Kabena v Honiara City Council [2024] SBHC 20; HCSI-CC 550 of 2020 (8 March 2024)

HIGH COURT OF SOLOMON ISLANDS

Case name:	Kabena v Clerk, Honiara City Council
Citation:
Date of decision:	8 March 2024
Parties:	Rachel Kabena v Clerk, Honiara City Council, Honiara City Council
Date of hearing:	16 February 2024
Court file number(s):	550 of 2020
Jurisdiction:	Civil
Place of delivery:
Judge(s):	Aulanga; Commissioner
On appeal from:
Order:
Representation:	Mr Mchesney Ale for the Claimant Mr Brenton Pitry for the First and Second Defendant
Catchwords:
Words and phrases:
Legislation cited:
Cases cited:

IN THE HIGH COURT OF SOLOMON ISLANDS
CIVIL JURISDICTION

Civil Case No. 550 of 2020

BETWEEN

RACHEL KABENA
(Trading as Kilin Enviro Management)
Claimant

AND:

CLERK, HONIARA CITY COUNCIL
First Defendant

AND:

HONIARA CITY COUNCIL
Second Defendant

Date of Hearing: 16 February 2024
Date of Judgment: 8 March 2024

Mr McChesney Ale for the Claimant
Mr Brenton Pitry for the First and Second Defendant

JUDGMENT

Commissionner Aulanga

1. The Claimant, Rachel Kabena, is a daughter of a Honiara City Councilor, named Alfrence Fatai (“Fatai”). She is the registered proprietor of the business entity called Kilin Enviro Management.
2. Mr. Fatai was elected on 17^th December 2014, to hold public office for the Second Defendant or the Honiara City Council. He was a Councilor from 17^th December 2014 to December 2018. At one stage, and that was, from 30^th December 2014 to 2^nd August 2016, he was a City Mayor for the Honiara City Council.
3. It was when he was a City Mayor that this turn of events happened. One, the business Kilin Enviro Management was registered and second, his daughter, the Claimant, was awarded a contract by the Honiara City Council. It was a written contract, for two (2) years. For reasons unknown, the Claimant already performed the contractual work several months before it was signed by the parties.
4. That contract lapsed in 2018 and an offer for extension for another 7 years was given to the Claimant. The Claimant performed the service based on the offer. The Defendants somehow withdrew and cancelled the offer and terminated the contract pursuant to a clause of the contract. The Claimant is aggrieved by this and claims, amongst others, damages for breach of the contract.
5. The First and Second Defendants collectively denied liability and said the formation of the contract was void and unenforceable in law. This is due to the fact that the contract has promoted conflict of interest as a result of the Claimant’s father, at the formation and signing of the contract was a Councillor for the Honiara City Council. Hence, it is injurious or reprehensive to the public and is therefore, unenforceable.
6. The trial before me is to determine the enforceability of the contract, the lawfulness of the termination of the contract and if so, for damages.

Pertinent facts

7. Before uncovering the evidence, it is important to traverse the brief facts of the case.
8. The Claimant is the daughter of Mr. Fatai. Fatai was an elected Ward Member for the Honiara City Council. He was elected on 17^th December 2014 to hold public office for the Second Defendant as Councillor for Vura Ward in Honiara.
9. On 30^th December 2014, he was elected a City Mayor. He, however, resigned from the Mayorship on 2^nd August 2016 and continued as an ordinary Councilor until the end of December 2018.
10. The Claimant is the owner a business entity trading as Kilin Enviro Management. It was registered on 8^th February 2016, the time Fatai was the City Mayor, but deregistered on 1^st May 2019.
11. On 31^st July 2017, the Claimant, being the daughter of Fatai, entered into a written tenancy contract with the Second Defendant to operate the ablution blocks at the Honiara Central market. The contract was for 2 years. The Claimant, for reasons unknown, already took possession of the facility and prematurely performed the contractual work several months before the signing of the contract. Hence, it was backdated to 15^th October 2016 with expiry date to be on 15^th October 2018. The contract was signed by the Claimant and representatives of the First and Second Defendants. Thereafter and before commencement of this proceeding, it was stamped with a stamp duty.
12. Clause 8 of the contract is of important consideration. For it provides for the right of either party to terminate the contract at any time and “for any reason” by giving of a month written notice. There are other two clauses, clause 9 and 10 that also give the right to either party to terminate the contract without a notice. Except for clause 8, there is no issue taken by the parties in this proceeding in respect to any grievance arising from the two clauses.
13. Before the contract expired, the Claimant sought it to be extended. On 22^nd March 2018, then Clerk of the Second Defendant named Charles Kelly responded in writing and informed the Claimant of the extension of the contract to another 7 years. This should end on 15^th October 2025. That letter did not specify whether another contract of extension could be signed.
14. On 1^st September 2020 and after Charles Kelly had ceased employment, Rence Sore, who worked as the First Defendant terminated the contract by way of a letter addressed to both the Claimant and Fatai. There were six (6) reasons for the termination as contained at page 82 and 107 of the Court Book. The Claimant was asked to cease any work and vacate the ablution facility accordingly.
15. On 10^th January 2022, another letter for termination of the contract was issued by the First Defendant to the Claimant, based on two reasons as contained at page 110 of the Court Book.
16. It appears from the facts that before the letter of termination dated 10^th January 2020 was issued, the Claimant had obtained an interim injunction order from the High Court to restrain the Defendants from interfering with the Claimant’s business operation at the ablution facility. That order manifested the intention of the Claimant to bring legal proceeding against the Defendants.
17. The Claimant continued to have possession of the ablution facility and refused to vacate in light of that Court order. On 29^th April 2022, the Claimant’s employees were forcefully removed out of the ablution facility after they had refused to comply with the First defendant’s notice to vacate and cease business operations at the facility.
18. Having disagreed with the termination of the contract, the Claimant then instituted this proceeding by claim Category A against the Defendants.^[1]
19. On 26^th March 2021, an amended claim was filed, seeking reliefs for specific performance of the agreement; permanent injunction restraining the Defendants from interfering with the Claimant’s business until lapse of the contract on 15^th October 2025 or order for damages in the sum of $4,950,000 to be assessed, and costs.
20. It is interesting to note that the Claimant in person never produced any sworn statement or evidence in this proceeding. This was despite she was the signatory to the contract and the proprietor of Kilin Enviro Management. In Court, it was confirmed that she was still alive and well. Why she did not provide any evidence for the proceeding is unknown. All the evidence relied upon to determine whether there was a breach of the contract came from Fatai.
21. Following the service of the claim, the First and Second Defendants filed their defence. It was later amended and further amended.^[2] The further amended defence put to issue, and perhaps the critical one, the enforceability of the contract. This was based on the perception that the contract entered into by the parties on 31^st July 2017 cannot be enforced because it has promoted conflict of interest that is contrary to public policy. Thus, as averred, it cannot be enforced.
22. The Defendants say the Claimant is the daughter of Fatai who was the Councilor working for the Second Defendant at the time of the formation, signing and performance of the contract. The Defendants further say the business Kilin Enviro Management was ostensibly owned by Fatai in disguise of his daughter, the Claimant. The Defendants rely on the evidence of Justus Denni, Vincent Kohata and the admissions of Fatai. Based on these asserted grounds, the Defendants say the claim should be dismissed.
23. Both counsels have agreed in the Amended Undisputed Facts and Issues document filed on 6^th October 2023 for six issues for the Court to consider, as follows;
    • (a) whether the contract made on 31^st July 2017 between the Claimant and the Defendants is enforceable in law;
    • (b) whether or not the Agreement was validly extended;
    • (c) whether or not the Claimant breached the Agreement;
    • (d) whether or not the Agreement was validly terminated;
    • (e) whether or not the Claimant is entitled to loss of business; and
    • (f) if the Claimant is entitled to loss of business, what is the total sum of loss payable to the Claimant.
24. With those issues, if the Court finds the contract is not enforceable then that should be the end of the matter. During the trial and even during closing submissions, that issue was largely contested and is determinative for this case.
25. At the outset, the Defendants submit that the Claimant, Rachel Kabena, has never produced any evidence at all in the proceeding. The evidence to rebut the further amended defence only came from Fatai, who is not the Claimant. On that basis, the claim should be dismissed.
26. In my view, there is of course no absolute rule that the Claimant has to present specific evidence on behalf of herself in Court. The Claimant could, in theory, rely totally on the evidence of others to prove the claim. The question at the end of the day is whether the evidence the Claimant is seeking to rely on her father is sufficient to prove her claim and rebut the defence raised by the Defendants. If, for example, the father’s evidence is simply hearsay then it is of no value at all. In this case, it is my view that the Claimant, at the very least, should provide evidence for the purpose of addressing the defence raised at paragraph 10 of the further amended defence about the face to face discussion that took place on 3^rd September 2020 inside the Honiara City Council office between the Claimant and the First Defendant. Nothing has been provided which is unfortunate.

Whether the contract made on 31st July 2017 between the Claimant and the Defendants is enforceable in law

27. The contention here is that the contract entered into by the parties on 31^st July 2017 has promoted conflict of interest and therefore, is enforceable. In law it is void on the ground of public policy. The main thrust of contention as I understand is the purported existence of the conflict of interest which has rendered the contract unenforceable based on public policy. This is based on the trite common law that the Court should not be seen to be enforcing a contract that is undesirable and reprehensive to the general public. Once that is established, the Court must declare the contract as void and unenforceable.
28. Despite the filing of the further amended defence raising this issue of conflict of interest, it is unfortunate that the Claimant in person did not provide any evidence to address that defence. There is no evidence from the Claimant in person about how she was awarded with the contract when her father, Fatai, was still the Councilor for the Honiara City Council at the relevant time and why she decided to prematurely perform several months before it was signed. Whether the contract awarded to her followed merit-based selection applications or some internal clandestine move remains unknown.
29. There were submissions made by the Claimant’s counsel, making reference to section 14 of the Leadership (Further Provisions) Act 1999 which in my view is inapplicable since the proceeding here does not concern any complaint or grievance arising from the Leadership Code Commission.
30. So, when is a person found to be in a conflict of interest over a matter, and if I may add, including when entering into a contract? Neither counsel provide any authority either from case law or authoritative texts on this point.
31. In the search for this legal solution, I have referred to Namah v Poole,^[3] a Supreme Court of Papua New Guinea decision that explained an occurrence of conflict of interest when a person is exercising or performing a power, function, duty or responsibility. The Court in that case held that a conflict of interest normally occurs in two situations. First, is when a person is having a personal interest in the subject matter and second, when a person has an obligation to advance or protect the interests of more than one person, in circumstances where those interests are in conflict but failed to do so.^[4]
32. I now turn to the evidence. During the oral evidence of Fatai, he denied having any influence over the decision-making process that led to the formation and award of the contract to his daughter.
33. There was also an evidence relied on by the Claimant from Justus Denni that conflict of interest was never a consideration when the contract was terminated.
34. However, what is largely an undisputed evidence before the Court is that on 15^th October 2016 when the Claimant prematurely performed the contract without any signing and at the signing of the contract on 31^st July 2017, Fatai was the Councilor of Honiara City Council. The Claimant who was awarded the contract was his daughter. The Honiara City Council is the authority that awarded the contract to the public. It turned out very surprisingly that the daughter of Fatai, being the Councilor of the Second Defendant, was awarded the contract. From that contract, she would receive money from the public for the use of the ablution facility owned by the Second Defendant, for personal business gain.
35. In Fatai sworn statement filed on 20^th October 2020,^[5] he admitted that he was the manager of Kilin Enviro Management. He introduced him as “I Alfrence Fatai of Kombevatu, Manager of Kilin Enviro Management, Honiara swear the following is true.” At paragraphs 3 and 10 of that sworn statement, he continued:
    • “I say that in or about September 2020, I received a termination letter dated 1^st September 2020 regarding the contract our business Kilin Enviro Management (KEM) had with the Honiara City Council (HCC)
    • [..]
    • Due to the sudden termination of this contract we are now affected as we have been unprepared for this sudden turn of events. KEM will also cease to exist due to the sudden unforeseen turn of events.” (Underlined mined).
36. He continued to divulge and reveal himself as the manager of Kilin Enviro Management in all his sworn statements^[6] filed in the proceeding. There is no evidence from him to explain when he first became the manager of the entity. There is also no evidence from the Claimant herself to address this point. Whether it was before or after he ceased working as a Councillor remains uncertain. However, the undisputed evidence remains that he was the manager of the business entity that was awarded the contract by the Honiara City Council.
37. His evidence in Court that he has no influence in the formation and award of the contract when considered in whole, is at marked variance to his own admissions. This makes him an unreliable witness. This unfortunately, dismantles the case of the Claimant against the affirmative defence raised by the Defendants.
38. By his own admissions, I accept that he has a vested or to be specific, a family interest in the business that was awarded the contract by virtue of his daughter as the owner of that business and also as a result of his managerial position in the business.
39. Vincent Kohata who worked as a legal administration officer for the Second Defendant also gave evidence on oath that there existed a conflict of interest when the contract was entered into by the parties, considering Fatai was a Councilor of the Honiara City Council at the relevant time. In such situation, the question is whether the contract entered into by the parties does not amount to promoting of a conflict of interest?
40. I understand he is not the signatory to the contract. However, he was the manager of the business entity that was contracted to do the service for the Honiara City Council. Hence, he has a fiduciary relationship with his employer, herein the Honiara City Council, to avoid any conflict of interest by not allowing or permitting his daughter and the business he managed to be awarded with that contract. He failed to do so and for that reason, he is caught under the second limb in Namah v Poole earlier cited.
41. Going by the second limb in Namah v Poole case, there is no evidence from Fatai or the Claimant herself to show that upon realisation, he has taken steps to protest against the award of the contract to his daughter as demonstrative of his actions in protecting the interest of the public over his daughter. This is for the common good of the public considering his standing as the Councillor of the Honiara City Council. There is no explanation from Fatai in Court on this point. As a Councillor and manager of Kilin Enviro Management, he has a public duty and obligation to act in that way. It is not proper according to the public standard for the contract to be awarded to his daughter and moreover, to the business entity that he eventually worked for as the manager. He did absolutely nothing to protect the interest of the general public over his daughter to avoid such conflict of interest situation. Nothing was done and so I conclude that the contract signed by the parties herein is tainted with one that has promoted a conflict of interest.
42. Based on his own admissions that he was the manager of the busines entity, in such situation, there clearly existed a conflict of interest. Hence, the Court will not enforce such contract because it is reprehensive to the community standard based on the principle or ground of public policy.
43. In Darroch & Anor v Pearce & Anor,[7] the Court held that the principle of public policy as applied to enforcement of contracts has two broad prongs in the following manner:
    • “The law categorises certain clearly defined generic types of contracts as void and unenforceable on the ground of public policy. It also declines, on the ground of public policy, to enforce contracts or obligations which are so patently reprehensible that they must be styled 'illegal'.”^[8]
44. In Wilkinson v Osborne,^[9] the Court held that a contract can be invalidated and cannot be enforced based on public policy. In that case, Isaac J made the following statements:
    • “The rule of law as to contracts against public policy is constant - namely, that every bargain contrary to such a social governing principle is regarded as prejudicial to the State, or, in other words, contrary to 'public policy', or, as it is sometimes called, "policy of the law", and the State by its tribunals refuses to enforce it.....'The courts refuse to give effect to such a bargain, not for the sake of the defendant, not to protect any interest of his - indeed, they do not fail to notice that his failure to abide by his agreement sometimes adds dishonesty to illegality - but they refuse to enforce the bargain for the sake of the community, who would be prejudiced if such a bargain were countenanced.”^[10]
45. In Ansons Law of Contract (29^th Edition), the learned authors state the Court will not enforce a contract that is injurious to the administration of the public service:
    • “The law will not uphold a contract whereby one of the parties agrees to use influence or position for the purpose of securing a title, contract, or some other benefit from the government for the other.....The public has a right to demand that public officials shall not be induced merely by considerations of personal gain to act in a manner other than that which the public interest demands, and that no-one shall enter or refrain from entering the public service for the same reason.”^[11]
46. Based on the above reasons, it is my view that this is a contract that is void in law and cannot be enforced by this Court.
47. Even if it is enforceable, the issue of whether it is validly extended is quite troubling, if not, hard to assimilate. The letter advising of the extension^[12] in my view does not have a contractual effect because of the difficulty in implying whether the letter was a sufficient consideration without the need to sign another contract for extension. The words conveyed in the letter is equivocal and uncertain. In any event, the letter is not the actual contract signed by the parties and therefore, it can be revoked or cancelled at any time before signing of the contract for extension of the service.
48. However, what is worthy to note is clause 8-Part B of the contract states:
    • “Either party may terminate the Agreement at any time and for any reason by giving of the other party at least one month’s notice in writing.”^[13]
49. Accordingly, that clause gives either party the right to terminate the contract at any time and “for any reason” by giving of at least one month’s notice in writing. The parties have agreed to this clause at the time of signing the contract. Therefore, they are bound by it. In Lomo v Attorney General,^[14] Izuako J, upheld the view that if the termination of the contract was based on a clause of the contract then the parties were performing their obligations embodied in the contract. Also, in Tom Gesa v Bernard Kipit,^[15] a Papua New case, Kandakasi J, stated:
    • “The question that I need to consider therefore in this case is this, what did the parties agree to in terms of the written contract between them? This requires an interpretation of the terms employed by the parties in their contract to the exclusion of any extrinsic evidence.”^[16]
50. The correspondences^[17] given by the First Defendant to the Claimant contains the reasons for the termination of the contract. For example, the correspondence addressed to Fatai, dated 1^st September 2020, also addressed to the Claimant, contained six (6) reasons the contract should be terminated:
    • “1. The present standard of the toilet is not at the required health standard for public usage;
    • 2. the Council has decided to renovate that Toilet facilities to the required health standard for human habitat usage;
    • 3. The Council has decided on the ground that it has incurred a big loss compared to what it has received on the monthly rental;
    • 4. That your operation has no legal binding contract with the City Council as according per the record identified;
    • 5. That the extension of your operation is illegal as required by the legal requirement of Honiara City Council’s tender requirements; and
    • 6. The Council has decided to operate the toilet to help assist its financial stability to sustain its daily services within the Central Market.”^[18]
51. Another correspondence dated 10^th January 2022 for termination of the contract also states the following reasons:
    • “i. Kilin Environment breaches Clause 6, Part C of the Tenancy Agreement by failing to pay for service charges, especially water, when they are due. On our record, Kilin Environment has been claiming reimbursements from HCC for supplying water to the Central Market toilets. To date, HCC has paid Alfrence Fatai of Kilin Environment a total of $93,000 for water charges. Kilin Environment should be responsible for water and electricity charges at the Central Market Toilet as agreed.
    • ii. HCC has plan to re-develop or rehabilitate the Central Market this year so decide to terminate the Tenancy Agreement now in accordance with Clause 8, Part B to enable HCC commence the re-development or rehabilitation works.”^[19]
52. There is nothing in the contract to suggest that the reasons for the termination must be investigated to be truthful and reasonable before it can be terminated. If that is so, the contract should state it clearly and unequivocally. By disclosing the reasons in the notice as the basis to terminate the contract, the First Defendant was in fact invoking and exercising its right under clause 8 of the contract. Even if the reasons for the termination are ought to be reasonable as stated in Renard Constructions (ME) Pty Ltd v Minister for Public Works,^[20] referred to by counsel for the Claimant, it is my view that the reasons provided by the Defendants for the termination of the contract, as contained in the correspondences, are reasonable and justified in the circumstances. For example, the need for renovation or rehabilitation of the market facility, amongst others, as one of the grounds to terminate the contract, is a reasonable ground to have the contract terminated. I do not think the Defendants were acting unconscionably or were breaching the contract by invoking that clause. It is my view that based on the reasons, I do not think the Claimant can have a chance of successfully suing on that basis given that she had unanimously agreed to be bound by that clause. Given the explanations, the contrary arguments raised by the Claimant must fail.
53. For those reasons, it is needless for me for address the remaining issues. The first issue in fact has settled this matter without going further. The discussions rendered for the subsequent issues were in fact an extension or further clarifications of the Court’s findings on the unsuccessful litigation of the Claimant. It must follow that for this proceeding, I am not satisfied on the balance of probability to grant the reliefs sought by the Claimant. Hence, the claim must be dismissed accordingly with costs to be paid to the First and Second Defendants on standard basis. Any interim injunctive orders relating to this proceeding must also be discharged forthwith.

Orders of the Court

1. The claim is dismissed with costs to be paid to the First and Second Defendants on standard basis.
2. Any interim orders in the proceeding must be discharged forthwith.
3. Right of appeal applies.

BY THE COURT
Augustine Sylver Aulanga
Commissioner of the High Court

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^[1] Court Book (“CB”) page 1.
^[2] Page 11 and 14 CB.
^[3] [2016] PGSC 34.
^[4] At paragraph 51 of the decision.
^[5] Page 24 CB.
^[6] Page 24, 44 and 50 CB.
^[7] [1989] SASC 1265.
^[8] At page 43.
^[9] [1915] 21 CLR 89.
^[10] Pages 97 and 98.
^[11] At page 388.
^[12] Page 105 CB.
^[13] Page 32 CB.
^[14] [2009] SBHC 9.
^[15] [2003] N2457.
^[16] Referred to in paragraph 14 of Saiho v Solomon [2016] PGNC 282; N6474 (7 October 2016).
^[17] Page 82, 107 and 110 CB.
^[18] Page 82 and 107 CB.
^[19] Page 110 CB.
^[20] [1992] 26 NSWLR 234.