Gallego Resources Ltd v Kalahaki Timber Ltd [2013] SBHC 147; HCSI-CC 368 of 2012 (19 November 2013)

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

Civil Case No. 368 of 2012.

BETWEEN:

GALLEGO RESOURCES LIMITED
Claimant

AND:

KALAHAKI TIMBER LIMITED
Defendant

Hearing Date: 29th October, 2013
Date of Ruling: 19th November, 2013.

Mr J Keniapisia for the Claimant.
Mr C. Solosae for the Defendant.

RULING ON APPLICATION TO STRIKE OUT:

Faukona J: This application was filed on 13th March, 2013, pursuant to Rule 9.75, for striking out the claimant's claim, on the ground of disclosing no cause of action and it is frivolous and vexatious.

2. The original claim is basically for two reliefs. First, is for permanent injunction and secondly for demurrage fees and loss of business, to be assessed.

Brief Facts:

3. The Claimant is a business entity incorporated under the relevant laws of Solomon Islands, and carries on the business of felling and exporting round logs (logging).

4. The Defendant is a business entity registered under the relevant laws of Solomon Islands. It holds a valid felling licence Tim 2/67 issued by Commissioner of Forests. The License covers concession areas on word 2 and 3, West Guadalcanal, Guadalcanal Province. The concession areas cover two zones. One is zone 2, which covers jarupeha area and is currently in issue, and the other is zone 3, which covers variana area.

5. Pursuant to clause 3, the Claimant and the Defendant signed two Technology agreements (T/A). The first was signed on 28th may, 2011; and covers zone 2, jarupeha area. The second (T/A) agreement was signed on 12th October, 2011, and covers Zone 3, variana area.

6. The first agreement signed, among other things, has 60/40% FOB share. And the second agreement was 56/44% share. By their percentage shares the parties will meet their legal obligations pursuant to clause 13.

7. As usual, the contractor receives 60% and the License holder receives the other half, of course subject to amendment by consent. And exactly what happened in this case in respect of the second agreement.

The application:

8. The application, per se, was specifically under Rule 9.75. The Defendant by way of relief seeks setting aside or termination order that ex-parte orders on 6th October 2012 be set aside or terminated. That cause of action or relief is not under Rule 9.57. Perhaps an application amalgamating the two rules is appropriate to extend the legal arguments to cover application to set aside. There is nothing done at all or either ever thought of.

9. Secondly, application under Rule 9.75 does not provide for striking out order. The rule confers power on the Court to order dismissal of the proceedings or claim, where it appears to the Court that the proceedings or claim are frivolous and vexatious, or has no reasonable cause of action disclosed, or the proceedings are an abuse of Court process.

10. Whilst the formal application attempts to maintain the status quo, the oral submissions by Counsel reflect the application is for striking out, a cause of approach different from the one advocated by Rule 9.75.

11. Whether it is a mistake or oversight or a slip of a tongue cannot be reversed. It's a mixture and I caution Counsel must be well prepared prior to coming to Court, and ensure proper rules are applied.

License fees - $600,000.00:

12. The Defendant asserted that the payment of $600,000.00 being for license fees is a legal entitlement under both technology agreements is still outstanding and not paid by the Claimant. I have perused both agreements diligently. I could not able to find or identify any clause therein that indicate the obligation by the claimant to pay a license fee. Mr Keniapisia has been quite clear and vocal about in his submissions. If nothing of this nature was entrenched into the agreements, then it is futile relying on it to pursue an issue, which do not provide a reasonable cause of action. It does not form any basis for any claim at all.

Frivolous and vexatious claim:

13. What supposed to be a simple claim for permanent restraining order and demurrage cost and loss of income, ballooned into a wider prospection of issues? In fact the statement of case in this application refer to one issue only, that is difference in cash advance. It does not cover other issues raise by the Defendant in submissions. The application is in nowise precise with clarity.

14. The Defendant argues that permanent restraining order is not necessary. The conversion from interim to higher status of permanent order serves no one and no interest. Counsel submits that since the impasse had been sorted out there has not been any disturbance, conflict between the parties. Work had resumed and continues from 4th Shipment to 11th shipment now. Peace and harmony had returned and has prevailed with conducive working environment. Therefore permanent restraining order is almost redundant and of no effect any more. Hence, no cause of actions discloses and should be dismissed.

15. Foreseeability of future recurrence is a vision into the future with almost certainty, at all angles. That is the forecast by the Claimant premise on the fact that distribution of shares is a live issue, which has yet to be sorted out. Addition to that are other obligations under the agreements, which the Defendant alleges are not honoured. Further added is the overwhelming issue of licence fee. Never in any clause in the agreements provide for this fee. Already these had created a stalemate. In view of the situation the Claimants contemplate a permanent restraining order is appropriate to maintain peace and harmony.

16. Looking from outside, one cannot eloquently say that peace and harmony has prevailed. That environment persisted because of the interim orders on 6th October, 2012. With the outstanding sensitive issues yet to resolve, I am optimistic that the interim orders ought to be in place until such further orders. With that, I do not think that the claim for permanent restraining order discloses no reasonable cause of action or is frivolous and vexatious. Therefore, application to have the interim orders set side or terminate fails.

Demurrage fee and loss of income:

17. The demurrage cost claim by the Claimant in US$50,000.00 for five days the ship moored in the harbour without loading of logs, for reasons the Defendant and workmen had caused. Loss of income or earnings for those five days is part of the claim.

18. The Defendant argues that the stop work was for only two days and not five days as claimed. Whatever amount paid as demurrage cost can be arranged to be deducted, which had been done, even before this issue is actually sorted out in Court. If deductions had been done or commenced then the claim for demurrage cost is futile, the relief has been satisfied and no longer on foot, therefore discloses no reasonable cause of action and should be dismissed.

19. The Claimant says that the deduction of $23,000.00 is for advances made by the Defendant and perhaps landowners associated with the Defendant Company. Demurrage cost has never been deducted, cash advance by the Defendant and individuals amounted to $2,781,506.15 SBD.

20. At this point a number of issues are raised by the Defendant. The issue of failure to provided further and better particulars. The issue of failure to open a joint trust account. The issue on non-compliance with two agreements, which led to the counter-claim for non-payment of share obligations in the net entitlement of $2,163, 329-80 – (paragraphs 20-24 of sworn statement of Melkior Veovera filed on 30th August 2013).

21. In my simple accounting knowledge cash advance when reconciled with net entitlement the Claimant still has $618,176.32 due to it. After deducting $23,000.00, the balance due to the Claimant should be $595,176.35. However, I noted the figure arrived at by the Defendant was calculated from six shipments. The Claimants are concerned with four shipments only; that will definitely has some impact on the figure due to it.

22. I am not resorting to calculations to make an award, but something parties could obtain a hint as to their positions; where necessary something ought to be done.

23. It does not end there; further arguments escalated venturing into pleadings. Mr Solosae relies on the case of South Pacific Oil, Civil Case No. 223 of 2011 and emphasize that each party is bound by its own pleading. He further refers to the case of Maeke V Commissioner of Lands[1] where Court can exercise its discretionary power in two ways,

(a). to strike out where no cause of action discloses.

(b). amend where pleading is badly drafted.

24. In opposing this application Mr Keniapisia relies on Tikani V Motui[2]. It says in dismissing the claim, at this stage, the Court ought to examine the pleadings and not evidence and then exercise its discretion. The rest of the submissions I concur. However, in Tikani case it was heard under the old rules. In the 2007 Rules, Rule 9.75 does not provide for strike out but dismissal. The rules, in my view are quite clear. There are separate rules for both circumstances. They cannot be entertained or mingled at any stage of the proceedings.

25. Referring to Tikana case, His Lordship had set out very pertinent considerations. On page 6 paragraphs 10 His Lordship Palmer (ACJ) that the jurisdiction given to the Court on these ground is to be sparingly used and only in exceptional cases. It should be exercised only where a claim is devoid of all merit or cannot possibly succeed. His Lordship then refer to the case of Norman V Mathews[3].

"In order to bring a case within the description it is not sufficient merely to say that the Plaintiff has no cause of action. It must appear that his allege cause of action is one which on the fact it is clearly one which no reasonable person could properly treat as bona fide, and content that he had a grievance which he was entitled to bring before the Court".

26. Where no reasonable cause of action is alleged, His Lordship Palmer (ACJ) said on page 2, paragraph 6;

"In such application, no evidence is admissible and the Court can only look at the pleadings and particulars (Wenlock V Moloney [1965] 1 W.L.R 12,13. The Court should only exercise its discretion to strike out in "plain and obvious cases" (Hubbuck and Gas V Wilkinson [1898] UKLawRpKQB 176; [1899] 1 Q.B 86, 91, and where no reasonable amendment would cure the defect. Such an application is only appropriate where it is clear that the statement of claim as it stands is insufficient, even if proved, so entitle the plaintiff to what he asks (Chow V AG CC 127 of 2000). A reasonable cause of action means a cause of action with some chance of success or where a tenable case has been disclosed for the relief sought (Gatu V SIEA, AG and Gold Ridge CC 59/95). So long as the statement of claim discloses some cause of action, or raise some question fit to be decided by trial, the mere fact it is weak and not likely to succeed is no ground for striking out (Meo V Lawson [1915] 31 T.L.R 418. If however, it is found that the alleged cause of action is certain to fall, the statement of claim should be struck out (Drummond V British Medical Association (1970) 1 WLR 688 at P.692".

27. In this case Mr Keniapisia admits the circumstances have changed since the claim was filed, and striking out is not a possible remedy, but amendment to reflect changing circumstances. He also submits that reply and defence to Defendant's counter-claim has been filed. That will take care of the issue of demurrage costs.

28. In respect to request for further and better particulars, the Claimant says they have responded to one agreement. They need to respond to the other as raised in the counter-claim.

29. It definitely appears the Defendant is drawing into the picture the rest of the shipments as oppose to by the Claimant who concern only for first four shipments.

30. From my observations, the submissions by the Defendant premise on wrong basis and rule. Facts from other shipments are taken in to account to substantiate the application, which should have confined to first four shipments only. To touch on other facts not forming part of the claim would require legal extension, which can only be done through pleadings.

31. At the conclusion of the formal written application, it states that the claim is general and vague, and the Defendant requested the Claimant to provide further and better particulars, which has not been done (paragraph 14-15 of statement of case). Simply mean that pleading is in dire need to give clarification and where possible identify issues and narrow them down.

Relief Sought by the application:

32. The first relief sought is to set aside and or terminate the ex-parte interim order of 6th October, 2012. This has never encompassed by the Defendant's submissions.

The Counsel seems to concentrate on the issue of permanent restraining order sought in the claim. This relief must be refused on the ground that with the interim order in place there is no disturbance from shipment 4 to shipment 11 (now).

33. What has been transpired in the submissions is the exchange of words as to what has been done, what has not been done, dishonouring of the obligations in the agreements and etc. From the submissions, I do not think dismissing the clam is the best way forward. It is not so bad that requires dismissal. In fact, the first remedy sought, permanent restraining order stood its ground. The second relief sought though attracted arguments boils down to the counter claim, which according to my calculation may not stand a strong case. I therefore refuse to grant the counter-claim.

34. In respect of performance of duties and legal obligations under the technology agreements, much have been said, there are a lot of obligations under the agreements. However, if proper pleadings have been done and submissions confine to the boundary drawn by the claim (4 shipments), this case could not have sprang in array. The best way forward is to allow pleading to recommence. I refuse to order any obligation to be performed.

Orders:

1. Order to set aside interim order of 6th October, 2012 refused.

2. Order to dismiss the claim on the basis for being frivolous our vexations refused.

3. No order as to award of counter-claim.

4. No order for Claimant to perform its duties.

5. Cost in the cause.

6. Case adjourns to next motion day for parties to obtain direction orders to recommence pleadings.

The Court.

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^[1] [2009] SI High Court, 129 of 2009.
^[2] [2002] SBHC 10,; HC-CC 29 of 2001 (18 March 2002).
^[3] [1916] 85 L.J KB 857, 859 Luch J.