Spring Hill Ltd v Toronto Connection (SI) Ltd [2011] SBHC 134; HCSI-CC 378 of 2011 (4 November 2011)

IN THE HIGH COURT OF SOLOMON ISLANDS
(Mwanesalua J)

Civil Case No. 378 of 2011

BETWEEN:

SPRING HILL LTD
Claimant

AND:

TORONTO CONNECTION (SI) LTD
1st Defendants

AND:

GREAT WOODS LTD
2nd Defendants

Date of Hearing: 19 October 2011
Date of Ruling: 4 November 2011

G Suri for Claimant
R Kingmele for Second Defendant
S Balea for SamLin Sang

RULING

Mwanesalua J:

1. The Claimant filed its claim against the First Defendant on 22 September 2011. It also filed an ex pate application for interim freezing order on equipment and machines owned by the First Defendant. The material paragraph of that order is paragraph 1, which is in the following terms: "1. Until further orders, the Defendant, by itself, its directors, shareholders, managers or agents be restrained from removing from Solomon Islands or dealing with (including sale) the following logging equipment and machines in or out of Solomon Islands: (a) 3 units x Hitachi Excavator; (b) 2 units x D7OLE Komatsu Bulldozer; (c) 1 unit x CAT D60 Bulldozer; (d) 1 unit x 3836 Meiz Log Truck; (e) 1 unit x Nissan Truck; (f) 1 unit x Nissan Dump Truck; (g) 3 units x Loader CAT 966 and (h) 3 units x HZ175 Land Cruiser". The interim freezing order was obtained on 23 September 2011.

2. On 10 October 2011, Messrs G Suri, M Pitakaka, R Kingmele and Mr Samuel Balea of counsel appeared before the Court. Mr Kingmele sought an order for joinder of the Second Defendant in the claim. Mr Pitakaka sought leave to withdraw from representing the Defendant, Toronto Connection (SI) Ltd in the claim on the basis that he might have a conflict of interest. Mr Kingmele and Mr. Pitakaka were granted the orders they sought. Mr Balea's application to join SamLinsan (SI) Ltd for joinder in the claim was not granted because no application for joinder was filed in court.

3. The claim came before the court for the third time on 19 October 2011. On that date, the second Defendant, Great Woods Ltd, sought an order to set aside the interim freezing order granted to the Claimant on 23 September 2011, on the basis that it entered into a sale and purchase agreement (the Agreement) with the First Defendant on 13 September 2011, pursuant to Section 17 of the Sale of Goods Act 1893 (uk). The purchase price for the equipment and machines ("the goods"), was paid in full on 15 September 2011. The Applicant, says that the Property in the goods was transferred from the First Defendant to the Second Defendant/Applicant on 15 September 2011. It was on 15 September 2011, that First Defendant Toronto Connection (SI) Ltd as Seller and Great Woods Ltd as the buyer wanted the goods to be transferred to the buyer. Great Woods Ltd contends this intention is supported by Section 17 which is in these terms: " S.17(1) where there is a contract for the Sale of Specific or ascertainable goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.(2)For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties, and the circumstances of the case".

4. The Second Applicant's argument is that the property in the goods had passed to the Applicant before the interim freezing order was obtained on 23 September 2011.

5. On the contrary, the Claimant contends that the goods had not passed to the Applicant because the Sales Agreement is unenforceable in law. This is because the Sale Agreement was not stamped as required under Sections 9 and 10 of the Stamp Duties Act [Cap.126'. These Sections are in these terms: "9. No document executed in Solomon Islands or relating, wheresoever executed, to any property situate in Solomon Islands or to any matter or thing done or to be done in Solomon Islands, shall be pleaded or given in evidence or admitted to be good, useful or available in law or equity unless it is duly stamped in accordance with the Law in force at the time when it was first executed." "10. (1) every document executed which is chargeable to duty under this Act shall be duly stamped irrespective of whether or not that document is required by law to be registered. (2) All the facts and circumstances affecting the liability of any instrument to duty or the amount of the duty with which any instrument is chargeable are to be fully and truly set forth in the instrument and the chief collector shall refuse to stamp such document unless he is satisfied that such evidence as he may deem necessary to prove that all such facts and circumstances are truly set forth in it. (3) (i) in the case of a transfer of property, the chief collector shall require a valuation from a certified valuer in respect of the value of the property transferred".

6. Further, the Claimant contends, that the Agreement violates the stamp Duties Act because of the following grounds: "(1) the duty paid on the Agreement was only $50.00. It should be 3.75% of the value of the property transferred as stated in paragraph 1 of the Schedule to the Stamp Duties Act. Machine and equipment are properties. Thus sale of machines and equipment in this case falls under Transfer on Sale. Section 2 of the Stamp Duty Act defines "transfer on Sale" as "includes every document and every decree, certificate or other order of the Court or interest in any property upon the sale thereof is transferred to or vested in a purchaser or any other person on his behalf or by his direction".

7. Paragraph 11 of the Schedule to the Stamp Duty Act also describes properties as "any property whatsoever or of any interest thereon on."

8. The Agreement states that the purchase price is RM2, 700,000.00. Using the standard currency conversion rate of IMY[1] = SBD2.55, the equivalent of RM2,700,000.00 is SBD6,885,000.00. Hence, proper Stamp Duty at 3.75% should be $258,187.50, not SBD50.00

9. There is no valuation on the goods to be transferred in this case. That is a requirement under section 10 of the Stamp Duties Act. It is clear that sections 9 and 10 were not complied with by the Second Defendant/Applicant.

10. The Claimant cited authorities on contracts inconsistant with statute. First Mahmond and Ispahani (1921) KB 716 statement of Ellenborough CJ in Langton v Hughs (2) namely that "what is done in contravention of the provisions of an Act of Parliament, cannot be made the subject matter of an action" In addition the statement by Le Blane J in Langton -v- Hughs at Page 725 where he stated: "It is an established principle, that the court will not lend its aid in order to enforce a contract entered into with the view of carrying into effect anything which is prohibited by law" In the same case Scrutton LJ said at page 729 "the court does not sit to enforce illegal contracts. There is no question of estopped; it is for the protection of the public that the court refuses to enforce such contract and in George v Greater Adelaide [1929] 43 CLR at 97-98 Knox CJ said " there can, I think be no doubt that, leaving aside any question of illegality, the contract was and was intended to be a binding agreement for the sale of the land the performance of which was not to be completed until the provisions of the Act had been complied with, and it is clear that the subject matter of the contract consists of "allotments" Nor do I entertain any doubt that the transaction amounted to a "Sale" within the meaning of Sec. 23 of the Act, in which the word "sell" is used to describes a transaction different from a transfer, conveyance or disposition of lands. Such a transaction is forbidden by the Act, and is therefore unlawful, unless the provisions of the Act – i.e the Act and Regulations – are complied with."

11. It is clear that sale agreement between the First Defendant and the Second Defendant executed on 13 September 2011 was rectified on 12 October 2011. However, it also obvious that the Defendants have not complied with the relevant provisions of the Stamp Duties Act as referred to above. It is clear that the First Defendant gained from the sale of the goods, leaving its debts unsettled with the Claimant. The court will not sanction their Sale Agreement for non-compliance, with the Stamp Duties Act. In the circumstance, the court refuses the Applicant's application to set aside the interim freezing order granted in favour of the Claimant on 23 September 2011.

Order: (1) That the goods (machines and equipment) impossession of the Applicant be returned to the Claimant for safe keeping.

(2) That the Second Applicant pays the Claimant's costs on indemnity basis.

(3) The Applicant's application to set aside the interim frozen order granted in favour of the Claimant on 23 September 2011 is refused and dismissed.

THE COURT

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^[1] Malaysian Riggit