Panga v Estate of Pau Yee [2013] SBHC 49; HCSI-CC 109 of 2010 (3 May 2013)

IN THE HIGH COURT OF SOLOMON ISLANDS
(Mwanesalua J)

Civil Case No. 109 of 2010

BETWEEN:

STEVEN PANGA
Claimant

AND:

THE ESTATE OF PAU YEE
First Defendant

AND :

DIAMOND CORPORATION
Second Defendant

Date of Judgment: 3 May 2013

Mr. Rano for the Claimant
Mr. Radclyffe for the First Defendant
Mr. Afeau for the Second Defendant

JUDGMENT

[1] The Claimant and the First Defendant were close friends. The First Defendant died in 2008. He was a director and held 50% of shares in the Second Defendant. The Second Defendant, Diamond Corporation Limited, is a locally Incorporated Company in Solomon Islands. Apart from the commercial building ("the property") on the land, there is no other known business operated in that name. On or about 25 May 1995, the Claimant applied to the Commissioner of Lands ("the Commissioner") for an allocation of a Fixed Term Estate in Parcel No. 191-023-155, Lot 1016/Hon ("the Land"). The land is situated adjacent to the Central Magistrates Court, in Honiara, Solomon Islands.

[2] On or about 23 July 1995, in anticipation of the offer of the land from the Commissioner, the Claimant and First Defendant entered into a written agreement ("the Agreement"). The terms of the Agreement, among other things, are that: (a) Diamond Corporation Limited will pay all necessary fees for the registration of the Land; (b) The costs for the development of the land will be shared equally and shall be of joint partnership; (c) Each partner would contribute 17.5% of the costs for the development of the land and the remaining 65% be sought from a Commercial bank and that any repayment be made equally; (d) Upon completion of the property on the land, the Claimant would receive rentals for the upper floor while the First and Second Defendants will receive rentals for the lower floor; and (e) Diamond Corporation Limited will apply to the Registrar of Companies to include the Claimant as a partner (shareholder) of the Company.

[3] On or about 25 July 1995, the Claimant and the First Defendant jointly made the project proposal ("the Proposal") for development on the land. The proposal reiterated the terms of the Agreement. On or about 28 July 1995, the Commissioner, in writing offered the land to the Claimant. The total premium offered for the land was $6,756.25. However, the premium was later reassessed at $10,000.00 The Claimant paid that premium to the Commissioner. On or about 10 August 1995, pursuant to the Agreement and the proposal, the Claimant advised the Commissioner to execute the grant on the Fixed Term Estate of the land, to the Second Defendant. The grant was executed and made to the Second Defendant as the legal owner of the land. This was on the advice of the Claimant to the Commissioner.

[4] The construction of the property took two years, from 2002 to 2003. It seemed that much of the funds used by the Second Defendant to construct the property was loaned from the then Development Bank of Solomon Islands. As the Claimant lacked financial capital to contribute to the construction, as a result of the ethnic tension in this country, prevailing at the time, it was verbally agreed between the parties ("the verbal Agreement"), that the First Defendant and the Second Defendant would continue to finance the construction of the property. This verbal agreement was not disputed at trial. It is accept by this court and that it was made by the Claimant and the Defendants.

[5] From 2004 to 2008, the property was leased to the Solomon Islands Government. On or about April 2008, the Claimant and First Defendant commenced discussions on the Claimant's proposed shareholding of the Second Defendant. There was delay in that process, due to the First Defendant's routine trips to Hong Kong. Whilst in Hong Kong, during one of such trips, the First Defendant died on 6 March 2008 and the agreement to formalise the Claimant's shareholding in the Second Defendant could not be progressed and concluded as provided in the Agreement. There were only two directors of the Second Defendant since incorporation to 2008. They were the First Defendant and Mr. Daniel Ma.

[6] The Claimant's solicitor raised the matter of shareholding by the Claimant with Mr. Ma by letter on 19 June 2009, who made no reply. As a consequence, the Claimant filed this claim against the First and Second Defendants on 29 March 2010. The Claimant seeks the following relief: (1) An order that the Claimant have an equitable interest over the land; (2) An order that the said interest is held in trust by the First and the Second Defendants; (3) An order that pursuant to the Agreement, the Claimant has an interest in equity over 50% of the shares in the Second Defendant; (4) Alternatively, an order that the Claimant is entitled to half of the shares held by the First Defendant in the Second Defendant; (5) An order for specific performance of the Agreement; (6) Alternatively, the First and the Second Defendants transfer 50% of the shares in the Second Defendant to the Claimant and a share certificate be issued upon the said transfer; (7) An order that the First and Second Defendants are estopped from denying the Claimant from acquiring the shares in the Second Defendant; (8) In any event, if the First and Second Defendants refuse to grant the shares in the Second Defendant, the Registrar of the High Court be empowered to execute any transfer of the shares in the Second Defendant to the Claimant; and (9) costs of and incidental to this action.

[7] The first submission for the First Defendant is that the Claimant's claim is time barred. It was contended that the time limit applicable for taking action in this case is 6 years, which began to run from 23 July 1995, when Claimant and First Defendant made the Agreement, because this is not a case dealing with the recovery of the land, which has a time limit of 12 years, in which, to take recovery proceedings. The chief reason for the Claimant filing this claim, was because the First defendant failed to transfer shares to the Claimant as stipulated in the Agreement. The cause of action in this case accrued after there was no response to the letter of 19 June 2009 to Mr. Ma about the Claimant's shareholding in the Second Defendant. Because of this reason this claim is not time barred as the claimed by the Defendants.

[8] The next issue to be decided is whether there is a right of specific performance by the Claimant under the Agreement. In the opinion of this court, that is so. There is evidence that the Claimant spent money to pay the premium for the property; incurred expenses in purchasing bricks; and the production of 200 pieces of timber to build the property. There was clearly part performance of the Agreement by the Claimant. Part performance of a contract is a recognised principle in equity, which is part of the Laws of Solomon Islands, as provided in the Constitution. There was no laches or delay on the part of the Claimant in bringing this claim before this court for the reason alluded to herein.

[9] The Claimant was not a shareholder of the company when the Agreement was made. He was an outsider. It was submitted that the First Defendant did not obtain the consent of the other director, Mr. Ma of the Second Defendant to transfer shares to the Claimant. Here, the Claimant as mentioned, is not an official of the Second Defendant and does not know the rules governing the transfer of company shares. But the Law says, that, "if you are dealing with a director in a manner which a director would normally have the power to act for the company, you are not obliged to inquire whether or not the formalities required by the articles before exercising that power have in fact been complied with. See Kredit Bank Cassell G.M.B.H –v- Schenkers, Ltd, and others"[1927] 1KB at p.844; [1927] All ER Report p430. In this case, the power to transfer shares to a new shareholder lies with the Directors of the Second Defendant. One of the terms of the Agreement is that the Second Defendant will apply to the Registrar of Companies to include the Claimant as a partner (shareholder) of the Second Defendant. The transfer of these shares were covered under the Agreement. The transfer of shares is a benefit under that contract. The beneficiary is the Claimant. It appears to this court that there is an assignment of these shares to the Claimant. In equity, a contract to assign is treated as an assignment. Further, equity treats a contract to do a thing as if the thing were already done.

[10] The Claimant received rentals of the upper rooms of the property. That was done in accordance with the Agreement. There is provision in the Agreement for the Claimant to collect the rentals from tenants of the upper floor of the property. It is not clear that the Claimant would then account to the Defendants after the rentals are collected. There is no evidence that the Defendants took action to reclaim the rentals from the Claimant before this claim was filed.

[11] The First Defendant contends that the Claimant has no legal or equitable interest in respect of the land and the shares in the Second Defendant. The First Defendant denies that the First Defendant agreed to sell or transfer the shares in the Second Defendants. These views seem to be shared by the Second Defendant. The response to this is the Agreement. The shares held by Defendant would not worth much had the Claimant refused to give his land to the First Defendant.

[12] It is not disputed that the land was registered after the Agreement was made. The Second Defendant has a registered legal title to the land given by the Claimant. But I consider that the Second Defendant holds its registered title to the Fixed Term Estate in Parcel No. 191-023-155 subject to the Claimant's equitable interest. Further, the shares in the Second Defendant were assigned to the Claimant by contract. And that the Defendants hold those shares in trust for the Claimant.

[13] In conclusion, orders 1,2,3,5,7 and 9 are granted to the Claimant. The other orders not referred to here are refused. Order accordingly.

THE COURT