IN THE SOLOMON ISLANDS COURT OF APPEAL

NATURE OF JURISDICTION	Appeal from a judgment of The High Court of Solomon Islands (Palmer CJ.)
	
COURT FILE NO.	Civil Appeal Case No. 005 of 2005
(an appeal from Civil Case No. 048 of 2004)
	
DATE OF HEARING:	Monday 18th July 2005.
	
DATE OF DELIVERY OF JUDGMENT:	Thursday 4th August 2005.
	
THE COURT:	Lord Slynn of Hadley, President, Adams JA & Kabui, JA.
	
PARTIES:	THE PREMIER OF ISABEL PROVINCE (representing the Isabel Provincial Executive of the Isabel Provincial Assembly)

-V-

EARTHMOVERS GROUP OF COMPANIES (TRADING AS EASTERN DEVELOPMENT ENTERPRISES LIMITED)
	
ADVOCATES:
Appellant:
Respondent:
	
N. Moshinsky Q.C.
J Sullivan and Rodney Kingmele	
		
ORDER:	APPEAL ALLOWED.
	
PAGES:	(1 - 21)	

JUDGMENT

Eastern Development Enterprises Ltd (“the Company”) is a company incorporated in Solomon Islands. Its business primarily is that of logging in Isabel Province and in other parts of Solomon Islands. The Defendant, the Premier of Isabel Province is sued as representing the Isabel Provincial Executive of the Isabel Provincial Assembly (“the Provincial Government”).

The central question in these proceedings is whether the Company is liable to pay to the Provincial Government substantial moneys in respect of business licences for logging activities in the years 2001 to 2004 and conversely whether the Provincial Government is liable to repay to the Company such moneys which the Company has already paid. There is a second question as to whether the business licence fees for Shipping Service’s, Freighter’s and Stevedore Services fell to be paid by the Company since it did not carry on such businesses.

The central question arises in this way. By Section 106 of the Constitution “No taxation shall be imposed or altered except by or under an Act of Parliament”.

By section 31 (1) of the Provincial Government Act 1997 –

(1)	“A Provincial Assembly has power to make laws only (1) if and to the extent that (a) they relate to matters within the legislative competence of the Assembly;”

………………….

(5)	A Provincial Assembly has no power to make laws imposing, altering or abolishing any tax, except where power to do so is expressly conferred on the Provincial Assembly by or under this Act.”

Section 26(1) of that Act under the heading “Transfer of Functions Devolution of Functions etc” provides that “(i) A Provincial Assembly shall exercise as regards the Province the functions specified in Schedule 3 and 4”. Schedule 3 includes “Finance”.

4.	Raising revenue by –

(a)	basic rates;
(b)	property tax;
(c)	fees for services performed or licences issued by or on behalf of the Provincial Executive (other than services performed or licences issued by them as agent of another); and
(d)	……..”

By section 67 of the Interpretation and General Provisions Act (Cap. 85) -

(1)	the power under an Act to make regulations providing for fees or charges may be exercise by making provision for the same in the ways specified; but

(3)	Where any fees or charges referred to Schedule (1) is in respect of any services provided by any public body, such fees or charges shall as far as practicable be within a range properly chargeable in respect of the services provided, and shall not be excessive or unreasonable.

The Provincial Assembly by the Isabel Business Licence Ordinance 1994 provided in section 3 that no persons should operate “any Business in the Province unless they have first been granted a Licence in accordance with the provisions of this Ordinance.” Schedule 2 to the Ordinance specified the categories of business and the fees payable was set out in schedule 3 where the range is from $30 for Prepared Food to $150,000 for Mining. The fee for Timber Felling: Permanent Logging – Export was $56,000.00.

By Section 5-

“(2)	The Executive or Authorized officer shall not grant a licence unless they are satisfied that the applicant complies with all relevant National and Provincial laws and policies”.

(3)	The Executive …. may attach such conditions and restrictions to any licence granted as it considers appropriate or necessary”

(4)	the Applicant “shall be notified of any conditions attached to the Licence”

(5)	All licence (sic) may be revoked by the Executive for breach of any conditions or restrictions endorsed thereon”.

By Section 6 (1) before a business licence is granted the extent of involvement in the business by people indigenous to Isabel Province and resident in the locality where the business is to be carried out and the contribution to services to the people of Isabel Province are to be taken into consideration. Carrying on business without a licence attracts a penalty.

By the Isabel Business Licence Amendment Ordinance of 1995 the fee for Timber felling – permanent logging was set at $80,000. By an Amendment Order of 2003 the fee for Timber Felling – Logging was set at $100,000 for a Contractor and $30,000 for a Sub-Contractor per Concession area. Other fees were also increased by the 2003 Ordinance, e.g. Mining was increased to $500,000.

In addition to the requirement of a business licence section 4 of the Forest Resources Timber Utilization Act (Cap 40) provided that it is an offence “to fell any tree or remove any timber from any land for the purposes of sale otherwise than for specified purposes and in particular under and in accordance with the terms of a licence issued under section 5”.

By a writ of summons and a statement of claim dated 21st March 2004, as amended on the 14th October 2004, the Company claimed a declaration that the Business Licence Amendment Ordinances of 1995 and 2003 in so far as they imposed annual business licence fees for timber felling; permanent logging for export of round logs were ultra vires the Provincial Executive and the Assembly.

The monies claimed are said by the Provincial Government to be fees due under the Licensing Ordinance. The company contends that they are not fees but they are taxes which the Provincial Government is precluded from setting or enforcing.

We had the advantage of submissions on a number of preliminary issues by the learned Solicitor General on behalf of the Attorney General. In view of the conclusions to which we have come it is we think sufficient, without any disrespect to the Solicitor General, if we summarise our views on these matters.

In the first place we accept his submission that the relief granted was of a final nature so that leave to appeal was not required. We agree too that the orders made should have been interlocutory rather than final orders but in the end for reasons which will appear the appellant was not prejudiced by this.

Although the contrary was not argued fully, we consider that the Solicitor General is right in contending for the reasons advanced by him that the Provincial Executive should be regarded as included in the concept of “the Crown” and that accordingly for the purpose of these proceedings the Attorney General should have been joined as a party to the proceedings under section 15 (1) of the Crown Proceedings Act.

We gave leave for the Attorney General to be joined and he was joined. He submitted that the learned Judge had erred in law in holding that the licence fee was a tax.

The Solicitor General contended that the fee here was only ‘fee for a licence’ and not a charge for a service. It was payment for a privilege. We deal with this matter below:

There are other issues between the parties as to the amount owing – the claim initially for $9,087,660 was later revised or reduced to $1,354,588 although it is now reinstated at the former figure. The Company denies separate liability for different areas covered by one licence since that there can only be one charge for all land covered by a licence. There may also be a dispute as to how much has already been paid by the Company which contends that it paid $565,334 plus $32,500. There is also a contention that some of the money is claimed in respect of land where the Company has a licence but where it has not commenced, or it has ceased, logging. However none of these calls for decision on this appeal since the learned Judge did not need to deal with them.

The Judge found that the business licence fees in schedule 3 to the 2003 Ordinance were discriminatory on their face since the Province was seeking “to raise revenue by attaching large licence fees to categories which attract large business interests”. No justification had been shown for the difference between $100,000 for contractors and $30,000 for sub-contractors. “In the absence of any apparent Forest Management powers divested by the Central Government Act or the Provincial Government Act these business licence fees complained of have the indicia of “tax” rather than any “services rendered” in consideration of such charges.” The charges were apparently excessive and so may be seen as a tax. He concluded that there was no sufficient evidence to show what services were provided by the Province and how they related to the amount of the fees. The Deputy Prime Minister had conceded in cross-examination that the moneys charged for the licence “raise revenue” and the Judge said that he was satisfied on that that “the principle purposes of these licence fees, to raise revenue, was illicit taxation” and beyond the power of the Province. The scheme therefore in purporting to impose licence fees on loggers, shipping services and stevedore services are void for it was ultra vires the Provincial Government.

The learned Judge accordingly held that the 1995 and the 2003 Amendment Ordinances were ultra vire the Isabel Provincial Executive and the Assembly in so far as they imposed annual business licence fees in respect of “timber felling: permanent logging for export of round logs” and the fees sought to be imposed on the Plaintiff for the four years beginning on the 1st April 2001, 2002, 2003 and 2004 were of no force and effect and that the Plaintiff was not liable to pay them. Secondly, the learned Judge held that during the those years 2000-2004 the plaintiff did not carry on the “business of shipping services – foreign freighters” or “stevedore services” within the jurisdiction of the Defendant so that there was no liability to pay any fees in respect of those matters. The second matter is not the subject of this appeal.

Although the Judge does not deal with other items in the Schedule than those referred to it would seem to follow that in the absence of specific services for specific businesses at what are proved to be reasonable cost-related charges, his ruling would apply to other if not all items in the Schedule and to all other Provinces which seek to impose business licence fees and make charges as on the face of it they are empowered to do.

The Provincial Government appeals on the grounds that the Judge was wrong to consider whether the “fee for service” charged reflected the cost of any actual service and indeed whether there was any discernible service to the Plaintiff. There was no legal requirement that the service funded by a licence fee had to be provided to the licensee itself. He also erred in holding that the licence fees in Schedule 3 of the 2003 Ordinance were discriminatory and that the fee for logging business was excessive. He was wrong to hold that in the absence of specific devolved powers to the Defendant and in the absence of Forest Management powers divested by the Central Government to the Provincial Government the licence fee had the indicia of a tax.

The Central question in this case has arisen before the court on a number of occasions. It is necessary to have a regard to what this Court and Judges of the High Court have said.

In Solomon Motors Ltd v. The Honiara Town Council [1995] SBCA 2; Civil Appeal Case No. 11 of 1994 (Judgment 5th September 1995) the fees extracted were flat rate fees through companies might be charged several fees for various aspects of their businesses. This Court recited that Palmer, J. at first instance had found that Attorney-General for Quebec v. Williams (1944) 4 DLR 488) and Conrad v. State of Delaware 16 Atl Rep. (2nd) 121 had established the proposition that “the essence of a law imposing (or altering) taxation (as distinct from a licence fee) is:-

(1)	that it is properly catalogued as a law to secure funds to a public authority by way of contribution to the revenue for what are properly seen as the Public Services of the State; or

(2)	that it is imposed solely or primarily or mainly to ensure revenue and not for the costs properly chargeable for the purposes of conducting a proper system of business licensing”.

In order to differentiate a particular charge as a licence fee or as taxation Palmer, J. considered that it was appropriate to apply the test stated by Hallows CJ in State of Wisconsin v. Jackman Wisconsin Reports Second Series 480 cited in his Lordship’s reason’s namely:-

“a tax is one whose primary purposes to obtain revenue while a licence fees is one made primarily for regulation and whatever fee is provided is to covet the cost and the expenses of supervision or regulation”.

The Court of Appeal added “Neither party contested this approach. Each accepted that this was the essence of the distinction envisaged by section 106 of the Constitution. For the moment the court will assume that this is correct”.

The Court of Appeal said at page 7-

“It can be seen that both for the arguments addressed to constitutional validity and those concerning the reasonableness of the fees charged by respondent for the licensing of businesses, an important, even crucial, question may be the establishment of the relationship (if any) between the fees actually charged by the respondent to licence particular businesses and the activities performed by the respondent in relation to such licensing. If all that the respondent were to do was to provide a piece of paper called “a licence” to any business applicant, conducting no investigations, inspections or enquiries and providing no services at all, clearly the “licence” and fees would be revealed as nothing more than the raising of revenue for the respondent. This would then raise the three objections tendered by the appellant in the appeal. If, however, there were services provided which bore some arguable relationship between the fees charged and the services provided, the Court would not involve itself in the precise ratio between charges and services. It would be enough for the Court to note that an arguable relationship was established. This would meet the contention that purported licence fees were actual illicit taxation, beyond power or otherwise not reasonable in the relevant sense.”

The Court in that case found that there was no sufficient evidence as to work done by the Council in inspecting and evaluating applications and more particularly about any ongoing monitoring of businesses “which would be normal in a system which was truly one of licensing of businesses (“as distinct from revenue raising)”. The case was accordingly sent back to the High Court for further evidence on these matters. “If the answer is that the Council does the activities apt for a business licensing body (inspection, monitoring sanctioning unacceptable activity etc,) the Court will not become involved in the exact relationship between the Council’s activities and its charges”.

In Allardyce Lumber Company Ltd v. The Premier of Western Province – [1995] SBHC 24; HC 234/94 (Judgment) 14 March 1995 Muria, CJ. having referred to Australian authority held that a licence fee in respect of round log timber exporting based on $10 per cubic metre on logs exported or cut for export was a tax, being a duty of excise, because it related to the volume of logs so dealt with. A flat rate fee of $50,000 per annum for logging activities, however, “did not necessarily have the effect of putting a control over the commercial operations of the plaintiffs in the Province but was rather a fee for carry on business in the Province. It is therefore within the competence of the Province to charge a reasonable licence fee based on a flat rate”.

He added-

“I hear no argument against the reasonableness of the flat rate licence fee of $50,000 in this case. In view of the nature of the operations of the Plaintiff in the Province, I see no justification for any objection to the flat rate here imposed”.

In Allardyce Lumber Co. Ltd. v. The Premier of Western Province Civil Case No. 161 of 1996 (Judgment 18th November 1996) Lungole-Awich, J. held that a flat rate fee of $150,000 per year for the business of round logs was ultra vires. He said at page 9-

“A very useful discussion on the question of whether a sum charged is fee or tax is in the American cases of Conrad v. State of Delaware 16 Atl Rep (2nd 121 and State of Wisconsin v. Jackman (Supra) (and in the Canadian case of Attorney General Quebec v. Williams 1994 4 DLR 488. If the charge is imposed (1) solely or mainly to ensure revenue and not for the costs properly chargeable for the purpose of conducting a proper system of business licensing, and (2) to secure funds to a public authority by way of contribution to the revenue for public services then the charges they tax”.

The Judge added at page 10:

“Moreover it is not for the court to calculate the precise arithmetic ratio of the relationship. I am, on the other hand, sure that there is no way that a figure as high as $150,000 would be within range. It is my decision that the charge of $150,000 per year for licence for exporting round logs from Western Province, bears is no arguable relationship whatsoever to duties expected of officials of the Province in relation to the business”.

His decision on that point was not eventually challenged by the Premier but the appeal was allowed on the basis that the Judge had been wrong to hold that the $50,000 fee revived if the $150,000 fee was set aside.

We have been referred to a number of authorities which have looked further afield. Thus in Y. Sato & Company Limited -v- Honiara Town Council & Attorney General and Solomon Motors Limited -v- Honiara Town Council [1998] SBHC 31; Civil Cases 48/97 and 55/97 (Judgment 16 of June 1998). The Judge put this matter in this way:-

“From the views of the Judges I have mentioned above it is my conclusion that for an imposition of money to be regarded as reasonable and therefore a licence fee and not tax, the imposition must be related to a sum of money required for defraying costs of services provided, duties carried out or expected to be carried out in monitoring, regulating, conserving or carrying out other activities required in relation to the business to be licensed or to be related to the value of the privilege for which the licence is to issue. The sum need not to be mathematically accurate it will suffice if it bears some reasonable proportion to the costs to be defrayed or the value of the privilege”.

At page 19 of his judgment he referred-

(a)	to a decision of the Privy Council in Midland Dairy Products Sales Adjustment Committee -v- Crystal Dairy Limited [1933] AC 168 that a tax was said to be compulsory, imposed for public purposes, and enforceable by law; and

(b)	to Air Caledonia International -v- The Commonwealth [1988] 165 CLR 462] where there was added a fourth condition derived from the case of Matthews –v- Chicory Marketing Board [Vict] (1938) 60 CLR 263, namely that in addition to the three conditions the charge should not be “a licence fee”.

The High Court of Australia commented that this definition was not an exhaustive definition of a tax and that tax might take different forms. They also added that the payment for services rendered must be services rendered to or at the direction or request of the person required to make the payment. The reference to the payment not being a payment for service as rendered “was intended to be “but an example for various special types of exaction which may not be taxes even though the positive attributes mentioned” are all present. Awich J. in Y. Sato (Supra) added that the definition was in still incomplete since it necessitated defining, a licence fee “itself exhibiting all the three positive attributes”. “In defining or determining what a licence fee is, the issue of relationship with services, duty and privilege and of reasonableness come in. Moreover it is often, still necessary to explain further that money imposed as licence fee is not payable into the general consolidation fund of the state, for providing general services.

In Luton v Lessels, Gaudron and Hayne JJ stated that:-

“The presence or absence of none of them, however, is determinative of the character of the legislation said to impose a tax. It is necessary, in every case, to consider all the features of the legislation which is aid to impose a tax”.

In the present case Brown, J. concentrated on the question whether there were services performed and he asked “so what does the Province do for the grant of these licences?” He answered “nowhere does the Province show type of services given the business in satisfaction”. Assuming that is the right question this court does not consider that it is necessary, as it was found to be necessary in Solomon Motors Ltd v Honiara Town Council (Supra) to send the case back for further evidence as to the nature of the services provided. In paragraph 6 of an affidavit sworn by Mathias Padaronvo Simata, Deputy Premier, Minister of Finance for Isabel Province he stated:-

“In 2003, the Defendant has increased the business licence fees for logging business per concession area from $80,000.00 to $100,000.00 per year. The Defendant increased the licence fees for logging business because of the nature of the logging industry and the number of logging companies operating in Isabel. The logging industry is very costly to the Defendant, hence, increasing the business licence fees. Some of the costs are:

(a)	in order to process business licences, the Provincial Executive members have to be called to Buala from all over Isabel to deliberate on the applications;

(b)	calling of Executive from all over Isabel to deliberate on Form I applications from the Commissioner of Forests;

(c)	staff touring of the logging camps for inspections and other related activities;

(d)	repair and maintenance of outboard motor canoes and engines used for the touring;

(e)	fuel usage on the outboard canoes and engines;

(f)	stationeries and supplies including photocopies;

(g)	travelling costs, accommodation, meals during Honiara tours in relation to logging matters”.

That statement does not set out the details but it gives the sense of what it is done and it is not necessary to show that items are individually charged. We do not see that the charges in any event have been shown to be unreasonable.

But that in our view is not the right question. The starting point is that the Provincial Government can only tax where a power “to do so is expressly conferred on the Provincial Assembly by or under this Act” i.e. the Provincial Government Act 1997. Section 26 (1) and Schedule 3 give that power. We stress that Schedule 3 in paragraph 4 includes not only fees for services performed but also for licences issued. The question is not whether this was a charge for services rendered but whether it was a fee for a licence issued by the Provincial Government.

We have no doubt that here a licence was granted. The 1994 Ordinance is headed “Isabel Province Business Licence Ordinance. An Ordinance to provide for the regulation control and licensing of business carry on in Isabel Province”. It enables conditions to be imposed on the way in which businesses are to be conducted in the Province and it enables monitoring and supervision of the way in which businesses are conducted.

Reliance has been placed by the Company on section 7 of the Interpretation General Provision Act (85) which requires that in respect of services provided the charges shall be within a range properly chargeable in respect of the services provided and not be excessive or unreasonable. That however, clearly applies only to the charge for services rendered. There is no provision in terms that the licence fee shall be a reasonable one. That section does not apply.

It may well be that in a developing administrative law there is an implied requirement that a fee should be reasonable or proportional. Assuming, without deciding, that that is so it is relevant to have regard to the Judgment of Lord Russell CJ, in Kruse v. Johnson [1898] 2 QB 91 which is cited by Awich, J. in Allardyce Lumber Timber Co. Ltd. v. Premier of the Western Province (Supra).

That statement may have been overtaken by the later development of administrative law but it still right in principle that the Court should pay regard to the assessment by elected representatives and government officials as to what is required and justified for the purpose of licensing activity within the Province. We are in any event satisfied that the fees for the particular licences involved here are not unreasonable.

We do not consider that the answer of the Minister in dealing with the fees charged for contractors and sub-contractors - “Correct, that is how we raise revenue”, - indicates that the principle purpose of the licence fees was “illicit taxation”. Revenue can be produced in number of ways which do not constitute taxation. Charges for services were obviously permitted and the provision of such services may well produce revenue over and the above the actual cost of providing the services. That does not make the excess, “the profit”, a tax. Nor do we think that the fact that different licence fees are fixed for different activities means that these were necessarily discriminatory. The Provincial Government is entitled to have regard to the nature of the services to their scope and to other economic considerations. Similarly the fact that different fees may be charged for a driving licence from the fees charge for a television set or radio does not make the tax necessarily discriminatory.

The evidence was that the cost of monitoring these businesses could be high and there is also evidence that the fees went towards meeting these costs. The fact that some of the fees might find the way into the general revenue of the Provinces does not in our view convert what is a genuine licence fee into a tax.

If properly seen the licence fees are to be regarded as a tax then in our view they are not in breach of section 106 of the Constitution because they are imposed by or under an Act of Parliament, i.e. by the Provincial Government Act 1997 namely by Section 26 and item 4 in Schedule 3 to the Act.

Accordingly we hold that this was a fee for a genuine licence issued by the Provincial Government within powers conferred on it and fees are properly payable. It was not ultra vires the Provincial Executive and the Assembly. We allow the appeal.