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Beckenburg Lim Boon Kee trading as SPI Sandalwood Vanuatu v Director of Forests [2008] VUSC 37; Civil Case 36 of 2006 (7 May 2008)

IN THE SUPREME COURT OF
THE REPUBLIC OF VANUATU
(Civil Jurisdiction)


Civil Case No. 36 of 2006


BETWEEN:


BECKENBURG LIM BOON KEE T/A SPI SANDALWOOD VANUATU
Claimant


AND:


THE DIRECTOR OF FORESTS
First Defendant


AND:


MINISTER OF AGRICULTURE, QUARANTINE, FORESTRY and FISHERIES DEPARTMENT
Second Defendant


Coram: Justice H. Bulu


Counsels:
Mr. George Boar and Mr. Ronald Warsal for the Claimant
Mr. Tom Joe Botleng for the Defendants


Date of Hearing: 25 – 26 July, 2, 6 – 7 August, 26 September and 1 and 5 October 2007
Date of Decision: 7 May 2008


RESERVED JUDGMENT


Background


  1. The Claimant is a business entity which carried out business in Vanuatu and was trading as SPI Sandalwood Vanuatu. On application Financial Services Commission approved the business name “SPI Sandalwood Vanuatu” on 1 April 2003 (expired on 30 September 2003).
  2. On 28 April 2003, the Vanuatu Investment Promotion Authority (VIPA) granted SPI Sandalwood Vanuatu its Approval Certificate permitting it, a foreign investor, to carry on business in Vanuatu. The certificate number is 392. The certificate specified that the SPI Sandalwood Vanuatu is authorized to engage in the following:-

(a) Class B: Manufacturing industries and trade.


(b) Cat. B: Manufacturing of sandalwood products. Export of sandalwood products.


  1. The certificate also contain this declaration:-

“The enterprise is subject to the laws of Vanuatu and to any prescribed terms and conditions in the attached schedule.”


  1. On 19 May 2003 a business licence was issued to the Claimant authorizing it to carry on business in the area of “manufacturing industries and trades”.
  2. On 4 June 2003 the VIPA approval was extended to 28 April 2005. On 24 May 2005 that VIPA approval certificate was again extended to 28 April 2006.
  3. On 11 February 2005, the Department of Forests issued the “Sandalwood licence” to the Claimant to conduct sandalwood operations for a period commencing from the 14th day of February 2005 to 14 February 2015 (First Sandalwood Licence). The licence stated:-

“The maximum quantity of sandalwood which can be purchased in anyone calendar year under this licence is 40 metric tons.”


  1. On 1 July 2005 in Civil Case No. 80 of 2005 Consent Orders were issued:-
  2. The Claimant was not a party to the Civil Case No. 80 of 2005 nor was it aware of the matter.
  3. In a letter dated 12 July 2005 the Acting Director of Forestry, Watson John Lui advised the Claimant of the Court’s ruling dated 1 July 2007 quashing the 10 year Sandalwood licence granted to the Claimant and attaching a copy of the Court Order. The Claimant upon learning of the matter had taken steps to either have the orders set aside or appeal them. However, as at the date of hearing of this matter the applications or appeals have not been disposed off.
  4. In a letter dated 10 August 2005 Geoffrey Gee & Partners, then lawyers for the Claimant;

(a) Advised the then Minister of Forestry that the Claimant has advised them that despite having the requisite approvals they could not operate.


(b) Advised that a copy of the Order of 1 July 2007 has been shown to them. They could not believe that their clients were not informed nor given an opportunity to be heard given that the orders seriously and directly affect the Claimants business in Vanuatu.


  1. On 29 September, 2005 a second sandalwood licence was issued by the Director of Forestry to the Claimant authorizing the Claimant to conduct sandalwood operations for a period of 10 years (the Second Sandalwood Licence). The maximum quantity of sandalwood authorized to be purchased in a calendar year is up to 40 metric tons.
  2. On 13 January 2006, in Civil Case No. 4 of 2006, the Claimant, its servants, employees and agents were restrained from “harvesting, purchasing or otherwise acquiring howsoever any sandalwood or sandalwood products, trading, processing or exporting of sandalwood, sandalwood oil any sandalwood product because if SPI is permitted to do so, it will be in contravention of a Council of Ministers’ decision of 25 June 2003 reserving all involvement in sandalwood operations to Ni-Vanuatu custom land owners (under) sections 4 and 5 of the Forestry Act No. 26 of 2001.”
  3. On or about 22 March 2006 legal proceedings were commenced in the Supreme Court claiming loss and damages against the Director of Forestry and the Minister of Forestry which claim was particularized as follows:-

“Particulars

Contracted sales VT97,500,000

Less costs of sales, sandalwood and Government fees VT2,150,000

Direct obtaining expenses VT13,250,00


Total VT15,400,000

Gross profit VT82,100,000

Less indirect operating expenses VT6,840,00

Less fixed assets write off VT6,500,000


Net profit before tax VT68,760,000


WHEREFOR the Claimant claims against the Defendants and jointly and severally:-


  1. Judgment in the sum of VT97,500,000;
  2. Exemplary damages to be assessed;
  3. Nominal damages to be assessed;
  4. Costs;
  5. Any further order the Court deems fit.”
  1. On 21 July 2006 default judgment (damages) was entered against the Defendants for having failed to file their defences within the required period as prescribed by rule 4.13 (1) and (2) of the Civil Procedure Rules. The Court went on to direct that the Claimant recover against the First and Second Defendants damages to be assessed.
  2. On 8 September 2006, on application, the Court directed the Defendants to file their application to set aside the Default Judgment within 7 days of that date. However, the Defendants failed to do so within the required time or at any other time thereafter.
  3. On 30 January 2007 counsel for the Defendants, at a chambers hearing informed the Court that he was facing difficulties in obtaining the required sworn statements from the First and Second Defendants. Mr. Botleng wanted to apply to set aside the default judgment, but later advised the Court that he was not going to make such an application after all on behalf of his clients.
  4. On 5 July 2007 Mr. Botleng raised the possibility that he wanted to apply to have the Default Judgment set aside. The Court however, refused to entertain any such further application, as Mr. Botleng had earlier advised the Court that they were not going to pursue an application to set aside the Default Judgment after all.

Issues


  1. The issues that arise in the claim for damages to be determined by the Court are:-

(a) Whether the Claimant is entitled to any damages at all as the first licence was declared to be invalid by the Court and the Claimant was restrained from doing any business at all in sandalwood pursuant to the Second Sandalwood Licence because it would contravene the Council of Ministers decision dated 25 June 2003 reserving all involvement in sandalwood operations to ni-Vanuatu custom land owners pursuant to sections 4 and 5 of the Forestry Act.


(b) Whether the Claimant can recover his losses of investment in the sum of VT97,500,000.


(c) Whether the Claimant can recover the loss of profits which he would have had but because the First Sandalwood Licence was revoked and it was restrained by the Orders of the Court to engage in the business of sandalwood operations for the sum of VT720,340,000.


Claimant’s evidence


  1. The Claimant did not provide any sworn statement in support of the pleadings contained in the claim.
  2. Mr. Lin Yi Lung made three sworn statements in support of the claim for damages. These were filed on 6 September 2006 and 6 July 2007. Two of the sworn statements were filed on 6 September 2006. The sworn statements were admitted into evidence and marked as follows:-
  3. Mrs. Wang Huei Ling filed one sworn statement on 6 September 2006 which was admitted and marked as “C4”.
  4. The evidence as contained in “C1”. The proponent of “C1” swore and gave evidence that he and Mrs. Wang Huei Ling are creditors of SPI Sandalwood Vanuatu. The Claimant had sought and obtained financial assistance from themselves amounting to VT19,444,333,05. This is broken down as follows:-

(a) 2003 Investment capital VT5,000,000

(b) 2004 Credit cards – Wang Huei Ling VT3,803,665

(c) 2005 ATM Machine withdrawals – Li Yi Lung VT6,500,750

(d) 2005 Credit Cards – Li Yi Lung VT250,000

(e) 2005 Credit Cards – Wang Huei Ling VT3,889,918


Total VT19,444,333


  1. The particulars relating to how the money was actually spent is found in annexures “LYL10 – 1” to “LYL10 – 6”. The payments fall into the following categories:-

(a) Money paid by credit card to Air Vanuatu by Wang Huei Ling in connection with sandalwood business operations in Vanuatu in 2004.


(b) Money paid by credit card to Melanesian Port Vila Hotel by Lin Yi Lung or Wang Huei Ling in connection with sandalwood business operations in Vanuatu in 2005.


  1. Mr. Lung went on to give evidence that such monies is deemed to be a loss in investment because the Claimant could not operate despite being granted all valid permits and licences since 28 April 2003 when VIPA approved the Claimant to carry on sandalwood business in Vanuatu, and in particular, the cancellation of the First Sandalwood Licence without the Claimant’s consent, approval or knowledge.
  2. Mr. Lung further gave evidence that the Ministry of Forestry gave approval for the Claimant to have a one-off licence to export sandalwood to ameliorate some losses connected with Mr. Netvan late in 2002. The Ministry and the Department of Forests however, failed to honour their commitments. On the assurances given by the Ministry and the Department, the Claimant had gone ahead and made arrangements for the export of sandalwood and such sandalwood to be sold to Francis Chen of Expo Crafts PVT Ltd., in India. All the sandalwood envisaged to be exported under the one-off licence were in one container which is 10 tons and has an FOB sales value of US$260,000.00 or VT27,300,000 generating a net profit before taxation of US$155,904.77 or VT16,370,000 which is now a loss, derived as follows:-

(a) Contracted sales $260,000.00 VT27,300,000


(b) Less: Cost of sales

Total $99,095.23 VT10,405,000


(c) Gross profit $160,904.77 VT16,895,000


(d) Less indirect operating expenses $5,000.00 VT525,000


(e) Net profit before taxation $155,904.77 VT16,370,000


  1. Mr. Lung further swore that on 29 July 2005, the Claimant signed two confirmed sales orders No. ES00502 and ES00503 (confirmed sales orders) with Expo Crafts PVT Ltd. (Buyer) with a total FOB value of US$975,000.00 or VT97,500,000. These confirmed sales orders are for the export and sale of the processed sandalwood products to the buyer. Confirmed sales orders are annexed as “LYL15 – 1” and “LYL 15 – 2”.
  2. To discharge the sales contractual obligations under the confirmed sales orders the Claimant entered into a Joint Venture Agreement with Shien Hao Enterprises Co. Ltd., in Taiwan (Venture Capital Partner) for their timber and machinery expertise and the provision of finance for the sandalwood operations. See “LYL – 16” for a copy of that Agreement. The Venture Capital Partner had provided financial assistance amounting to US$400,729.64 or VT42,076,612.20 as follows:-

(a) Finance by telegraphic transfer and through ATM machines withdrawals at US$385,399.95 or VT40,466,994.74;


(b) Machinery, equipment, spare parts and packing materials at US$15,329.69 or VT1,609,617.45


Total = US$400,729.64 VT42,076,612.20


  1. On 1 July 2005 Consent Orders were issued in Civil Case No. 80 of 2005 quashing the decision of the Defendants First Sandalwood Licence.
  2. On 8 July 2005 the Claimant paid VT120,000 to the Department of Customs and Inland Revenue to renew the Business Licence Certificate for the year 2005. See LYL 13.
  3. On 11 July 2007 the Ministry of Forestry made a declaration that the sandalwood harvesting season for 2005 was open. Following the declaration the Claimant went into operations employing staff and workers and traveled to the approved islands to meet and negotiate with the Ni-Vanuatu farmers and owners of sandalwood for the Claimant’s manufacturing or processing requirements.
  4. On advice from the Acting Director of Forests the Claimant submitted another application for a sandalwood licence on 29 September, 2005. A new sandalwood licence was issued on the same day for a term of 10 years, to expire on 29 September, 2015 ( the second licence).
  5. Following the issuance of the Second Licence the Venture Capital Partner ordered a crusher, blake sharpener, chain saws and other related machinery and equipment for the manufacturing and processing of sandalwood products in Vanuatu. The machineries, equipment and spare parts arrived in Vanuatu on MV Coral Island II. See “LYL 24 – 1” and “LYL 24 – 2”. The first annexure shows a list of items but not the costs and the second annexure indicates that they were exempted from import duty.
  6. On 4 November, 2005 the Claimant paid VT10,000 to the Department of Customs and Inland Revenue for a business licence to operate and conduct the Claimant’s business in Port Vila. The business licence was issued. See “LYL – 27”.
  7. In January 2006 the Claimant received Notice for Civil Case No. 4 of 2006. Soon thereafter it received a copy of the Court Order stopping it to do or to carry on sandalwood business. Officers from the Department of Forests then removed 6 tons of sandalwood from the Claimant’s factory at Tebakor and 4 tons of sandalwood on Erromango Island. The total ex-village value for the 6 tons is claimed at VT4,500,000.
  8. Mr. Lung gave evidence that at total of VT1,644,882 had been paid in fees to the Vanuatu Government for licences and permits.
  9. Mr. Lung continued that the Claimant will not only suffer a very serious loss but also liable to be sued for non-performance or breach of sales contract due to the invalidation of its licences pursuant to a Council of Ministers’ decision of 25 June 2003. The estimated loss in profit is US$687,600.00 or VT68,760,000.
  10. The First Sandalwood License issued to the Claimant was for a term of 10 years (Feb. 2005 – Feb 2015). This license was struck down by the Supreme Court without the knowledge of the Claimant. It was not even a party in the proceedings before the Court at that time. The invalidation has caused financial hardship to the Claimant, loss in goodwill and credibility to its customers and suppliers and unable to perform sales contractual obligations and loss in substantial investment. The Defendants have denied the Claimant of the opportunity to carry on sandalwood business and to earn profit for the remaining 9 years. The anticipated net profit before taxation will be $618,840,000 (VT68,760,000 times 9 years).
  11. Mr. Lung urged the Court to understand the Claimant’s situation. That the loss of investment and loss of opportunity to earn profits is inevitable as the Claimant has ceased operations due to the invalidation of its license by the Defendants or its agents or organs. It has sustained substantial losses and it is quantified as follows:

(a) Loss of equipment 19,444,333

(b) Loss of profit for one-off export of sandalwood 16,270,000

(c) Loss of Investment of the Venture Capital Partners 42,076,61

(d) Loss of profit and confirmed sales contract 68,760,000

(e) Loss of anticipated profits for remaining 9 years 618,370,000

(f) Loss of profit on confiscated sandalwood 16,370,000


TOTAL VT781,860,945


  1. In exhibit “C2” Mr. Ling gave evidence that he is “a creditor of Beckenborg Lim Boon Kee trading as SPI Sandalwood Vanuatu”, the Claimant in this proceeding. He submitted that the total amount of financial assistance provided to the Claimant during 2003 to 2005 is VT11,750,750. This is broken down as follows:-
    1. Deposit into SPI Sandalwood Vanuatu

Account with Westpac Banking Corporation,

Port Vila Branch......................................................VT5,000,000


  1. Money drawn from ATM ..................................VT6,500,750

Paid to Melanesian Hotel by credit cards .........................VT 250,000


TOTAL .........................................................VT11,750,750


  1. Mrs. Wang Huei Ling gave evidence that: –

(a) She is a creditor of Beckenburg Lim Boon Kee trading as SPI Sandalwood Vanuatu.


(b) From 2004 until 2005 the claimant had sought and obtained financial assistance, without interest, from her totaling VT11,750,750. Particulars of such payments are as follows –


2004 Air Vanuatu...................VT151,120

Laho rent a car.......................VT95,408

Melanesian Hotel....................VT3,557,137


2005 Melanesian Hotel.............VT3,889,918


DISCUSSIONS


Flaws in Claimants evidence


  1. On or about 22 March 2006 the Supreme Court claim was filed in the Supreme Court Registry in Vila. There is no evidence before the Court that SPI Sandalwood Vanuatu or one of its directors filed that claim seeking damages and loss incurred due to the revocation of the First Sandalwood License or its inability to do business under the Second Sandalwood Licence does to the restraint imposed on it but the order of the Court. During examination in chief and cross-examination of Mr. Lin Yi Lung it became clear that he commenced the proceedings pursuant to a Power of Attorney given to him by Beckenburg Lim Boon Kee dated 15 July 2006.
  2. There are three directors or principals of SPI Sandalwood Vanuatu. They are

- Liu Cheng Yen

- Liva Boon Kee

- Lim Boon Cheong


  1. These persons are the licencees under the Business Licence No.7813 issued on 19 May 2003.
  2. None of them has filed any sworn statement to say that the Claimant had suffered loss and damages due to the revocation of the First Sandalwood Licence and the Court restraining it to operate under the Second Sandalwood Licence. The Claimant has no evidence before the Court of any loss or damages claimed he has suffered.

It is trite law that a Claimant files evidence to support his claim. What is contained in a claim is an allegation that must be proved before the Court through evidence.


Moneys lent to Claimant


  1. Both Mr. Lung and Mrs. Lung are creditors to SPI Sandalwood Vanuatu. Their evidence falls into two criterias. First, moneys they have lent to the Claimant in relation to the sandalwood business. Those moneys amount to VT19,444,333. See annexures LYL 10-1, LYL 10-2, LYL 10-3, LYL 10-4, LYL 10-5, LYL 10-6.
  2. LYL 10 -1 is a photocopy of two documents. First page is headed “SPI Sandalwood” and shows that on 9 March 2004 a sum of vt.151,120 was paid by credit card to Air Vanuatu by Mrs. Wang Huei Ling. However, there is no evidence from Air Vanuatu to show that such sum was indeed received by it. On cross examination, Mr. Ling gave evidence that the Claimant (Beckenburg Lim Boon Kee) came to Vanuatu in 2004 and that the money was expended on maintaining him in Vanuatu to enable him to set up the Claimant. However, Mr. Ling could not provide evidence from the Melanesian Hotel to show that the Claimant did stay there, nor the rental car company, to show that the Claimant did rent a car during that period.
  3. The next document is a photocopy that appears to be from Fubon Bank. The print is mostly in Chinese or other language and is of very little use to the Court. Translation of the document was made. There is nothing in evidence from the Fubon Bank that the transaction said to be to Air Vanuatu, did occur. The photocopy is not attested to before a notary public or a Commissioner of Oath to show that it is a true copy of the original document and to confirm contents of the photocopy.
  4. LYL 10-2 surfers from the same defects. It relates to money alleged to have been spent on rent-a-car hired from Deou Motors and accommodation costs incurred at the Melanesian Hotel. There is no receipt or statement from either entity to confirm the evidence. LYL 10-2 consists of 3 pages, all photocopies. Second page appears to be from Cosmos Bank, and last page appears to be from the International Commercial Bank of China. What I find puzzling is that Mr. Ling provides these documents without any Commissioner of Oath or notary public attesting to its true nature. There is no evidence from Deou Motors nor Melanesian Hotel verifying the amounts spent at these outlets accordingly, and further whether the Claimant did stay at the hotel or hired a rental car during the relevant period.
  5. LYL 10-3 suffers the same defects. The document is a photocopy. No Commissioner of Oath or notary public has attested to the documents being copies of true original and the veracity of their contents. It is submitted that between 14 January 2004 and 29 December 2004, various transactions took place totaling VT3,557,137 through the Fubon Bank, ICBC, Union Bank, Cosmos Bank and Taipei Fubon Bank. However, no evidence from each of those Banks that such transactions did occur. There is no evidence from the Melanesian Hotel Port Vila, that the Claimant did stay at the hotel during that period. No evidence was adduced from Deou Motors to show that a car had been hired also during that period.
  6. LYL 10-4 concerns money said to have been spent in Vanuatu between 6 May 2004 and 9 January 2006 in connection with sandalwood business operation in Vanuatu. It adds up to vt.6,500,750. On cross examination Mr. Ling gave evidence that all that money was used for setting up operations in Vanuatu, for example, petrol and living expenses. It was put to him that operational expenses is a broad term and that there is nothing in the sworn statement about the breakdown of expenditure, how it was calculated and spent. Mr. Ling agreed that it was a very broad term. The annexure further suffers as follows –

(a) There is no evidence on what the amount in item No.1 was spent on.


(b) There is no evidence on what the amount in items No. 2 -15 were spent on.


(c) There is no evidence to show exactly how much was spent on travel, accommodation, meals, etc.


  1. Mr. Lung under cross-examination when asked, “Did the Claimant tell you he bought sandalwood with those moneys in items 1 – 15”. He responded positively. He gave evidence that in July and August 2005 the Claimant bought the sandalwood with the moneys referred to in items 1 – 15. That contradicts earlier evidence he gave that all the money was used for operational expenses e.g., establishing office, maintenance and traveling in Vanuatu to establish business deals.
  2. Further on cross-examination he was asked, “of all the matters in Items 1 – 15, nothing in your statement says that claimant exported sandalwood, true?” and he replied “yes”. But no where in the sworn statements is the evidence of such export, the date, name of ship/plane exported on, tonnage, the price? There was no reply to this.
  3. Mr. Lung went on to give evidence that all the money in items 1 – 15 were sent to Vanuatu either through the ANZ Bank or Westpac Bank. That when “Claimant needs money and I gave him my ATM card with the PIN number. So what happens when he needs money, I deposit cash in my savings account. He then just go to Westpac or ANZ Bank to withdraw the money. The money he received in Vanuatu is in vatu currency.” This may be fine, but there is no evidence from the Westpac Bank and the ANZ Bank in Vanuatu confirming such transaction did occur. Further there is no evidence from the Claimant that he did receive the moneys referred to in Items 1 – 15.
  4. Prior to being asked whether sandalwood was exported during the relevant period, he was asked.

“Q: The Claimant did not buy any sandalwood from those moneys, agree?

Ans: I disagree.

Q: Did the Claimant tell you he bought sandalwood with those moneys in Items 1 – 15?

Ans: Yes

Q: When was the sandalwood purchased?

Ans: In July and August 2005.”


  1. However,

(a) There is no evidence that sandalwood was purchased in July and August 2005.


(b) If sandalwood was purchased, no evidence of quantity and price.


(c) Items 1 – 15 is silent on the issue of purchase of sandalwood during the relevant period.


(d) The evidence that sandalwood was purchased with moneys received and referred to in Items 1 – 15 again contradicts Mr. Ling’s own evidence given earlier that, the moneys was used for start up operation expenses (setting up office, living expenses, visiting islands to establish business deals).


  1. LYL 10 – 5 concerns money said to be paid by credit card to Melanesian Hotel by Ling Yi Lung in connection with sandalwood business operation in 2005. The total expenditure is VT250,000. LYL10–5 is also a photocopy of documents. It refers to moneys paid from 6 May 2005 to 28 June 2005. The transactions were made from the Sunny Bank, Jih Sun International Bank, Cosmos Bank and AIG International Credit Card. However, there is no:-
  2. Mr. Lung under cross-examination gave evidence that:-
  3. Mr. Lung in the end agreed that there is no evidence to substantiate his oral evidence on how the money was spent. There is further:-
  4. LYL 10 – 6 concerns money said to be paid by credit card to Melanesian Hotel, Port Vila by Wang Huei Ling in connection with sandalwood business operations in Vanuatu in 2005. The particulars show that the transactions commenced on 24 January 2005 and stopped on 23 December 2005. Two final transactions after 23 December 2005 show dates of May 2006. Presumably, these occurred in May 2006 for operations in 2005.
  5. The transactions were made from Taipei Fubon Bank, Union Bank, ICBC, Chinese Bank, Cosmos Bank, Macoto Bank, American Express, Far Eastern Bank and Tai Shin Bank.
  6. LYL 10 – 6 is a photocopy of documents mostly from different banks in Chinese language. Translation of the documents was made. They are not certified by a notary public or a commissioner of oath that they are copies of original documents originating from those banking institutions and the veracity of those documents.
  7. The transactions made via the American Express appears to have been made from:-
  8. There are no explanations as to what the documents or statements mean. The proper inference that could be drawn is that the moneys are in someway connected with the expenditures incurred at the Melanesian Hotel, Port Vila in connection with sandalwood operations in Vanuatu in 2005.
  9. The total amount of moneys paid to Melanesian Hotel during the relevant period amounts to VT3,889,918. There are no detailed accounts as to what amounts were used or paid for what items or services. There is no statement from the hotel that such payments were made to it and on what dates. There were no statement from the various banks confirming the transactions.
  10. “C4” is the exhibit containing the sworn statement of Wang Huei Ling. She deposed in her sworn statement that:-

(a) She is a creditor of Beckenburg Lim Boon Kee trading as SPI sandalwood Vanuatu;


(b) From 2004 to 2005 she had lent a total VT11,750,750 to the Claimant:-


  1. “C4” however, contains:-

(a) No evidence from Air Vanuatu that the Claimant did fly on Air Vanuatu in 2004 and the fare was VT151,120;


(b) No evidence from Laho Rent a Car that the Claimant (or any of its directors) did use one of its rental vehicles at VT95,408;


(c) No evidence from Melanesian Hotel in 2004 and 2005 that VT3,889,918 was paid to it in those years.


  1. The annexure to “C4” suffers the same defects as I have pointed out regarding LYL 10 – 1 to LYL 10 – 6 to exhibit “C1”. There are no:-

(a) Translations to the documents annexed to “C4” especially those said to be from Fubon Bank, Cosmos Bank, The International Commercial Bank of China, Union Bank and Taipei Fubon Bank.


(b) Evidence from the various banks referred to confirming the transactions.


(c) Statements from a notary public or commissioner of oath attesting that they are true copies of original documents and to the veracity of the contents of the copies of the documents.


  1. Under cross-examination, Mrs. Lung gave evidence that:-

(a) This is her case. She is the Claimant;


(b) She is the Claimant because Lim Boon Kee (Mr. Lung’s son) borrowed money from her for sandalwood business.


  1. Mrs. Lung gave evidence through an interpreter. She gave evidence that she does not speak English and her sworn statement was prepared by her husband, Mr. Lung. And that he explained what was in the sworn statement to her in Chinese, she understood it and signed it. She stood firmly under cross-examination and maintained that:-
  2. Her evidence in Court at times was a contradiction to her sworn statement. For example, under cross-examination she gave evidence that she is the Claimant. The basis for that is that she had borrowed money from Lim Boon Kee for sandalwood business operations. The following questions and answers bring this out.
  3. Q: You talem long Court se case blong you, earlier.

Ans: Case iblong me.


  1. Q: From wanem boe blong yu istap suem Ministry mo Director?

Ans: Case iblong me from we me me karem money blong boe blong me.


  1. Q: You karem money blong boe blong man blong yu?

Ans: Yes me me karem money blong hem.


  1. Q: Afta you mekem wanem long money ia?

Ans: Me borrowem money blong mekem business.


  1. Q: Yu remember wanem business?

Ans: Blong mekem business blong sandalwood.


  1. Q: Paragraph 3 of your sworn statement – Total amount of money provided to the Claimant for 2004 and 2005 is VT11,750,000.

Ans: Yes money ia now we me borrowem.


  1. I have gone over the oral evidence carefully to ascertain the proper meaning of her testimony as she was giving evidence through a translator. During cross-examination the Court had to intervene to direct the interpreter to translate the evidence as if Mrs. Ling was talking directly to Court. This helped but there were times when I thought the translator was trying to summarize what the witness was saying and not tell the Court what she was actually saying.
  2. The issue arising at this stage is whether she was contradicting herself. In her sworn statement she said she loaned moneys to Lim Boon Kee. In her oral evidence she seems to be saying that Lim Boon Kee loaned money to her. I have considered the evidence on this issue and it would appear to me to be a translation issue. The proper position is as contained in her sworn statement. That she lent money to Lim Boon Kee for sandalwood business operations in Vanuatu. Further that she may have borrowed the money from some one else and on lend it to Lim Boon Kee.
  3. She is a creditor to the Claimant.

Moneys claimed as loss of profit or investment


  1. The second area of claim falls into that of claim for loss of profit or investment due to the revocation of the First Sandalwood Licence and Claimant’s inability to do business due to the restraining orders.
  2. On 25 February 2005, the Director of Forests issued the first sandalwood Licence to the Claimant. It was quashed and set aside by the Supreme Court on 1 July 2005, approximately 4 months 6 days from the date of issue.
  3. Mr. Lung had given evidence that pursuant to the grant of the sandalwood Licence the Claimant had entered into two confirmed sales orders with Expo Crafts PVT Ltd. Which export sales will generate a net profit before taxation of VT68,760,000. See LYL 15 – 1 and LYL 15 – 2 to annexures to Exhibit “C1”.
  4. On 28 April 2003 VIPA gave its approval to SPISV to carry on the business of manufacturing sandalwood in Vanuatu. Since that date and up to when the second licence was revoked the Claimant had invested a total of VT19,444,333 in getting the business going. The Claimant had borrowed such monies on the trust and reliance of the VIPA approval, an agent of the Government responsible for assessing foreign investors and giving them the permission to do business in Vanuatu.
  5. Mr. Lung gave evidence that the Claimant had further relied on the first sandalwood Licence and entered into a joint venture Agreement with Shien Hao Enterprise Co. Ltd. of Taiwan and invested a total sum of VT42,076,612 for cash financing of the Claimant’s business operations.
  6. The lost of investment is VT62,954,464 claimed Mr. Lung.
  7. The Claimant also claimed VT16,370,000 as the value of the one-off export licence which the Defendants agreed to grant but failed to do so. This had come about as a result of a separate arrangement between the Claimant and Netvan but which the Ministry and the Department had agreed to give the Claimant a one-off licence to resolve the outstanding amount between the Claimant and Netvan.
  8. The Claimant also claimed loss of forseeable profits from:-

(a) One-off export licence of sandalwood licence at VT16,370,000;


(b) Confirmed export sales orders with Expo Crafts PVT Ltd., India at VT68,760,000;


(c) Remaining 9 years at VT618,840,000


(d) Confiscated sandalwood at VT16,370,000


-------------------

VT720,340,000


  1. Three main flaws are attributable to the claim under this head:-

(a) It suffers the same fault as made in relation to the first situation, in particular evidences relating to export sales orders with Expo Crafts PVT Ltd. of India. The agreements attached to the sworn statement are copies. There is no statement by anyone authorized to make a statement that the copies of the orders are true copies of the agreements made pursuant to the grant of the First or Second Sandalwood Licence, and further to confirm the content of such agreements (their accurateness).


(b) The two confirmed “Sales Orders” between SPI Sandalwood Vanuatu and Expo Crafts PVT Ltd. and Shien Hao Enterprise Co. Ltd. are dated 29 July 2005. These provide for the export of “sandalwood 100% de-barked and de-sapped or in pre-grind form of net size 6mm/7mm for sandalwood logs with diameter 5 cm to 8 cm” by the Claimant to Expo Crafts PVT Ltd., and for Shien Hao Enterprise Co. Ltd. to provide financial assistance and also assist in the installation of machineries and training of workers in the use or operation of such machinery. These were entered into 28 days after the First Licence was struck down by the Court. The Second Sandalwood Licence had not yet been issued. They were issued when the Claimant had no valid licence to engage in sandalwood operations in Vanuatu.


(c) The “Joint Venture Agreement” between SPI Sandalwood Vanuatu and Shien Hao Enterprise Co. Ltd. was entered into on the 27 day of September 2005. As at that date no valid sandalwood licence was subsisting. The First Sandalwood Licence had been declared invalid by the Court on 1 July 2005 and further declared to be of no effect. These had been drawn to the attention of the Claimant. The Second Sandalwood Licence was not issued until 29 September 2005. A prudent business person would not be in a hurry to enter into such agreement when it is unclear when another sandalwood licence could be granted.


Moneys claimed as loss on a one-off licence


  1. Mr. Lung gave evidence that the Claimant was entitled to VT16,370,000 under this head. However, the evidence is lacking to show that the sandalwood actually weighed 10 tons and the price at that time.

Is the Claimant entitled to the damages as claimed in this proceeding?


  1. This issue, in my view, goes to the heart of the Claimants case. The Supreme Court has, in Civil Case No. 80 of 2005, quashed the decision granting the sandalwood licence to the Claimant and declared the decision to grant the First Sandalwood Licence dated 11 February 2005, invalid.
  2. There is a background to this matter and it will assist to set out the chronology of events leading up to the restraining orders dated 13 January 2006 and the commencement of the proceedings in this matter. This is set out fully below:-

Chronology of events


1 April 2003
FSC approved business name “SPI Sandalwood Vanuatu”


28 April 2003
VIPA granted its certificate of approval permitting the Claimant to carry on business in Vanuatu. The certificate authorized the Claimant to engage in “Manufacturing of sandalwood products. Export of sandalwood products.” The certificate also stated that “The enterprise is subject to the laws of Vanuatu ...”


19 May 2003
SPI Sandalwood Vanuatu was issued a business licence to carry on business in the area of “manufacturing industries and trade”. Extended twice to 28 April 2006.


24 June 2003
COM prohibits trading in sandalwood by foreigners. This is found in “Decision 67: Ol eria blong mekem bisnis o investment long forestry sekta we oli blong ol kastom land ona nomo”

The letter from the Secretary General of the Council of Ministers dated 25 June 2003 to the Minister responsible for Forests advised that the Council had met on 24 June 2003 “Mo taem ia, Kaonsel i agri long desisen antap ia wetem ol toktok se, Kaonsel blong ol Minista i appruvum:-

  • Se ol ona mo ol operetta blong ol mobael somil mo jenso mini-mil bambae oli restriktid long ol Ni-Vanuatu kastom land ona nomo;
  • Se ona mo operesen blong sandal wud (harves & export), bambae oli restriktid long ol Ni-Vanuatu kastom land ona nomo;
  • Se ekspot blong ol sid (evri kaen sid) mo ol narafala prodakt we oli kamaot long forest we ino nidim bigfala mane blong invest long ol, olsem se blong ol nat (nuts), flawa, resin, solap blong tri (burl), ol lif mo ol narafala prodak we oli stap long forest, bambae oli restriktid long ol Ni-Vanuatu kastom land ona nomo.”


11 February 2005
Director of Forest issued a “Sandalwood Licence” to the Claimant to conduct sandalwood operations for a period of commencing on the 14 day of February 2005 to 14 February 2010.


1 July 2005
In CC80/05 Consent Orders were issued:-
(a) quashing the decision to grant the First Sandalwood Licence to the Claimant;
(b) setting aside the First Sandalwood Licence dated 11 February 2005.


12 July 2005
Acting Director of Forests advised Claimant of the Court Orders.


29 July 2005
Claimant entered into two confirmed Sales Orders Agreement Nos. ES00502 and ES00303 with Expo Crafts PVT Ltd., India for export to its sandalwood products.

The Claimant pursuant to the confirmed sales orders entered into another agreement with Shien Hao Enterprises Co. Ltd., Taiwan for timber and machinery assistance and also the provision of finance for sandalwood operations in Vanuatu.


10 August 2005
Geoffrey Gee & Partners complained to the Ministry of Forests about the action taken to set aside the First Sandalwood Licence issued.


27 September 2005
The Claimant entered into a “Joint Venture Agreement” with Shien Hao Enterprise Co. Ltd.


29 September 2005
Director of Forests issued another the Second Sandalwood Licence to the Claimant to conduct sandalwood operations for a period of 10 years.


13 January 2006
Restraining Orders were obtained from the Court in CC04/06 restraining the Claimant, its servants, employees and agents from “harvesting, purchasing or otherwise acquiring howsoever any sandalwood or sandalwood products, trading, processing or exporting of sandalwood, sandalwood oil or any sandalwood product because if SPI is permitted to do so, it will be in contravention of a Council of a Ministers Decision of 25 June 2003 reserving all involvement in sandalwood operations to Ni-Vanuatu custom land owners (under) sections 4 and 5 of the Forestry Act No. 26 of 2001.”


22 March 2006
Current proceedings were commenced in the Supreme Court.

The Law


  1. The relevant provisions of the Vanuatu Foreign Investment Promotion Act [CAP. 248] are set out fully below:-

The long title provides:-


“An Act to establish the Vanuatu Investment Promotion Authority to expeditiously facilitate, promote and foster foreign investment in Vanuatu.


PART 1 – PRELIMINARY


  1. Purpose of Act

The purposes of this Act are:


(a) to promote and facilitate investment in Vanuatu by foreign investors; and

(b) to provide an efficient, effective and transparent system for appraising and approving investments proposals by foreign investors; and

....................;


  1. Interpretation
(1) In this Act, and unless the context otherwise requires:-

“fit and proper person” means a person;


(a) who has not been convicted of an offence that calls into question that person’s character such that it would be inappropriate for that person to participate in a proposed investment or be granted a work residence permit; or

(b) who has not been convicted of a serious offence involving tax evasion;

(c) not in liquidation or who is not an undischarged bankrupt;

(d) who is a natural person and who is not partly or wholly the legal or beneficial owner of officer of a body corporate that is in liquidation;

“foreign investor” means:-


(a) a person who is not a citizen of Vanuatu; or

(b) a body corporate:-

(c) any entity other than a natural person or a body corporate, where the control of, or the benefit to be derived from the entity, will vest wholly in persons who are not citizens of Vanuatu or a body corporate that is a foreign investor;

“investment proposal” means a proposal by a foreign investor to invest in Vanuatu, and includes a proposal by a foreign investor investing through a joint venture, partnership or other association with citizens of Vanuatu or companies incorporated in Vanuatu;


“investor” does not include a citizen of Vanuatu or an enterprise wholly owned and controlled by a citizen of Vanuatu;


“reserved investment” means the list of investments set out in the Reserved Investments Table in Part 2 of Schedule 1;


“reserved occupation” means an occupational activity declared under section 9 of the Labour (Work Permits) Act [CAP. 187] to be a reserved occupation as is set out in Schedule 2;


(2) For the purposes of this or any other Act, the list of reserved investments in Part 2 of Schedule 1 and the list of reserved occupations in Schedule 2 must be interpreted strictly by the Board. For example, if a proposed investment does not fall strictly within reserved investment category, then the investment can still be authorized, even if personnel will need to be recruited from reserved occupations.

(3) (Repealed)
  1. Reserved investments and occupations
(1) The investments specified in:-

(i) are wholly controlled by persons who are citizens of Vanuatu; and


(ii) have all their shares (voting or otherwise) beneficially owned or controlled by persons who are citizens of Vanuatu;


And a foreign investor cannot enter into any joint venture, partnership or association with any such citizen or company in relation to those reserved investments, being investments for which the Board must not grant an approval certificate.


(2) The occupations specified in the Schedule 2 are reserved occupations for citizens of Vanuatu for which the Board must not issue a work permit.

(3) The investments and occupations specified in Schedules 1 and 2 respectively must not be added to or removed except by the express provisions of this or any other Act.

PART 2 – APPROVAL OF FOREIGN INVESTMENT


  1. Purpose of part

The purpose of this Part is to establish and regulate a system for appraising investment proposals and granting approvals to foreign investors to invest in Vanuatu.


  1. Foreign investment without approval certificate prohibited
(1) A foreign investor must not invest in Vanuatu without first obtaining an approval certificate.

(2) Where a foreign investor invests in Vanuatu without an approval certificate or engages in an investment not authorized by an approval certificate then, every contract and every agreement entered in to by that foreign investor and relating to that investment will be void and of no effect.

(3) A transfer or a legal or equitable interest or an increase in the share capital or any proprietary interest in an enterprise, that has the effect of the enterprise becoming a foreign investor shall not be valid or of any effect unless an approval certificate has first been obtained.
  1. Application for approval certificate
(1) A foreign investor proposing to invest in Vanuatu or an enterprise that proposes to become a foreign investor must apply in the prescribed form to the Authority for an approval certificate .

(2) An investment proposal must contain full particulars of:-

(i) the foreign investor if an individual; or


(ii) in any other case – the legal and beneficial owners of the foreign investor, being owners who are not citizens of Vanuatu and who intend to reside on a full time or part time basis in Vanuatu;


(f) the number of employees who are not citizens of Vanuatu and an estimate of the number of persons to be employed during the first 3 years of the investment;


(g) the number of residence and work permits that will be required and the reasons why;

(h) what provisions (if any) will be made for the training of Vanuatu citizens in the event that specialist skills are required of persons to be employed by the foreign investor;

(i) a statutory declaration that no criminal or taxation evasion convictions have been entered against the foreign investor who is a legal or beneficial owner of the foreign investor and persons who will require work or residence permits and if convictions have been entered, the date of conviction, the offence and the penalty imposed.

(j) Whether the foreign investor or any investors who are the legal or beneficial owners of the foreign investor or its officers are or have been in liquidation or bankrupt and if so, full details of the circumstances;

(k) The value of bank deposits together with bank references and he location and value of unencumbered assets of the foreign investor and investors who are the legal or beneficial owners of the foreign investor relative to the proposed investment;

(l) Other information as may be requested by the Board.

8. Approval of investment proposal


(1) Subject to subsections (2), (2A) and (3) the Board must approve an investment proposal;


(2) When considering an investment proposal, the Board must be satisfied:-


(a) the application contains full particulars of the information required by section 6;

(b) the foreign investor or the legal and beneficial investors of the foreign investor are fit and proper persons;

(c) the foreign investor has sufficient financial resources for the proposed investment;

(d) the persons who will receive work or residence permits are fit and proper persons;

(3) An application for an approval certificate for a proposed investment will not be approved where the investment:


(a) is a prohibited investment; or

(b) is contrary to the law of Vanuatu; or

(c) will interfere with an exclusive right of investment granted by the Board under subsection (6C).

(3) In determining whether a person is a fit and proper person, the Board is not confined to a consideration of the matters set out in the definition of that term but may:-

............................


(6C) The Board may approve an application for an proposed investment on the condition that the foreign investor has an exclusive right in relation to that investment for a period specified by the Board, being a period that does not exceed 5 years.


(4) A certificate of approval in the form to be prescribed must be issued by the CEO within 7 days of the date of the Board’s approval and will remain valid for a period of 12 months from the date to be specified in the certificate.

(5) Subject to a foreign investor satisfying the Board that implementation of the investment has been pursued with all diligence, the Board must renew the certificate for such further periods of 6 months as may be required by the foreign investor while the approved project is still being implemented.

(6) When the Board is notified and satisfied by the foreign investor that the investment for which a certificate of approval has been issued is a going concern the CEO must issue a notice to the investor that the certificate of approval will remain valid subject to section 8A and section 8B.

8A. Fees for approval certificates

(1) The foreign investor named in an approval certificate must pay to the Authority the prescribed fee for the issue and annual renewal of the certificate on or before the prescribed date.

(2) If a foreign investor fails to pay the prescribed fee by the prescribed date, the Authority may, by notice in writing to the foreign investor, cancel his, her or its approval certificate.

(3) This section applies to an approval certificate whether issued before, on or after the commencement of this section.
  1. Effect of approval certificate
(1) Subject to compliance with the law and the statutory declaration referred to in section 6 (2) (1) being correct in every material respect and subsection (2) an approval certificate will entitle the foreign investor named in the certificate to engage in the investment specified in the certificate.

(2) A foreign investor must diligently pursue the investment specified in the certificate without any material deviation from the substance of the investment proposal and where there is a material deviation the Board must not revoke the certificate of approval without first taking into account the circumstances that gave rise to that deviation.”
  1. The Vanuatu Foreign Investment Promotion Act [CAP. 248] came into operation on 24 April 1998.
  2. The Forestry Act [CAP. 276] (Forestry Act) came into force on 3 March 2003. The relevant provisions are set out fully below:-
  3. The long title of the Act states:-

“An Act to make provision for the protections, development and sustainable management of forests and the regulation of the forestry industry in Vanuatu, and for related purposes.


PART 1 – PRELIMINARY


  1. Application of this Act

This Act applies to all forests and all forestry operations in Vanuatu.


...........................


  1. Interpretation

In this Act, unless the contrary intention appears:-


“approved negotiator” means a person approved under section 18 to negotiate a timber rights agreement under Part 2;

.....................


“commercial forestry operations” means:-


(a) the felling of trees in a forest for the purpose of their sale, or the sale of their products; or

(b) the removal of timer or other forest products from a forest for the purpose of its sale, or the sale of its products; or

(c) sandalwood operations; or

(d) any of the following if done in relation to the sale of timber or forest products:-

but it does not include the felling of trees or removal of timber or other forest products by custom owners for sale to ni-Vanuatu in accordance with current customary usage;


......................


“sandalwood harvesting season” means the period during which sandalwood trees can be legally felled for sale that starts on 1 June and ends on 31 of August each years, unless varied under section 47 (6);


”sandalwood operations” means the purchasing or trading of sandalwood and the processing and exporting of sandalwood, sandalwood oil or any sandalwood product;


“sandalwood trading season” means the period during which sandalwood can be purchased and collected from sandalwood owners by a person under a sandalwood licence, being the period that starts on the same day as the sandalwood harvesting season, but ends 2 months after the end of that season;

.........................................;


PART 2 – ADMINISTRATION


Division 1 – General principles


  1. Principles of forestry administration

In performing their functions and powers under this Act, the Minister, the Board and the Director must have regard to the following principles:-


(a) the forests of Vanuatu must be sustainably managed, developed and protected so as to achieve greater social, environmental and economic benefits for current and future generations;

(b) the diversity of the forests and forest ecosystems of Vanuatu must be protected;

(c) the rights of custom owners and other ni-Vanuatu with customary interests in forests must be recognized;

(d) any relevant international obligations undertaken by Vanuatu must be respected.
  1. Performance of the Minister’s functions and powers
(1) Where this Act provides for the Minister to perform any function or exercise any power acting on the advice of the Council of Ministers, the Minister must so act only with, and in accordance with, the advice of the Council of Ministers.

(2) The Minister’s functions and powers must be performed and exercised subject to and in accordance with this Act, regulations made under this Act and the Forestry Sector Plan.”
  1. Section 9 of the Act provides for the preparation of the Forestry Sector Plan. Section 10 goes on to provide for the contents of the Forestry Sector Plan. The responsibility to prepare the plan is imposed on the Director of Forests and section 11 states that such a plan must be in draft form and be presented to the Minister. Section 12 imposes a mandatory duty on the Minister to submit the plan, within 28 days of receiving it to the Council of Ministers for its considerations. Section 12 states:-

“12. Approval of the Forestry Sector Plan


(1) The Minister, upon receiving the Forestry Sector Plan, must submit it within 28 days to the Council of Ministers for its consideration.

(2) When it has considered the Forestry Sector Plan, the Council of Ministers must either:-

(a) approve the Plan; or


(b) refer the Plan back to the Director, specifying the amendments that it considers necessary.


(3) If a reference is made under subsection (2) (b), the Director must either:-

(4) The Minister must submit to the Council of Ministers:-

(5) The Council of Minister must:-
  1. I will now apply the law to the circumstances of this case.
  2. On 28 April 2003, VIPA granted its certificate of approval authorizing SPI Sandalwood Vanuatu to engage in “Manufacturing of sandalwood products” and “Export of sandalwood products”. This was done pursuant to Part 2 of the Vanuatu Foreign Investment Promotion Act (VFIPA Act). The Authority under Part 2, receives applications from foreign investors to invests in Vanuatu. It screens those applications and makes its decisions accordingly. Section 8 (1) states that the Authority “must approve an investment proposal” made under section 6 of the same Act. The application or investment proposal may only be rejected if:-

(a) the investment is a prohibited investment; or


(b) the investment is contrary to law; or


(c) the investment will interfere with an exclusive right of investment granted by the Board under section (6C).


  1. When considering an investment proposal the Board must be satisfied that:-

(a) The application contain full particulars of the information required by section 6;


(b) The foreign investor or the legal and beneficial investors of the foreign investor are fit and proper persons;


(c) The foreign investor has sufficient financial resources for the proposed investment;


(d) The persons who will receive work or residence permits are fit and proper persons.


  1. Further when considering whether a person is “a fit and proper person” the Board is not confined to a consideration of the matters set out in the definition of that term but may:-

(a) take into account such other matter as maybe relevant (including any association between the person being considered and a person who is not a fit and proper person); and


(b) consider any information obtained form any reliable source and in the event that the Board is of the opinion that further investigation is required, undertake that investigation.


  1. The Claimant went through this process as established by the VFIPA Act and satisfied the Authority to the standard required firstly, that the Claimant is “a fit and proper person” and second the investment proposal does not offend section 8 (3) of the Act. The Board granted the approval certificate also because the Act only prohibits “Export of sandalwood in stick and chips form” and “local trading of sandalwood”. The proposed investment by the Claimant was one not prohibited by law. Export of sandalwood in “stick and chip form” are prohibited, but processed sandalwood in any other form is not prohibited. That is the Claimant’s case basically.
  2. The VFIPA Act came into operations on 24 August 1998. It has been amended so far two times, the latest by Act No. 5 of 2001. Section 3 provides for reserved investments and occupations. It sets out what are reserved investments for citizens of Vanuatu in Part 2 of Schedule 1
  3. The Forestry Act [CAP. 276] came into operation on 3 March 2003, three and half years later after the enactment of the VFIPA Act.
  4. The long title to the Forestry Act states that it is an “Act to make provision for the protection, development and sustainable management of forests and the regulation of the forestry industry in Vanuatu and for related purposes.” The Act establishes a scheme to ensure that the purpose of the Act is achieved. Included in this scheme is a forestry plan that the Minister must first obtain the Council of Ministers approval for it to have effect. Section 4 of the Act states that the principles of forestry administrations are:-

“(a) The forests of Vanuatu must be sustainably managed, developed and protected so as to achieve greater social, environmental and economic benefits for current and future generations.


(a) the diversity of the forests and forest ecosystems of Vanuatu must be protected;

(b) the rights of custom owners and other ni-Vanuatu with customary interests in forests must be recognized;

(c) any relevant international obligations undertaken by Vanuatu must be respected.
  1. On 24 June 2003, the Minister of Forests sought and obtained the approval of the Council of Ministers to restrict the exploitation of the sandalwood industry only to the Ni-Vanuatu custom land owner. This decision has not come under any challenge by the Claimant as to whether what the Minister took to the Council of Ministers at that time falls within a forestry plan as mentioned in sections 9 and 10 of the Forestry Act.
  2. The scheme in the VFIPA Act appears to promote a one-stop shop for a foreign investor intending to invest in Vanuatu. When a foreign investor is given an approval certificate, that investor should not have to worry or cause further investigation to ascertain whether the activity or activities he or she wants to invest in and approved are not prohibited by law. The scheme captured in that Act, in my view, is aimed at:-

(a) promoting investments in Vanuatu by foreigners; and


(b) shopping in one place only, and that is at the Foreign Investment Promotion Authority, to know all about the feasibility of investing in a given area in Vanuatu, and knowing whether the law enables a foreigner to invest in such activity.


  1. The certificate of approval granted to the Claimant to engage in sandalwood operations was approved on 28 April 2003. About 2 months later on 24 June 2003, the law in relation to a foreign investor carrying on business in Vanuatu, in the sandalwood industry, went through a complete change as a result of the Forestry Act which came into operations on 3 March 2003, and the decision of the Council of Ministers of 24 June 2003.

Findings relating to first issue


  1. The Vanuatu Foreign Investment Promotion Authority granted the certificate of approval to the Claimant to do business in sandalwood operations on 28 April 2003 because at that time a foreign investor was not prohibited from engaging in the export of sandalwood in forms, other than “stick and chips”.
  2. The approval certificate granted to the Claimant and the business licence it obtained on 19 May 2003 were valid and remained valid up to 24 June 2003 when a total restriction on foreigners doing business in the sandalwood industry was imposed by the Council of Ministers pursuant to the Forestry Act. The Claimant would be entitled to any damages or loss incurred in or for this period.
  3. During the period 28 April 2003 – 24 June 2003:-

(a) No clear evidence at all emerges to show if any fee was paid and how much to the Financial Services Commission for payment of the registration of the Claimant’s business name,


(b) A fee of VT187,257 was paid to the Department of Customs and Inland Revenue business licence granted on 19 May 2003;


(c) There is no evidence to show if any fee was paid on grant of certificate of approval , and what was the amount of the fee paid to the Vanuatu Foreign Investment Promotion Authority;


(d) For the sandalwood licence fee, there is no evidence if any fee was paid, and what was the amount of the fee paid.


(e) In relation to the Bankers guarantee under a sandalwood licence an amount of VT5,000,000 had been deposited with the Westpac Bank. This is confirmed by Westpac in a letter dated 28 April 2003. Oral evidence of Mr. Lung confirms that is the money.


  1. On 1 July 2005 Consent Orders obtained from the Court:-

(a) Quashed the decision to grant the First Sandalwood Licence dated 11 February 2005.


(b) Set aside the Sandalwood Licence dated 11 February 2005.


  1. The effect of that order is simply that eventhough, the Claimant had its VFIPA Certificate of approval, it cannot enter into the business of sandalwood operations as that required a specific authorization under the Forestry Act, and the current authorization had been taken away by virtue of that Court Order. It no longer had the authority to do so. The Court Order had a retrospective effect to the date the Sandalwood Licence was granted to the Claimant. In my view, it went even further back to the date (24 June 2003) when the Council of Ministers placed an embargo on foreigners being involved in the sandalwood industry. This view is based on reading the Forestry Act and more specifically the long title to the Act, the principles of forestry administration established in section 4, and the powers vested in the Minister in sections 5, 12 and 13. The net effect of those provisions, in my view, is that when the Council of Ministers approved a plan, that plan becomes part of the law regarding exploitation of the forests resources of Vanuatu and has the force of law.
  2. On the loss and damages suffered or incurred as a result of the revocation of the First Sandalwood Licence granted on 11 February 2005, the Claimant has the onus of proving by relevant and admissible evidence all the losses and damages it has claimed.
  3. The first hurdle that the Claimant must overcome is to prove by evidence that at the time he did actually suffer such loss or incurred such damages. As I have shown earlier in this judgment the evidence of both Mr. Lung and Mrs. Lung suffer extensively from various defects that I had pointed out. Their evidence fails on the particulars necessary to substantiate the claim of the Claimant. To make matters even worse, the Claimant or any of the principals in the business had filed no sworn statement evidencing losses and damages suffered or incurred.
  4. Mr. and Mrs. Lung in their sworn statements confirmed that they are creditors of the Claimant. It follows that their claim is against the Claimant, and not the Defendants, in my view.
  5. The evidence on the losses made in 2004 and 2005 are not detailed enough to satisfy this Court that such losses did occur. The Civil Procedure Rules provide that evidence in the Supreme Court is to be provided by a “sworn statement” and that a “witness may be cross-examined and re-examined on the contents of the witness’s sworn statement”. In the absence of evidence in the form of sworn statements by the Claimant or any of its principals, I am of the view that the evidence as to losses and damages claimed are not in the clearest terms to assist this Court reach a decision on each head claimed.
  6. The two Confirmed Sales Orders dated 29 July 2005 were entered into at a time when the First Sandalwood Licence had been struck down and no other licence had been granted and in force. The Claimant was informed of the striking down of the licence on 12 July 2005 and yet went ahead and entered into the sale orders on 29 July 2005.
  7. The Joint Venture Agreement was entered into on 27 September 2005 before the Second Sandalwood Licence was entered into. That Second Licence was granted on 29 September 2005.
  8. Having had the First Sandalwood Licence struck down by the Supreme Court on 1 July 2005, a prudent business person, in my view, would not rush into making new or further arrangements until he is absolutely clear that he has a lawful licence to operate. On the evidence he entered into 3 separate agreements between 1 July 2005 and 27 September 2005 when he had no licence to engage in sandalwood business operations in Vanuatu. All he had was a general approval from the Foreign Investment Authority.
  9. In Holman v. Johnson [1775] EngR 58; [1775] 1 Cowp. 341 Lord Mansfield said “No Court ought to enforce an illegal contract or allow itself to be made the instrument of enforcing obligations alleged to arise out of a contract or transaction which is illegal, if the illegality is duly brought to the notice of the Court, and if the person involving the aid of the Court is himself implicated in the illegality.”
  10. On the evidence adduced in this matter, it is my view that Mr. Lung who has the Power of Attorney, to commence proceedings on behalf of the Claimant, has come to this Court with unclean hands. He is a creditor of the Claimant and yet persists on suing the Government when the proper person to go after is the Claimant. Secondly, Mr. Lung and the Claimant knew that at the time the Confirmed Orders and the Joint Venture Agreements were entered into, the Claimant had no valid sandalwood licence. I concur with the statement by Lord Mansfield in the case cited above. The Court must not be seen to be enforcing obligations arising out of transactions which is unlawful. The First Sandalwood Licence was struck down because of the provisions of the Forestry Act.
  11. For those reasons, it is my view that the answer to the first issue must be in the negative. The Claimant however is entitled to:-

(a) VT187,257 in business licence fees;


(b) Bankers guarantee of VT5,000,000;


  1. The orders of the Court are:-

(a) Judgment is entered in favour of the Claimant in the sum of VT5,187,257.


(b) Costs of and incidental to this proceeding.


(c) Next conference in this matter to be at 9.00 a.m. on 2 June 2008.


DATED at Port Vila, this 7th day of May, 2008.


H. BULU
Judge.

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