Sea King Holdings Ltd v New Star Construction Ltd [2021] SBHC 70; HCSI-CC 135 of 2020 (10 September 2021)

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Case name:	Sea King Holdings Ltd v New Star Construction Ltd

Citation:

Date of decision:	10 September 2021

Parties:	Sea King Holdings Limited v New Star Construction Limited, Cui Jiang Tao

Date of hearing:	30 August 2021

Court file number(s):	135 of 2020

Jurisdiction:	Civil

Place of delivery:

Judge(s):	Kouhota; PJ

On appeal from:

Order:	1. That the defendant transfer the title in PN 192-004-1737 and 192-004-1776 back to the claimants at the defendant cost. 2. The defendant to pay stamp duty on the transfer and registration fee. 3. Defendant to pay damages for breach of contract to the claimant, 4. Cost is awarded to the claimant and the third party to be tax if not agreed.

Representation:	Radcliffe A for the Claimant Kwaiga L for the Defendant Teddy P for the Third Party

Catchwords:

Words and phrases:

Legislation cited:	Companies Act 2009 S 49 and 103, S103 (1) (a), 103 (1) (b) (ii), S 105

Cases cited:

Radcliffe A for the Claimant
Kwaiga L for the Defendant
Teddy P for the Third Party

There are two matters before the Court, a claim for breach of contract by the claimant and a counter claim by the defendant against the claimant and a third party. The contract was for sale and purchase of fixed term estate in parcel number 192-004-1737 for the sum of $35,475,000-00 and parcel number 192-004-1776 for a sum of $2,525,000-00, a total of $38,000,000-00.

The contract was executed by the claimant representative and one of the directors of the defendant Mr Cui Jiang Tao on behalf of the defendant. The defendant company New Star Construction Ltd has two directors. Mr Yu Xiao Dong who resides in Hong Kong and director Mr Cui resides in Solomon Islands. Mr Cui is also the General Manager of the defendant. The defendant pleaded that Mr Cui had not consulted Mr Yu the director who reside overseas about the land purchase however, Mr Cui in his sworn statement filed on 15th September 2020 deposed that prior to entering into the transaction he had communicated with Mr Yu and that Mr Yu was aware of the purchase agreement. Mr Cui also deposed that Mr Yu never object to the contract to purchase the land. Mr Cui further stated he believed the letter dated 15^th December 2019 used by the defendant against him for liability for the contract is misleading and false. The defendant did not adduced any evidence to dispute Mr Cui’s evidence.

As a term of the contract Mr Cui paid a non-refundable deposit of $1,900,000 to the claimant. Thereafter no money was paid despite assurances by Mr Cui that the balance will be paid and a request for extension of time. The property, the subject of the contract however was already transferred to the defendant.

The claim is expressed in the alternative, either specific performance of the contract or damages for breach and an order that the parcel of land be transferred back to the claimant.

The claimant submits that the contract dated 25^th January 2019 is a valid contract and enforceable because it was signed by the claimant and a director of the defendant and the company common seal was affixed.

The defendant counsel submits that the contract is void by virtue of Section 49 and 103 of the Companies Act 2009. The defendant counsel submitted that the contract for the sale and purchase of the land was not consented to by the directors and shareholders of the defendant company. Defendant counsel submit it was a major transaction because the amount of money involved is more than half of the assets of the defendant company so the third party acted contrary to Section 49 of the Companies Act 2009. Despite the submission the defendant never adduced any evidence to show that contract amount of $38, 000,000-00 was more than half of the defendant’s assets.

Counsel for the claimant on the other hand submitted that the contract is an agreement to sell, not a contract required to be by deed, so Section 103(1) (a) does not apply and therefore not a statutory requirement that two directors must sign the contract. Counsel submitted that the defendant can enter into the contract either in the manner specified in Section 103(1) (a) or by a person acting under the company’s expressed or implied authority under Section 103(1) (b) (ii). Counsel submits that the unchallenged evidence is that the third party was a director and General Manager of the defendant at the time the contract was signed and that Mr Yu was aware of the contract before it was signed and that he told the third party he could sign it so he did not attend the signing.

The crucial question to be answered in the present case is whether Mr Cui as director was authorised either expressed or implied to enter into the contract with the claimant on behalf of the defendant. To answer this question one has to look at Mr Cui’s position in the defendant company. It is not disputed that Mr Cui at the time of executing the contract on behalf of the defendant on 25^th January 2019 was not only a director of the defendant but also its General Manager. He was also a shareholder of New Origin Resources Ltd the majority shareholder of the defendant. Mr Cui in his sworn statement deposed that he notified the other director Mr Yu Xiao Dong about the purchase of the land and that Mr Yu was aware of the purchase but raises no objection. Mr Yu also arranged for counsel Rano to act for the defendant. Counsel Rano was present at the signing of the contract. The defendant adduced no evidence to dispute Mr Cui’s evidence.

I had considered the materials before the Court and Sections 49 and 103 (1) (b) (ii) of the Companies Act 2009 and I am satisfied that Mr Cui in his position as director and General Manager of the defendant has implied authority to enter into the contract on behalf of the defendant. The contract is therefore valid.

The defendant filed a counter claim. The counter claim contained mostly allegations of improper or unlawful actions against Mr Cui both prior and after the contract was executed. The allegations inter alia was about the payment of stamp duty and the payment of the non-refundable deposit. The defendant however adduced no evidence to prove the allegations raised in the counter claim

In any event the matters raised by the defendant in the counter claim which happened after the execution of the contract in my view does not affect the validity of the contract.

Having concluded that that Mr Cui has the authority to enter into contract on behalf of the defendant and by virtue of Section 105 of the Companies Act 2009, the counter claim against the claimant and the third party must be dismissed.

I give judgment for the claimant. As the defendant indicated that it is willing to transfer the title back to the claimant and order for specific performance may not be appropriate. I consider the following orders appropriate instead;

High Court of Solomon Islands

Sea King Holdings Ltd v New Star Construction Ltd [2021] SBHC 70; HCSI-CC 135 of 2020 (10 September 2021)