Lever Solomon Ltd v Solomon Islands Electricity Authority [2016] SBHC 164; HCSI-CC 71 of 2016 (30 September 2016)

IN THE HIGH COURT

OF SOLOMON ISLANDS

Civil Jurisdiction

BETWEEN: LEVER SOLOMON LIMITED - Claimant

AND: SOLOMON ISLANDS ELECTRICITY AUTHORITY - Defendant

Date of Hearing: 8 September 2016
Ruling 30 September 2016

Mr. G. Suri for claimant
Mr. B Upwe for defendant

This is an application for breach of contract made between these parties on 21 February 2014

Brown J.

As a consequence of an agreed delay to hear the application to set aside a default judgment mistakenly allowed in these proceedings, the parties have instead argued a question of law; whether the contract relied upon by the claimant is illegal or invalid. For the Solomon Islands Electricity Authority [the Authority] now claims that its written agreement with Lever Solomons Ltd [Lever] is illegal.

The claimant entered into the agreement. The agreement is admitted into evidence. The defendant contends that the contract is illegal for that it is contrary to its statutory function.

The preamble (to the agreement] said:-

“Whereas,

1. The landlord is desirous to have an agreement with the Authority that will enable both parties to work within for the future extensions and maintenances of the power lines that are on the lands owned by LSL around Lungga, Henderson, New Zealand Camp/Bloody Ridge, Tenaru, Ilu, and Tenavatu area.
2. The Authority had established its distribution network in and around Lungga and Henderson area where some poles and lines run across the landlord’s land and connect illegal occupants.

100. Both parties hereto have agreed to execute this agreement to resolve some of the issues in relation to the Landlords land and the powerlines at Lungga and Henderson area and to establish the terms of the aforesaid objectives.

NOW THIS Agreement witness as follows;

In consideration of these objectives, IT IS HEREBY AGREED AND DECLARED AS FOLLOWS: “

Then follow various terms numbered in the document. At clause 3 is said:-

“3. That the Authority agrees to disconnect any customer advised by LSL as an illegal occupant unlawfully occupying any LSL lands which fixed term estate parcel numbers are record in Schedule 1 attached hereto or which may be later advised.”

This clause may be categorised as a restraint of trade contrary to public policy and void^[1].

For clearly the interests of the claimant seek to interfere with the liberty of the Authority to contract with whomsoever is wishes, in accordance with its charter as an electricity provider.

The Authority is established as a body corporate which may sue and be sued and may enter into contracts and may acquire, purchase, take, hold and enjoy real and personal property et cetera^[2]. The words following “may enter into contracts” are ejustem generis with that phrase, so that it rather conclusively determines the extent of the Authorities power to contract. The Act may be looked at to throw further light on the powers and responsibilities of the Authority to see whether the agreement sought to be upheld by Lever in this instance is validly within the Authorities power to contract by virtue of other provision.

Both counsel refer me to Section 15 which gives power to the Authority to supply electricity to any person requiring a supply if the person enters into a contract with the Authority for the payment of supply. By regulations, the Authority may cut off supply in the event of non- payment or where it decides to do work on the installations.^[3] The power to supply is not conditional upon any approval or refusal to be obtained or given by a third party. To presume the right to control the Authorities right to contract is a species of restraint of trade and illegal.

A restraint may only be justified if it is reasonably seen as in the interests of the contracting party and in the interests of the public. In this case, neither condition is available to the applicant. Certainly the clause is detrimental to the Authority and since it adversely affects the facility to supply anyone willing to contract with the Authority, and is contrary to the public interest. For by Section 15, an “electricity user may enter into contracts as a consumer of the defendants electricity in accordance with a separate agreement to undertake to receive and pay for or to continue to receive and pay for a supply of electricity upon such terms and conditions as the Authority may determine.”

The defendant quoted Guadalcanal Province v SIEA ^[4] as affording the court guidance to support the assertion that the contract is illegal for it was decided the Province had no power to affect the Authorities right under the Act to manage and operate the Lungga Power House, so no other body can seek to circumscribe the right of the Authority to provide power to those willing to contract and pay. I accept the proposition.

The claimant relied upon Ampo Company Ltd v Tropical Forest Resources Ltd^[5] as authority for the purpose of the contract, to provide regularity measures for the orderly conduct of the business of the parties and consequently it may be upheld on that basis.

Clause 3 is clearly beyond any measure of regularity, nor is the Authority dependent upon the claimant in any measure for its work.^[6] For the Authority is only obliged to give notice of its intention to do work and is not dependent on any consent by other persons.

While the parties must have thought reasonable to contract at the agreements inception, as evidenced by the execution of the document by the Authority, on reflection and probably legal advice the contract has been denied by the Authority when this claim for breach arose. This Court may accordingly find purpose in the clause 3 which clearly presumes a right in the “landlord”, [Levers] to determine to whom the Authority may supply electricity. Any such right is contrary to the sole power under the Act afforded the Authority. It cannot be subject to the direction or control of Lever to determine with whom it contracts to supply electricity.

Rather it is purposefully directed to the restraint of business of the electricity authority and as such contrary to public policy. The refusal of supply benefits the “landlords” proprietary interest in his land vis a viz these “squatters” but the refusal claimed by Lever is not countenanced by the Act.

A power to contract out of the legislative regulations cannot be read into the meaning of Regs. 42 or 49 so as to allow Lever to choose the Authorities’ customers to whom electricity is not to be given.

Clause C of the Preamble may be seen to suggest a “consideration” for the agreement where it recites :- “ to resolve some of the issues in relation to the landlord’s land “

The “issues” relate to the supply of electricity to “squatters” claimed by the “landlord” to be on its land. By S. 34 of the Electricity Act the Authority is not dependent on the consent of the owner of land before carrying out works on land. The “issue” then is related wholly to the “landlords” purpose to cut off supply to persons deemed to be “squatters” on the land and cannot be “consideration” in terms of contract law.

In this case it is Lever which seeks to benefit from the contract by seeking damages for breach. It is Lever then to show “consideration” passing to the Authority for the promise of the Authority. On the recital of the preamble I find no consideration passing from Lever to the Authority as necessary under the rule sufficient to form a contract.

There is not something of value passing from Lever, rather the benefit may be seen to be passing the other way where Levers can direct the Authority to sever its electricity connection to consumers who are not shown to have breached any agreement for supply with the Authority.

“Landlord” is a person of whom another holds any tenement yet for some unexplained reason, the “agreement”, unstamped, dated 21 February 2014 which Levers seek to plead as “breached” names the company as such, of the one part and the S I Electricity Authority of the other part. The tenor of the agreement is that of landlord and tenant for at clause 5, for instance, the Authority agrees to rectify etc power lines and for such obligation “the Landlord shall permit the Authority to enter the said locations at an appropriate time”. And again at clause 6; “the Authority is permitted by the landlord to maintain the existing HP and LV lines that were being constructed prior to this agreement” and at clause 9; “the Authority at its expense shall [ following landlord’s consent] carry out improvements...”.

The incidents of Landlord and tenant cannot be applied in these circumstances for SI Electricity Authority, are not tenants or licencee of Levers. To presume an estate as Landlord is wholly unsupported by evidence. Both counsel rely on the Authorities power under the Act but nowhere do they suggest evidence to give rise to a Landlord and tenant relationship.

The agreement breaches the very foundation of the law concerned with the interests of the public for where a private individual or corporation adversely affects the statutory powers given the Electricity Authority pursuant to S. 34 then the agreement may be said to be contrary to public policy.

No agreement to circumscribe the powers set out in the Act shall be valid as it affects the Electricity Authority. In this case the offending parts cannot sensibly be excised from the remainder of the document.

In any event there can be no relationship of landlord and tenant.

Lord Right has said extra judicially,^[7] “public policy like any other branch of the common law ought to be and I think is governed by the judicial use of precedents. If it is said that rules of public policy have to be moulded to suit new conditions of a changing world that is true but the same is true of the principles of the common law generally”.

So while I presume to accept Levers direction and control over the statutory powers of the Authority without argument as contrary to public policy, the relationship between the parties is solely based on unstated facts or principles not pleaded by Levers if it relies on the landlord and tenant analogy.

For all these reasons I find the agreement to be illegal both as to form and contrary to statutory enactment. The effect of these findings is to show, pursuant to Rule 9.75 [d] no reasonable cause of action has been disclosed. The proceedings are accordingly dismissed.

The claimants shall play the defendants costs.

Extempore:

I find no trespass. The Authority in term of the Act is entitled to carry out its function without hindrance. My written reason will follow.

Reasons:

Further to the findings in relation to the invalidity of the contract and specifically reliant upon the provision of S.34 of the Electricity Act giving the Authority power to carry out its function to provide electricity without hindrance, relation to alleged trespass, I refuse the declaratory relief in relation to the alleged trespass. The rights to be found in S. 34 are not conditional, as argued because of the notice entitlement for landholders whereby 14 days notice of intention need be given, for that notice does not prevent or otherwise curb the Authorities power to enter land to carry out its work.

Consequently that part of the claim alleging trespass and declaratory orders to that effect grounding an order for damages is refused. The earlier order for costs in favour of the defendant shall apply.

By the Court.

---

^[1] Mason v Provident Clothing and Supply Co. Ltd, [1913] AC 724
^[2] Section 3 Electricity Act [Cap 128]
^[3] Regs. 42 & 49
^[4] HC-CC no. 375 of 1992 [Judgment on 5 march 1993]
^[5] [1997] SBHC 11; HC-CC 53 of 1995
^[6] Section 34 [d] of the Electricity Act
^[7] Legal Essays and Addresses iii 76,78