N3346

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS. NO. 1271 OF 2007

BETWEEN:

UMBOI TIMBERS INVESTMENT LIMITED
Plaintiff

AND:

PRECISION LOGGING LIMITED
Defendant

Lae: Kirriwom, J
2008: 15 & 16 April

PRACTICE AND PROCEDURE – Injunction - Interim orders – Application setting aside ex parte orders – Balance of convenience favours setting aside – costs – Costs awarded against non-party ie. not named in the action.

Cases cited:

No Cases cited in the judgment

Counsel:

S. Toggo, for the Plaintiff/Respondent 
K. Aisi, for the Defendant/Applicant

RULING

16 April, 2008

1.	KIRRIWOM, J: This is a motion by the Defendant, the Applicant herein, seeking inter alia, an order setting aside an ex parte order that was taken out by the Plaintiff on 19th March 2008 restraining the Defendant from exporting any logs extracted from Umboi Timber Rights Permit area on Siassi Island until further orders. The applicant also seeks further orders for the proceeding to be dismissed pursuant to O.12 r.40 of National Court Rules for being frivolous and vexatious. However, the Defendant is not vigorously pursing this suffice that it is successful in its application.

2.	The Plaintiff in this proceeding is the landowner company of Umboi Timber Rights Permit area on Siassi Island and the Defendant is the developer contracted to harvest and export the logs to an overseas market. 

3.	The Plaintiff commenced this action against the Defendant by Writ of Summons issued on 7th November 2007 which was subsequently amended on 19th March 2008. The relief sought in the original writ were for the Defendant to:

1.	Produce all records of their operation of Umboi Timber Rights Permit area to the Plaintiff.

2.	Pay all monies due to the Plaintiff under s.73(2)(f) and (g) of Forestry Act 1991.

3.	Stop all operations including cutting down trees and exporting logs at Umboi Timber Rights Permit area until further orders.

4.	Before the writ was served on the Defendant, the Plaintiff amended its writ in which it pleaded additional facts in paragraphs 6 – 8 of the Statement of Claim and paragraphs 9(c) and (d) in respect of the relief sought.

5.	Also on 19th March 2008 the Plaintiff obtained ex parte orders in these terms:

a.	An interim order restraining the Defendant from exporting any logs at Umboi Timber Rights Permit area until further orders.

b.	An order that Papua New Guinea Forest Authority provide to the Plaintiff by 3rd April 2008 all relevant documents in relation to and including Timber Rights Permit issued to the Defendant in respect of Umboi Timber Rights Permit area.

6.	A copy of this interim ex parte order was served on the Defendant’s camp manager on its operation site at Morili Base Camp, Umboi Project, Block 3, Siassi Island, Morobe Province even before the Writ in the substantive proceeding.

7.	This action appears to have been precipitated by a leadership tussle over the landowner company Umboi Timbers Investment Ltd amongst different factions within the Umboi Timber Rights Permit area. Between 2005 and 2007 the Plaintiff company was in turmoil as the landowners tried to sort out the directorship issue.

8.	In the process a group led by Barnabas Kauli wanted to sever all relationship with the Defendant and sought to forge a new partnership with another developer. This is now clearly reflected in the amended Statement of Claim in paragraph 7 and 8 where it was sought to terminate the contract with the Defendant and entered into a new Logging and Marketing Agreement with a company called Sundran Pacific Ltd on 27th January 2008.

9.	The interim orders of 19th March 2008 went before Gabi J on 7th April 2008 and were extended to 24th April 2008. It was also noted that PNG Forest Authority had not complied with the Court order.

10.	At the hearing of this application it was drawn to the Court’s attention that somewhat belatedly PNG Forest Authority complied with the order by facsimile transmission to the Defendant’s Managing Director a copy of letter dated 26th July 2007 signed by the Managing Director of PNG Forest Authority enclosing a copy of licence PNGFA L-410/05 which was extended for one year to expire on 28th July 2008.

11.	This is important to note because it was one of the Plaintiff’s concerns or complaints that the Defendant’s licence to operate in Umboi Timber Rights Permit area had long expired and it was operating illegally. But this is no longer the case now.

12.	While all these litigation is going on there is a ship now anchored inside the harbour to load logs for export. The ship "MV FUDA" was due to arrive on 6th April 2008 but was delayed and arrived on 11th April 2008 and has since been sitting idle in the harbour incurring demurrage charges costing US $16, 000 per day.

13.	The Defendant is arguing that the Plaintiff despite commencing proceeding in November 2007 was not served until 2nd April 2008, only days before the scheduled log shipment when the ship was already on its way to Lae. Had it been served earlier those matters it was aggrieved about could have been attended to. The urgency of this application now is that unless the ship is loaded and released to set sail as scheduled, it is incurring demurrage fee of US $16,000 per day sitting in the harbour which cost is going to be passed onto the shipper and to the Plaintiff.

14.	In my view there is a valid timber licence in force which does not expire until 25th July 2008. I am also satisfied that there is a Logging and Marketing Agreement signed between the Plaintiff and the Defendant on 4th February 2008 following an election of a new Board of Directors of the Plaintiff company led by Sam Nalong. Whether this is the legitimate Board or not is a matter that can be resolved between the parties in the substantive hearing with some amendments needed to the current proceeding to achieve that end.

15.	However for the purpose of the shipment of the logs by the Defendant, I see no legal impediment for that to go ahead. There is a valid licence in force which does not expire till 25th July 2008 and there is a Logging and Marketing Agreement between the Plaintiff represented by a duly elected Board of Directors and the Defendant signed on 4th February 2008. Balance of convenience favours up-lifting the ex parte interim orders for the good of the partners in the action.

16.	I note that the new Board led by Sam Nalong was elected in the Shareholders Meeting on 14th December 2007 at Mambong Tanetang House Birik, Siassi Island and lodged for registration with IPA on 23rd January 2008.

17.	The question of whether Barnabas Kauli is the legitimate Chairman of the Board of Umboi Timber Investment or not is not the issue in this proceeding. That is a separate matter and it does not arise in the current action as pleaded. Looking at this case from the Defendant’s perspective alone, there is no reason why it cannot be allowed to ship the logs. At the end of the day this is what the resource owners of Siassi Island want so that they can see the benefits accruing from this shipment. To delay the shipment much longer will incur enormous costs that is no doubt going to be passed down to the landowners to bear in demurrage fees. This is what individuals who claim to represent their people must be mindful about and act with some sense of responsibility.

18.	In the circumstances, I grant the relief sought in terms of paragraph 1 of the Notice of Motion for the restraining order to be lifted forthwith and the Defendant can proceed with the shipment of the log.

19.	For purposes of costs for this proceeding let me add this. The Court will recognize the group that has the support of the PNG Forest Authority as the legitimate landowner representative. After all that is the legal authority mandated by an act of Parliament to be responsible for the logging industry in this country. This is the authority that approves or disapproves. On current indication this responsible authority is working along with the Defendant and duly elected landowner representative since 14th December 2007 so it must be deemed to be the legitimate authority on behalf of the landowners, hence the landowner company, Umboi Timber Investment Ltd, the Plaintiff herein. 

20.	In the circumstances I will not award the costs of this proceeding against the Plaintiff, but I will award it against Barnabas Kauli and those standing by and with him to pay the Defendant’s and the Plaintiff’s costs for this proceeding, if not agreed, to be taxed. I do not make this costs order lightly. I have given it serious consideration. In view of the serious implications of the case, I advised the lawyers to go back to their clients and get them to reach an amicable settlement but I was told that negotiations did not reach any compromise. I trust this ruling will cast some light and illuminate the way forward for the continuation of the substantive matter and the balance of the Defendant’s motion.

21.	Orders of the Court are:

1.	Interim ex parte order of 19th March 2008 restraining the Defendant from harvesting and shipping logs from Umboi Timber Rights Permit area is hereby lifted and set aside.

2.	Barnabas Kauli and those standing by and with him in this action shall pay the Defendant’s and the Plaintiff’s costs in this proceeding on party-party basis to be taxed, if not agreed.

_________________________________

Daniels & Associates Lawyers: Lawyers for the Plaintiff
Steeles Lawyers: Lawyers for the Defendant