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Quater Enterprises Pty Ltd v Allardyce Lumber Company Ltd [2011] SBHC 21; HCSI-CC 208 of 2000 (15 April 2011)

IN THE HIGH COURT OF SOLOMON ISLANDS
(Mwanesalua J)


Civil Case No. 208 of 2000


BETWEEN :


QUARTER ENTERPRISES PTY LIMITED
Claimant


AND :


ALLARDYCE LUMBER COMPANY LIMITED
First Defendant


AND :


JOHN HENRY HOWDEN BEVERLEY
Second Defendant


AND


DEVON GEORGE MINCHIN
Third Defendant


AND


AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD
Applicant


AND:


NAOMI TSURUMI
First Respondent


AND


RONOLD HARRY GIBBS
Second Respondent


AND


QUARTER ENTERPRISES LIMITED
Third Respondent


HEARING : 7 March 2011
JUDGMENT : 15 April 2011


Mr. Primo Afeau for the Applicant
No Appearance for the Respondents


JUDGMENT


Mwanesalua, J:


Application


  1. This application was heard at 9.30 am on Monday 7 March 2011. It was filed by the Applicant on 20 September 2010, seeking relief that:
  2. This application is supported by the statement of Ben Anderson sworn on 10 September 2010.

Background


  1. This interlocutory application stems from a legal proceeding between Quarter Enterprises PTY Limited, a company resident of Australia ("the claimant") which sued Allardayce Lumber Company and two of its directors, John Howden Beverley and Devon George Minchin ("the defendants") in High Court case no. 208 of 2000. The action was tried in 2005 with judgment given for the claimant on 19 April 2007.
  2. The Defendants appealed against that judgement to the Solomon Islands Court of Appeal. The court heard the appeal in October 2007 and gave judgment on 12 March 2008, allowing the appeal and set aside the judgment at trial. The court dismissed the case against Minchin and gave judgment with costs in his favour. Against the remaining defendants, Allardyce Lumber Company Limited and John Howden Beverley, the court directed that a new trial be held, and ordered that their costs of the first trial abide the event of the new trial. The court also ordered the claimant to pay the defendants' cost of the appeal.
  3. The Chief Justice Sir Albert Palmer made an order on 11 August 2008 that the Claimant provide security of SBD1,216,037.31 for payment of the defendants costs of the new trial in Civil Case No. 208 of 2000. This order for security was made under Rules 24.50, 24.52 and 24.53 of the Solomon Islands Courts (Civil Procedure) Rules 2007 ("the Rules")
  4. On 27 July 2009, the Applicant at the request of the First and the Third Respondents, issued security in the form of a bank guarantee in the sum of SBD1,216,037.31 in favour of the High Court of Solomon Islands ("the High Court").
  5. On 20 May 2009, Goldsbrough J sitting in chambers as judge of the High Court dismissed the plaintiff's action in case no. 208 of 2000 (the new trial) for want of prosecution. He ordered that the defendants' costs of the first trial be paid jointly and severably by the claimant and Mr. Ronold Harry Gibbs (who was and is a director of the plaintiff). In addition, the judge ordered that the costs of the application before him be paid jointly and severably by the claimant and Mr. Ronold Harry Gibbs. An application for leave to appeal against the dismissal of the new trial to the court of Appeal was subsequently made in Civil Appeal No. 5 of 2009 on 22 July 2009. The court of appeal dismissed that appeal with costs.

Payment of SBD1, 216, 037.31 to Sol-Law


  1. Having dismissed the new trial in Civil Case No. 208 of 2000, the High Court ordered the Applicant to pay the sum of SBD1, 216,037.31 to Sol-Law Trust Account pursuant to its bank guarantee in favour of the High Court. The Applicant paid this sum by cheque on 5 November 2009.

Bank Fees on the Bank Guarantee


  1. The Applicant charged the Respondents bank fees in the sum of SBD$18,241.00 for establishing the bank guarantee and 3% per annum of the amount guaranteed as of 18 December 2009. The outstanding bank fees owning to the applicant were calculated as SBD$31,482.00, after the third Respondent had paid SBD5000 in part payment.
  2. Mr. Afeau indicated in court while making submissions on behalf of the Applicant that the Respondents were aware of the hearing of this application on 7 March 2011. He referred to the order of this court dated 9 December 2010, perfected, signed and sealed on 13 December 2010. That order listed the hearing of this application for 9.30 am on 7 March 2011 at the High Court in Solomon Islands; granted leave to serve court documents on the second Respondent outside of Solomon Islands; and the Applicant to serve or caused to be served on the Respondents this order to notify them of the hearing date. No appearance was made on behalf of the Respondents. Mr. Afeau therefore sought leave to proceed with the application in the absence of the Respondents. In the circumstance, he was granted leave to proceed with the application.

Joinder of parties to proceedings on Civil Case No. 208 of 2000.


  1. The Applicant contends that the court may invoke the power under Rule 3.5 and 3.6 of the Rules to add parties to Civil Case No. 208 of 2000. Rule 3.5 reads: "The court may order that a person becomes a party to a proceeding if the person's presence as a party is necessary to enable the court to make a decision fairly and effectively in the proceeding. A person who does not consent to be added as a claimant shall be added as a defendant". And Rule 3.6 reads: "A person affected by a proceeding may apply to the court for a court order that the person be made a party to the proceeding".
  2. It is apparent that the Applicant, the First Respondent and the Second Respondent were not parties to civil case no. 208 of 2000 from the beginning. However, on 27 July 2009, the Applicant issued a bank guarantee in the sum of SBD1, 216, 037.31 for the First Respondent and the Third Respondent in favour of the High Court. The bank guarantee was signed by the General Manager of the Applicant. The money was made available to the Respondents as security to pay the Defendants' costs of the new trial between Quarter Enterprises -v- Allardyce Lumber Company Limited and John Henry Howden Beverley as ordered by the Solomon Islands Court of Appeal under orders dated 26 June 2008, and the High Court order dated 11 August 2008. As referred to above, that new trial was dismissed by Mr. Justice Goldsbrough on 20 May 2009, and, that he ordered costs against the claimant and Mr. Ronold Harry Gibbs, who are sought to be added as the Second and the Third Respondent in this proceeding.

Bank Guarantee


  1. At all material times, the Applicant (as banker) provided banking facilities to the Respondents (as customers) and the relationship between the Applicant and the Respondents was one of 'banker' and 'customer'. For the purposes of this Application, the bank guarantee issued by the Applicant was unconditional. The obligation of the Applicant to pay the money was absolute upon demand from the court. Relevantly the terms of the bank guarantee state:

"In consideration of the Principal [High Court of Solomon Islands] accepting this undertaking, the bank undertakes unconditionally to pay the Principal on written demand from time to time any sum or sums to an aggregate amount not exceeding one million two hundred sixteen thousand and thirty seven dollars and thirty one cents SBD$1,216,037.31.


The Bank will pay this amount or any parts of it to the Principal on demand without reference to the customer and even if the customer has given the bank notice not to pay the money, and without regard to the performance or non-performance of the customer of Principal under the terms of contract or agreement.


Any alterations to the terms of the contract or agreement or any extensions of time or any other forbearance by the principal or customer will not impair or discharge the Banks liability under the undertaking.


This undertaking remains in force until one of the following events occurs:


Declaration


14 The Applicant sought declarations against the Respondents under Rule 7.39 of the Rules, which is in these terms: "The court may make an interim declaration by an interlocutory order when it appears to the court to be just or convenient to do so and the order may be made unconditionally or on such terms or conditions as the court thinks just".


Submissions by Applicant


15 The Applicant contends it is entitled to be paid the respective sums plus interest on the basis of either (a) an action for recovery of debt; or (b) Restitution on the grounds of unjust enrichment of the Respondents.


Debt Recovery Claim


16 The Applicant (as banker) and the Respondents (as customers) entered into a verbal agreement as follows:


(a) at the Respondents' request, the Applicant agreed to the establishment and provision of a bank guarantee to be issued in favour of the High Court of Solomon Islands;


(b) the consideration to be provided by the Respondents was:


(i) a promise to repay the Applicant upon demand, in the event the Applicant was ordered to and made payment pursuant to the bank guarantee; and


(ii) the payment of the Applicant's bank fees as stated in paragraph 9 above.


17 The Applicant, as banker, and the second and the Third Respondents, as Customers, had entered into similar banking arrangements on previous occasions, where the Applicant on the request of the customers issued bank guarantees and in exchange the customers provided an indemnity. Although an express indemnity was not provided in the case at hand, the Applicant contends that the course of conduct engaged in over the years firmly established an arrangement whereby the intention of the parties was to exchange the bank guarantee for an indemnity, as security.


18 The Applicant submits that as the Respondents have not repaid the sum of SBD1, 126, 037.31. It has a right to recover it as a debt, as stated by Guadron J in Trident General Insurance Co. Ltd v McNiece Bros Pty Ltd ([1]) "...an obligation to pay a debt to which a contract has given rise is separate and independent from the contract obligation, although corresponding in content with it. An action to recover the debt is an action on the debt and not an action on the contract".


19 The onus is on the defendant (in this case the Respondents) to prove that the debt has been paid: Young v Queensland Trustees Ltd ([2])


Restitutionary Claim


20 In the alternative, the Applicant contends that as a result of its payment of the sum of SBD1,126, 036.31 pursuant to the High Court Orders for the benefit of the Respondents, in accordance with the terms of the bank guarantee issued at the Respondents' request, and in the absence of payment, the Respondents have been 'unjustly enriched' and in the premises are each jointly and severally liable to the Applicant for the relief set out in the Application, in accordance with the principles of restitution and the doctrine of unjust enrichment.


21 The Applicant's restitutionary claim is based on the unjust enrichment of the Respondents. The doctrine of unjust enrichment was explained by Mason CJ in Commissioner of State Revenue (Vict) V Royal Insurance Australia Ltd ([3]): "Restitutionary relief, as it developed to this point of our law, does not seek to provide compensation for loss. Instead, it operates to restore to the plaintiff what has been transferred from the plaintiff to the defendant whereby the defendant has been unjustly enriched. As in the action for money had and received, the defendant comes under an obligation to account to the plaintiff for money which the defendant has received for the use of the plaintiff."


22 The Federal Court of Australia in Spangaro v Corporate Investment Australia Funds Management Ltd ([4]) per Finkelstein J, provided that the elements to be demonstrated in order for the Applicant to obtain restitutionary relief are as follows:


(a) The defendant (in this case the Respondent) was enriched;
(b) The defendants enrichment was at the plaintiffs expense (in this case the Applicant's);
(c) The enrichment was unjust (according to defined categorise developed in cases);
(d) No restitutionary or other defences would preclude restitution being made.

The Respondents were enriched


23 The Applicant submits that the Respondents were enriched because the money was paid to the court on behalf of the Respondents and in fulfilment of the Respondents obligations to the court under the courts relevant orders.


The Respondents enrichment was at the Applicant's expense.


24 The question of whether the Applicant here is entitled to maintain the claim against the Respondents, has been considered previously by both the Australian Court in Spangaro v Corporate Investment Australia Funds Management Ltd ([5]) and the English Court in Lipkin Gorman v Karpnal Ltd. ([6])


25 The Applicant was merely a conduct enabling the payment from the Respondents to the High Court to occur. As a result of the Respondents' failure to repay the Applicant for the payment made by it to the court pursuant to the bank guarantee, the Applicant itself has borne the financial burn of the Respondents' obligation to provide security for costs to the court.


The enrichment was unjust.


26 The question of whether the Respondents' enrichment was unjust is not to be determined "by reference to some subjective evaluation of what is fair or unconscionable": David Securities PTY Ltd v Commonwealth Bank of Australia ([7])


27 The Courts have established recognised categories of unjust enrichment to identify the basis for the obligation to make restitution. A common basis is, when money has been paid for a consideration which has failed: Moses v Macferlan ([8]); Royal Bank of Canada v the King ([9]); Roxborough v Rothmans of Pall Mall Australia Limited ([10]).


In Spangaro v Corporate Investment Australia Funds Management ([11]) Firkelstein J, citing Fibrosa Spolka Akcyina v Fairbairn Lawson Combe Barbow Ltd ([12]) espoused". "In this context, "consideration" can be distinguished from consideration sufficient to form a contract and "it is, generally speaking, not the promise which is referred as the consideration, but the performance of the promise".


Finkelstein J, citing Martin v Andrews ([13]) Chilling Worth v Esche ([14]); David Securities PTY Ltd v Commonwealth Bank of Australia ([15]); Baltic Shipping Co v Dillon ([16]); Roxborough v Rothmans ([17]) at p525, 577, continued: "There will be a "failure of consideration" where a payment has been made for a certain condition or purpose that is not fulfilled (including an unpromised future event), or in contemplation of a state of affairs which does not materialise".


28 The First and the Second Respondents filed sworn statements. They raised two points in their evidence. The first is that there was no order for a new trial made in Civil Appeal No. 5 of 2009. This is correct. However, the order for the retrial between Quarter Enterprises PTY (Claimant) Limited -v- Allardyce Lumber Company Limited and John Henry Howden Beverley (Defendants) was ordered in Court of Appeal Civil Appeal No. 15 of 2007.


29 The second point which the Respondents raised was that the Applicant had no authority to make any payments after the bank guarantee was cancelled on 22 October 2009. It would seem that the Applicant made payments on legal basis.


30 The bank guarantee takes the form of a promise to pay on demand by the Principal (High Court of Solomons). The High Court ordered the Applicant to pay the SBD1, 216, 037.31 into Sol-law Trust Account on 22 October 2009. A cheque in this sum was paid to Sol-law on 5 December 2009. The cheque was presented for payment on 5 November 2009. It was honoured on that date. The Respondent have not repaid the SBD1,216,037.31 nor the balance of bank fees in the sum of SBD31,482.00.


31 The Applicant is a person being affected in civil case no. 208 of 2000. It paid the bank guarantee of SBD1,216,037.31 to the Defendants on behalf of Respondent, and bank fees charged on that amount. It will be added as the Applicant to this case.


32 The bank guarantee was issued for the First and the Third Respondents. The Respondents questioned the authority of the Applicant to make payment to the Defendants subsequent to the cancellation of the bank guarantee on 22 October 2009. They are clearly persons whose presences are necessary in civil case no. 208 of 2000.


33 The Court has considered the evidence of the Applicant and the First and Second Respondents, and the authorities cited by the Applicant. There is evidence to grant the orders sought by the Applicant in this application.


Orders of the Court are as follows;


  1. Order that ANZ be added as Applicant, Ms Naomi Tsurumi be added as First Respondent, Mr. Ronold Harry Gibbs be added as Second Respondent and Quarter Enterprises PTY Limited be added as Third Defendant.
  2. Declare that the First Respondent, Second Respondent and Quarter Enterprises PTY Limited (the Third Respondent), are each liable unconditionally to pay to the Applicant on demand:
  3. The First Respondent, the Second Respondent and the Third Respondent (the Respondents) pay to the Applicant:
  4. The Respondents are to pay the Applicant's cost of this application

THE COURT

([1]) [1988] HCA 44; (1988) 165 CLR 107 (8 September 1988
([2]) (1956) 99 CLR 560.
[3] 1994 HCA 61
([4]) [2003] FCA 1025
([5]) [2003] FCA 1021
([6]) [1991] 2AC 548
[7] [1992] 175 CLR at 379
[8] [1760] Eng R 713;
[9] [1913] AC 283, 296;
[10] [2001] 208 CLR 516
[11] [2003] FCA 1025
[12] [1942] UKHL4; [1943] AC 32,48
[13] [856] Eng R 944; (1856) 7 EL & B1 at 4 [119 ER 1148, 1149;
[14] [1924] 1ch 97;
[15] [1992] 175 CLR at 382
[16] [1993] HCA 4; [1993] 176 CLR 344, 389
[17] 208 CLR

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