Gallego Resources Ltd v Kalena Foundation Resources Development [2014] SBHC 61; HCSI-CC 89 of 2014 (6 June 2014)

IN THE HIGH COURT OF SOLOMON ISLANDS
(FAUKONA J)

CIVIL CASE NO.89 OF 2014

BEFORE:

GALLEGO RESOURCES LIMITED
Claimant

AND:

KALENA FOUNDATION RESOURCES DEVELOPMENT
Defendant

Date of Hearing: 15th May, 2014
Date of Ruling: 6th June 1014

Mr J. Keniapisia for Claimant
Mr M. Tagini for the Defendant

DECISION ON INTER PARTES HEARING.

Faukona J: This hearing is specifically to hear from Counsels whether the interim injunctive orders made by this Court on 9th April 2014, was made on proper grounds in law or not. Mr Keniapisia relies on his submissions during the course of application for ex-parte orders with two additional.

2. The interim orders were granted based on a claim (category A) filed on 25th March 2014. The claim comprised two major reliefs. One is for specific performance and secondly for permanent injunction against the Defendants. Whilst I would appreciate a permanent injunction as a relief, it entails an extent application which can be best define as a relief against Defendant and its contractor from carrying out logging operations on Lots 9 and 12 of Kalena Customary Lands which fall under Defendant's licence No.A10516.

3. On 25th November 2012, a Technology Agreement was signed between the Defendant and New World Limited to carry out logging operations on Lots 9 and 12, West New Georgia, Western Province. The Claimants operation was possible from sub-contracting arrangement with New World Limited. Under the sub-contract agreement the Claimant supplied machineries and did marketing of trees felled. The Defendant disputed that agreement and alleged it was done without their authority and consent.

4. On 13th September 2013, the Defendant terminated the Technology Agreement with New World Limited for breach of certain provisions of the Agreement. That would also mean the sub-contracting agreement with Claimant was also terminated.

5. Following the termination of the agreement in the first quarter of 2013, the Claimant entered into a Technology and Management Agreement with the Defendant direct. That agreement was dated 14th March 2013. There is nothing in the submissions that this agreement was terminated. And there were no clauses 16-19 inserted.

6. In the last quarter of 2013, the Defendant entered into another Technology and Management Agreement with MSL Import and Export Limited. In February/March 2014, the Defendant terminated the agreement with MSL and signed another agreement with the Claimant on 12th March 2014 (Second agreement). It would appear according to evidence that that agreement was signed on 3rd March 2014, at the Defendant's village of Olive, Roviana Lagoon, Western Province and allegedly signed under duress, deceit and fraud.

7. On 13th march 2014, the Defendant had a meeting with the Commissioner of Forests who advised to issue notice of termination to the Claimant.

8. Following the second agreement, the Claimant had already mobilized to carry out logging operations on the concession lands. Acting under the second agreement the Claimant had obtained necessary approval from the Commissioner and also paid the Defendant's outstanding business license fees to Western Province of $76,000.00 on 21st March 2014.

9. Just as Claimant was advanced into preparations to commence operations, it received a termination notice from the Defendant on or about 13th April 2014, signed by 10 Directors of Defendant. In fact, the termination notice was dated 13th March 2014 and became effective on 13th April 2014, (30 days' notice). Whilst 30 days yet to lapse, the Defendant engaged another contractor MSL which had already landed machineries, equipment and labour to commence operations on Lots 9 and 12. The question is has the parties rectify the allegation of fraud and duress within 30 days' notice. There was nothing done or attempt to done until filing of this case on 25th March 2014. Normally such allegation is unacceptable and hard to resolve.

The Issue:

10. The issue is whether the notice of termination issued to the Claimant was within the bounds of Technology Agreement. If so, which one. The Claimant has pointed out that such termination was based on clause 18 (A) of the Agreement. The Defendant contended that the signing of the Technology Agreement was done by duress, deceit and fraud.

11. I have read the Technology and Marketing Agreement in particular Clause 18A which gives liberty to the Licensee (Defendant) to terminate the agreement by serving written notice of 30 days upon the Company (Claimant), during which period the nature of breach or breaches complained of be rectified.

12. The problem encountered here is that there were no complain of any breach or breaches, but the signing of the agreement was done by fraud, deceit and duress. Simply put, the effect of the agreement right from the beginning was questionable. There were two agreements. One was a complete one, the other dated 14th March 2013 had four clauses (16-19) were missing. The Clause which provides for termination of the agreement dated 14th March 2013 is Clause 15. There are variations noted in both clauses for termination.

13. Out from the two agreements which one will the parties are obliged to comply with. I noted there are variations in the agreements in particular termination clauses. I also noted that Mr Keniapisia is referring to Clause 18A, a clause entrenched in the agreement dated 12th March 2014, the very agreement the Defendant complained of as being signed under duress, deceit and fraud.

14. There is no dispute as to the legality of the timber rights processes and the licence. There is no challenge whether the Defendant was trespassing. However, I noted from Mr Keniapisia's submissions that the Defendant and its Directors had displayed an attitude quite peculiar. They had signed a technology and marketing agreement with one contractor then terminated and signed another agreement with another, then terminated, and then returned to the first agreement and then terminated it again, and returned to the second contractor and signed an agreement and then terminated. As a license holder the Defendant ought to be conscious that termination of same contractors more than once may subject a contractor losing money and does not speak well of the character of the Defendant. The question whether the termination was proper or not and the allegation fraud and duress are issues to deal with at trial. I think these are major issues to be tried.

15. Where there is allegation of breach of contract the usual relief attach to it are performance of the contract and damages as a remedy and other relief that may attach to such breach. The question to ask is it necessary for an injunction to be in place whilst relief is sought for performance of the contract. The question has to be answered by determining whether the alleged breach is proved or not. In any event, it should be a straight forward case that whilst the issue of performance of the contract is yet to be determined, of course a restraining order is necessary so as not to cause complexity.

16. First, the complexity did arise. Under which contract or agreement the Claimant sought an order for performance. There are two agreements on foot. And the major clause that encompasses the term "termination" varied in substance. One, a notice of termination be issued for three months whilst the other one month. This is a major term because it provides periods upon which parties have to fulfil certain obligations. And the longer the period is sufficient time to act to rectify the issue than the shorter period.

17. There is no clause, which provides for which agreement to take precedent over the other. There is no clause which provides that previous agreement was revoked and the latter take precedent. In such circumstances there is ambiguity in both agreements if allowed to run concurrent, hence is unenforceable in law.

18. With the reasons, I have concluded it would be in the interest of justice that the Claimant to continue pursues its case for specific performance and damages but the ex-parte orders have to be set aside. Setting aside injunctive orders does not subsumed the claim and reliefs sought.

Orders:

1. Ex-parte orders perfected by this Court on 9th April 2014 are to be set aside.

2. The Claimant to remove all its machineries from the log pond within 14 days.

3. Should the Claimant fail to remove machineries, a rental of $5,000.00 per day is charged.

4. The Claimant is restraint not to enter the lands, and not to disturb the Defendant's logging operation.

5. Cost is to be paid by the Claimant.

The Court.