling Licence No.A10308A.

7. Mr Suri's argument base on a number of facts. He submits that Mr Charles Bisa who is the Managing Director of first defendant executed the "Deed". Mr Bisa has the usual authority[1] to sign. Usual authority is a subset of implied authority. To proof this point Mr Suri further refer to a letter written by Mr Bisa dated 10th August 2006 attached to sworn statement of Choylin Douglas, which did not refer to a board of the company decision to revoke but the pronoun "I" was used, which simply implicate Mr Bisa has the usual authority to act on behalf of the company. On page 45 of the same statement Mr Bisa confirmed he was authorised to sign on behalf of the first defendant company.

8. Mr Suri further contends that the "Deed" itself reflects at paragraph 3.1 using the words including renewal or extension thereof. That phrase is broad to place obligation upon first defendant. That, as long as Licence No. A10308 is operative, and on occasion of its renewal or extension the benefits must be accorded to the Claimant.

9. Mr Suri's thrust of argument is that the "Deed" covers both licences owned by the first defendant. The "Deed" itself employed the verbatim words renew or extend. Simply put the second licence No. A10308A is not a separate licence but either renew or extension of Licence No. A10308. The reasons for such argument is that the numeral numbers in the licenses are the same except "A" was added to the last numbers of the second licence. Secondly, at page 47, paragraph 2 of Mr Bisa's letter attached to Choylin Douglas sworn statement, which Mr Bisa stated that 2007 harvesting plan is under the old licence. He also mentions it was a roll over plan. The name of the licence of the new licence is the same. Another proof is that a letter by the licencing officer dated 8th August 2011 confirms the new licence is the extension of the old one. And that there is no evidence that there was a new application for new licence in accordance with the Timber Rights Act. This was confirmed by the land owners on foot note 4. There is no document provided in Court in regards to Form 1, 2, and 3 and the timber rights agreement to show they had complied with the Forest Resources and Timber Utilisation Act in obtaining the new licence.

10. Having said that it could be summed up by saying that after the first licence expired on 3rd December 2008, there was no renewal sought and there was no certificate of completion issued to finally put the licence to rest.

11. Mr Kama's approach to the issue is twofold. One is that the "Deed" was devoid and unenforceable because of lack of consideration; that it purports to bind third parties for instance Dalgro (SI) Limited, Tropical Resources Company Limited, Officers and subsidiaries of the parties and the grantors of timber rights; who have not been consulted to give their consent to the arrangement. Above all it was not rectified by the Board of Directors of the first defendant. In fact the "Deed" was made for the benefit of those named in the document.

12. Secondly, in the alternative, Mr Kama submits that the "Deed" was unstamped as required by sections 3(1) and 9 of the Stamp Duties Act, therefore inadmissible and cannot be pleaded in any action. Section 9 in particular states that any document (including a Deed) executed in Solomon Islands, except in criminal or civil proceedings to recover any duty or personality be pleaded or given in evidence or admitted to be good, useful or available in law unless it is duly stamped at that time when it was first executed. Breaching those provisions will render the "Deed" inadmissible in evidence.

13. Further, Mr Kama submits that once the deed document is declared inadmissible the claimant's case comes to an end. There is no need to go through the process of execution, sign, seal and delivered. And no sense to argue whether the document covers the licence extended or renewal for the above purpose.

14. From the sworn statement of Mr Choylin Douglas I noted that there was a timber rights hearing on 24th October 2003 in respect of Kirigi and binu customary lands in Central Ngella. It would appear, from that determination that subsequently the second licence was granted on 5th May 2010. However no material on record to further verifies that.

15. I have comparatively study the two licences carefully. Both appear to be issued to the same licensee with the addition of letter capital "A" at the end of second licence numbers. The major differences are that both licences cover different customary lands and their validity rans from different span of time. The first licence was valid for 5 years which expired on 3rd December 2008, and the second licence was valid for two years and expects to expire on 5th May 2012.

16. The question whether the second licence was an extension of the old one, so as to be subjected to the "Deed of assignment", has a secondary impact on the first defendant's case in this issue. What matters most to the first defendant is that the document (Deed) is void against the rule of perpetuity, lacks consideration; other beneficiaries whose rights are affected were not consented to the assignment. Furthermore the "Deed" was unstamped, therefore inadmissible under section 3(1) and 9 of the stamp Duties Act and cannot be pleaded in any action.

17. Having said that, I am of the view that though there may be extension of the licence, or there was no certificate of completion issued before the second licence was granted, to pave a route for extent. Despite the "Deed" has been executed and perhaps money has been paid up front to show initial implementation of the "Deed". The fact that without the "Deed" being stamped as required by law, before it can be validly use for its purpose is sufficient enough to decide the "Deed" is inadmissible in its entirety. A consequence which cannot be pleaded in any action. I therefore rule that the "Deed of assignment" is void and is inadmissible. That is the only issue asked in this preliminary hearing to determine and I do so accordingly.

Orders.

1. The "Deed of Assignment" was invalid for reasons stated herein, therefore inadmissible as evidence.

2. That the Claimant pays the cost of the first defendant on standard basis.

The Court.

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^[1] Finance Ltd (is hq) v Bank of New Zealand (1993) 32 NSLR 50 at Page 133-Clerk and Gripps JJA.