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Kanna v National Fisheries Development Ltd [2001] SBHC 159; HCSI-CC 033 of 2000 & HCSI-CC 055 of 1999 (18 January 2001)

CC No 033, 99, HC

IN THE HIGH COURT OF SOLOMON ISLANDS

Civil Case No 033 of 2000 & 055 of 1999

KENICHI KANNA, AKITO KUDAKA

·-v-

NATIONAL FISHERIES DEVELOPMENT LIMITED

AND

NATIONAL FISHERIES DEVELOPMENT LIMITED

-v-

KENICHI KANNA, AKITO KUDAKA

High Court of Solomon Islands
(Muria, CJ.)
Civil Cases No. 033 of 2000 & 055 of 1999

Hearing: 2 October 2000
Judgment: 18 January 2001

J. R. Moti for Plaintiffs (Defendants in CC55 of 1999)
D. J. McGuire for Defendant (Plaintiff in CC55 of 1999)

MURIA CJ: There are two applications before the Court in these proceedings. The plaintiffs in Civil Case No. 33 of 2000 (“33 of 200”), are applying to the Court for a stay of execution of the judgment obtained against them by the defendant who was the plaintiff in Civil Case 55 of 1999 (“CC55 of 1999”) on 9 November 1999. The defendant on the other hand is applying to the Court for security for payment of defendant’s costs in CC33 of 2000 in the sum of SBD150,000 and further security for payment of the final judgment of SBD916,147.24 obtained by the defendant against the plaintiff in CC55 of 1999 (inclusive of costs and interest). The two cases involve the same parties and so these two applications arising out of the two actions are dealt with together.

Background facts

The plaintiffs are Japanese and owners of the pole and line fishing vessels “Shou Hou Maru”, “No.2 Saga Myojin Maru” and “Ryuushou Maru” respectively. By a written agreement (“the Agreement”) made on or about 21 January 1995, the Defendant agreed to charter the said vessels from the plaintiffs. It was part of the express terms of the Agreement that the defendant would pay to the plaintiffs the sum of ¥7,000,000 per vessel in two instalments, namely, one half upon execution of the Agreement and the balance when the vessels arrived in Tulagi and were ready to commence fishing. It was also part of the terms of the Agreement that the defendant would make advances to the plaintiffs to meet costs and expenses of the vessels during the continuance of the Agreement. Such advances would be paid by the plaintiffs. In order to secure the repayment of such advances, the plaintiffs pledged the vessels as security for repayment.

Between 21 January 1995 and 31 March 1996 the defendant advanced to the plaintiffs the sum of SBD760,894.00. Demands were made by the defendant for the plaintiffs to repay the sum of SBD760,894.00. Despite the demands the plaintiffs failed to make repayment. The vessel Ryuushou Maru was damaged in a storm off Tulagi while the other two vessels are still in the possession and control of the defendant.

By an action brought by defendant in CC55/99, the court ordered on 9 November 1999 that the plaintiffs pay to the defendant the sum of SBD760,894.00 together with interests at 5% per annum and costs. The summons on behalf of the plaintiffs filed on 16 November 1999 to set aside that order was dismissed on 17 December 1999 by Palmer J. Counsel for the plaintiffs raised comments about the order of the Court made on 17 December 1999 dismissing the application and so I will deal with this also in this judgment. The plaintiffs now seek stay of execution of judgment in CC55 of 1999 until the determination of dispute between the parties herein in CC33 of 2000.

With that brief background of the case, I shall now deal with each of the applications in turn. I feel it is appropriate that I deal first with the plaintiffs’ application.

The plaintiffs’ application for stay of execution

The plaintiffs have based their application for a stay of execution upon Order 45 r. 44 of the High Court (Civil Procedure) Rules which empowers the Court to order stay of execution of a judgment “if it appears just and reasonable” to do so. Rule 44 of Order 45 is expressed in the following terms:

“r44. Whenever an action shall be pending in the Court against the holder of a previous judgment of the Court by the persons against whom the judgment was given, the Court may, if it appear just and reasonable to do so, stay execution of the judgment either absolutely or on such terms as it may think just, until a judgment shall be given in the pending action.”

I do not think the defendant can dispute that it is “the holder of a previous judgment of the Court” in CC55 of 1999 against the plaintiffs and that the plaintiffs commenced an action in CC33 of 2000 against the defendant, which action is still pending before the Court. That being so, the said rule must apply in this case. The plaintiffs, however, must show that it is just and reasonable for the Court to exercise its discretionary power to order a stay of execution of its judgment given in CC55 of 99 in favour of the defendant. The burden is on the plaintiffs.

What is “just and reasonable” depends on the circumstances of each case. No hard and fast rule can be imposed upon the Court to employ in order to decide what is just and reasonable in a particular case. But I would venture to suggest that in a case where one or some of the parties are not residing with the jurisdiction, the need for the Court to be more vigilant in its search for balance between the interest of both parties in order to achieve a decision that is just and reasonable in the eyes of the law as well as in the eyes of both parties. When that is achieved, then the Court can truly say that the interest of justice has been served. For justice is achieved when parties to the dispute see eye to eye through the eye of the law and the Court, by its decision, must help those parties see that. Reliance was placed by the plaintiffs on a number of authorities to support their case that it would be just and reasonable to stay execution in this case. One of the authorities relied upon was the case of Maxwell -v- Keun [1927] All. E.R. Rep. 335 where the appellant/plaintiff who was an army officer brought two libel actions in October 1926 against the defendants. One of the two actions was due to be listed for hearing in the latter part of November 1927. In the meantime the plaintiff was posted in India and it was impossible for him to return to England in time for his case. He then sought an adjournment so that he would be able to attend to his case. The application for adjournment was refused by the Lord Chief Justice. On appeal, the English Court of Appeal in granting an adjournment held that although the Court of Appeal in granting an adjournment held that although it ought to be very cautious in interfering with the discretion of the trial judge but if the result of the order made by the trial judge was to deprive the parties of their rights altogether, and that would result in an injustice to the party affected, the Court of Appeal should and ought to review such an order. The learned Law Lords were clearly emphasising the underlying rationale of the judicial discretion which is the attainment of justice.

The British Columbia Court of Appeal in Scuilli -v- Planta (1928) 39 BCR 450, cited with approval Maxwell -v- Keun. In the former case, the Court allowed stay of execution, although only as to the amount claimed by way of set-off as the justice of the case demanded. I think it is also worth noting that Martin JA in that case, pointed out that the staying of an action which is still pending is different from staying of proceedings on a concluded judgment pending appeal.

In the case of Sheppards and Co. -v- Wilkinson and Jarvis [1862] EngR 1183; (1889) 6 LTR 13, the Court gave judgment for the plaintiff on his claim but execution thereof had to be stayed pending the trial of the defendant’s counter claim. There we see once again the Court reiterating the need to be cautious in exercising the Court’s discretion so as not deprive a party to the case of his opportunity of putting his case before the Court. The case of Sheppards -v- Wilkinson was applied by the Supreme Court of Manitoba in Wells -v- Knott (1910) 20 Man. R 146 where Mathers, CJ said:

“The circumstances of this case bring it exactly within Sheppards v. Wilkinson, 6T. L R. 13, except that in this case it is suggested that a stay might result in the loss by the plaintiff of the fruits of her judgment. In the words of the Master of the Rolls, I think the counterclaim “so far plausible that it is not unreasonably possible for it to succeed if brought to trial.” If the defendant has a just claim for damages in excess of the plaintiff’s claim the plaintiff should not have judgment against him. Whether or not the defendant has such claim can only be determined when the counterclaim is tried. In the meantime execution of the plaintiff’s judgment ought to be stayed unless there is some good reason why that course should not be followed.”

The same remarks can also be applied to the present case. In CC55 of 1999, that defendant obtained judgment on 9 November 1999 against the plaintiffs in the sum of SBD760,894.00 which claim arose out of the same written agreement as relied upon in this case, between the same parties herein. Attempts by the plaintiffs to set aside the judgment was not successful. It must be observed that the draft Defence actually filed by the plaintiffs at the time of seeking to set aside the judgment against them, challenged the defendant’s claims arising out of the Agreement and they counter-claimed in the sum of SBD2,576,070.74 against the defendant seeking to set-off and extinguish or diminish the defendant's claim, also upon the terms of the Agreement. Had the plaintiffs were successful in setting aside the judgment their defence and counter-claim would have been dealt with. As a result of the successful attempt to set aside the judgment in CC50of1999, the plaintiffs have brought the present action claiming damages for breaches of the same Agreement, the same breaches raised in their defence and counter-claim. Judging by the amount claimed by the plaintiffs in their counter-claim in CC55 of 1999, it would, if dealt with and succeeded, extinguish the defendant’s claim. The plaintiffs’ present case is in essence, revisiting their counter-claiming in CC55 of 1999. The parties are the same and factual circumstances are the same. These would most certainly weigh in favour of allowing the plaintiffs to put their case before the Court to be properly considered. That could only be done by staying execution of the judgment in CC55 of 1999.

One of the fundamental reasons for the existence of the discretionary power of the Court to stay execution of a judgment is to ensure that the parties have a just outcome to their dispute according to law and procedural rules, such as O. 45 r44, are an aid to the attainment of the just resolution of that dispute. Order 45 r44 empowers the Court to stay execution of a judgment “if it appear just and reasonable.” Those words encapsulate the end result of the exercise of the Court’s power under that rule, that is, the attainment of justice when resolving the dispute between the parties to a litigation.

Mr. Moti submitted that O.45 r44 has no counter-part in the Rules of the Supreme Court of England and that its closest resemblance, is O.47 r 1 (formerly O.42 r1) of the English Supreme Court Rules. Counsel warned against “wholesale” importation of the principles under that rule into the jurisprudence of our O.45 r44 of our High Court Rules. I agree. However, the practice and procedure under the English Supreme Court Rules can still apply in Solomon Islands, “so far as they can be conveniently applied” here. This is where I feel O.47 r 1 of English Supreme Court Rules is helpful in achieving the objective of our High Court Rules. The language of O.47 r1(1)(a) & (b) of the rules of the Supreme Court of the following terms:

“1. (1) Where a judgment is given or an order made for the payment by any person of money, and the Court is satisfied, on an application made at the time of the judgment or order, or at any time thereafter, by the judgment debtor or other party liable to

execution -

(a) that there are special circumstances which render it inexpedient to enforce the judgment or order, or

(b) that the applicant is unable from any cause to pay the money, then, notwithstanding anything in rule 2 or 3, the Court may by order stay the execution of the judgment or order by writ of fieri facias either absolutely or for such period and subject to such conditions as the Court thinks fit.”

This rule confers power on the Court to take into consideration “special circumstances” which render it inexpedient to enforce the judgment or order for payment of money. Those “special circumstances” when established will, in my view, be the very basis upon which the Court will exercise its discretion. It will be those “special circumstances” which will enable the judge to decide whether it is “just and reasonable” to stay execution. Thus O.47 r1 of the Rules of the Supreme Court can conveniently be applied in this jurisdiction in order for the Court to attain the objective of O.45 r 44 of our High Court Rules.

The “special circumstances” mentioned in the English Supreme Court rules, will no doubt vary from case to case. But I feel Burnet -v- Francis Industries plc [1987] 2 All ER 323 would provide a good general guide. In that case Bingham LJ sets out at page 330 some of the “special circumstances” which the Court may take into account when considering whether or not to order stay of execution of a judgment as follows:

“In deciding in any case whether such special circumstances do exist, a number of matters will call for consideration by the judge. A number of these factors may deserve mention, although I emphasis that the list I shall give is not intended to be exhaustive and that the relative significance of these factors among themselves will vary enormously from case to case.

First, it is relevant to consider the nature of A’s claim. Suppose, for example, that it were based on a dishonoured bill of exchange. According to ordinary principles, it would follow that rarely, if ever, would B’s application for a stay succeed in such circumstances.

Second, it is relevant to consider the extent of the identity between C and B. The more closely they are identified, the more like a true counterclaim C’s independent claim against A becomes.

Third, it is relevant to consider the interrelationship of the respective claims a A against B and by C against A, for the same reason.

Fourth, it is relevant to consider the strength of G’s claim. The more obvious it appears that A will have to pay C eventually, the less likely it is that he will be prejudiced by a denial of the fruits of his judgment against B in the short term.

Fifth, it is relevant to consider the size of G’s claim relative to A’s. That will rarely, if ever, be decisive, but it is I think a matter worthy of consideration.

Sixth, it is relevant to consider the likely delay before the merits of G’s claim against A will be the subject of adjudication.

Seventh (and including various factors that I have already mentioned), it is relevant to consider the extent of the prejudice to A if he is denied the fruits of his judgment until G’s claim is determined.

Lastly, it is relevant to consider the risk of prejudice to B if C makes payment to A under the judgment. That will be particularly relevant if it is shown that there is a risk of the fruits of the judgment being removed from the jurisdiction, dissipated within the jurisdiction. It is of obvious relevance if A is a British residence with ample means to satisfy any judgment C may recover against him. It may also be relevant to consider the number and worth of any co-defendants to C’s claim.”

The eighth factors mentioned by Bingham LJ are not exhaustive and are also, in my view, relevant for our present purposes. The nature of the claims in CC33 of 2000 and in CC55 of 1999 are interrelated; the parties in the two cases are closely linked, in fact they are the same; the size or worth of the plaintiff’s claim may well exceed the defendant’s claim’ and it would seem unlikely that the defendant would be prejudiced by a stay of execution, since no evidence has been shown that the plaintiffs would be unable to meet the judgment in CC55 of 1999. When one considers these matters together with circumstances surrounding the two cases concerned, one is driven to the conclusion that a stay of execution is the sensible course to take in all these. The conditions proposes by the plaintiffs are also sensible and the stay of execution should be ordered on the conditions, namely, that the proceeds of the sale of the vessels concerned be paid into Court to abide the judgment of the Court in CC33 of 2000, and the proceedings in that case be prosecuted with diligence.

I therefore grant the order sought by the plaintiffs for a stay of execution of the judgment of this Court in CC55 of 1999. I further order that the proceeds of the sale of the vessels concerned be paid into Court forthwith to abide the judgment in CC33 of 2000. I further order that the plaintiffs prosecuted their action in CC33 of 2000 with diligence.

Security for Costs and Security for Judgment.

The defendant has applied for an order that the plaintiffs paid the sum of SBD150,000.00 as security for its costs in CC33 of 2000 and a further SBD916,147.24 as security for payment of the judgment in CC55 of 1999, a total of SBD1,066,147.24 as security payment. I will deal each of these two limbs of the defendant’s application as each of them must be founded on different principles.

Security for Costs

The defendant’s application for security for costs is brought under O.65 of the High Court (Civil Procedure) Rules where rules 4, 5 and 6 provide as follows:

“4. In any cause or matter in which security for costs is required, the security shall be of such amount, and be given at such times, and in such manner and form, as the Court shall direct.

5. A plaintiff ordinarily resident out of the jurisdiction may be ordered to give security for costs, though he may be temporarily resident within the jurisdiction.

6. In actions brought by persons resident out of the jurisdiction, when the plaintiff’s claim is founded on a judgment or order or on a bill of exchange or other negotiable instrument, the power to require the plaintiff to give security for costs shall be in the discretion of the Court.”

The basic thrust of the defendant’s argument in seeking payment of security for costs is that the plaintiffs are out of the jurisdiction and that it is uncertain that they have assets in the jurisdiction. Thus, argued Counsel, the discretion of the Court must be exercised in favour of ordering security for costs in CC33 of 2000 to be paid by the plaintiffs.

Mr. Mati of Counsel for the plaintiffs raised a constitutional objection to the exercise by the Court of its discretion to order security for costs against the plaintiffs who are not resident within the jurisdiction. The objection is premised upon the provisions of section 15 of the Constitution. For convenience, I set out subsections (1), (4) and 5 of section 15:

“(1) subject to the provisions of subsections (5), (6) and (9) of this section, no law shall make any provision that is discriminatory either of itself or in its effect.

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

(4). In this section the expression “discriminatory” means affording different treatment to different persons attributable wholly or mainly to their respective descriptions by race, place of origin, political opinions, colour, creed or sex whereby persons of one such description are subjected to disabilities or restrictions to which persons of another such description are not made subject or are accorded privileges or advantages which are not accorded to persons of another such description.

(5). Subsection (1) of this section shall not apply to any law so far as that law makes provision -.

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

(b) with respect to persons who are not citizens of Solomon Islands.

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

(g) whereby persons of any such description as is mentioned in the preceding subsection may be subjected to any disadvantage which, having regard to its nature and to special circumstances pertaining to those persons or to persons of any other such description, is reasonably justifiable in a democratic society.”

Section 15 of the Constitution clearly provides for the protection against discriminatory treatment on the grounds set out in subsection (4) of that section. Counsel submitted that the absence of any scope for the discretionary operation of rr. 4 and 5 of O.60 requiring a plaintiff ordinarily resident out of the jurisdiction to furnish security for costs violated section 15 of the Constitution. On the face of it, one may ague that the language of those provisions of the Rules would appear to conflict with section 15 of the Constitution. However, does it really violate the constitutional protection guaranteed by section 15? I feel that it does not. Subsection (5) of section 15 allows legal provisions such as those of O.65, rr. 4 and 5 to apply either of themselves or in their effect. A person’s place of origin relates to his nationality and normally, his residential status would very often resemble that as well. There are situations, however, when a person’s residential status does not necessarily resemble his place of origin or nationality or citizenship. The modern means communication and travel are such that a person can be a Solomon Islander but resident in Australia or in any other part of the world. Thus, the nature and special circumstances pertaining to such a person may justify restriction or disability to be imposed upon such a person such as is reasonably justifiable in a democratic society. This is what subsection 5(g) of section 15 of the Constitution envisages. The case Australian Building Construction Employees’ & Builders Labourers’ Federation & Others -v- Commonwalth Trading Bank & Others [1976] 2 NSWLR 371 cited in support of the plaintiffs’ case is distinguishable as s.117 of the Commonwealth Constitution relied upon there, differed from s.15 of our Constitution in its scope and application.

The phrase “reasonably justifiable in a democratic society” is not defined in the Constitution. However for my part I would prefer the view that the words used connote that an action taken must be necessary in the interest of preserving the rights and freedoms of others or in the public interest, and where the action taken is restrictive in nature, it must not be out of proportion to the object it sought to achieve. Any exercise of the Court’s power under O.65 r4 with these consideration in mind cannot be regarded as violating section 15 of the Constitution. Thus the constitutional issue raised on behalf of the defendant is rejected. The alternative argument put on behalf of the plaintiffs is that security for costs should not be required from the plaintiffs as they have assets in Solomon Islands. The general rule is that a plaintiff who is resident out of the jurisdiction ought to give security for costs of an action brought in this country. However, the plaintiffs in this case can escape from doing so if they can show that they have assets in the country which are sufficient to meet the defendant’s costs if ordered.

There is evidence in this case that the plaintiffs’ assets in this jurisdiction consisted of two vessels had already been sold at a realised price of $15,000 for both vessels. The plaintiffs have now brought the present action, CC33 of 2000, in this Court while they are resident out of the jurisdiction. The rule empowers this court to order security for costs to be paid unless they show that they can be excused in the manner stated in Kevorkian -v-Burney (No.2) [1937] 4 All ER. 468, 469 where Greer, LJ said, in relation to a case involving a New York businessman suing in the English Court:

“In this case, the plaintiff is an art dealer carrying on business in New York, and he is therefore subject to the prima facie rule that he ought to give security for costs of an action which is brought in this country. The rule is subject to certain exceptions, one being that, if there is in this country property which can reasonably be regarded as available to meet the defendant’s right to have his costs paid, then there should be no order for security.”

The Court is satisfied that in the circumstances of this case it ought to exercise its discretion in favour of granting the defendant’s application for security for costs. Counsel for the defendant has put the estimate of that costs to SBD150,000.00 to which no counter-amount has been suggested. The Court accepts that figure as reasonable and order that the plaintiffs provide security for costs in this action in the sum SDB150,000.00. I shall give the plaintiffs 28 days from the date of this order to pay the said amount into Court.

Security for payment of Judgment

The second part of the defendant’s application is that it seeks an order against the plaintiffs for the payment of SBD916,147.24 into Court as security for payment of the final judgment in CC55 of 1999. The basis for seeking this order was that the defendant was in possession of a judgment which had not been appealed against. Counsel for the defendant also sought to rely on O.65 rr1, 4, 5 & 6 in support of this application.

I have agree with counsel for the plaintiffs that O.65 does not apply to such application. It may well be that the defendant has a judgment in its favour in CC55 of 1999 but that does not entitle this Court to resort to a wide judicial discretion under its inerent jurisdiction and exercise a power which it does not have in the first place in order to enforce the defendant’s judgment in the manner suggested. In Wicks -v- Wicks [1997] EWCA Civ 3050; [1998] 1 All. ER 977, 986, Ward LJ has warned that the Courts must be cautious in not hiding “under the cloak of fair play and making orders affecting the parties’ substantive rights which must be governed by the general law and rules, not by resort to a wide judicial discretion derived from Courts inherent jurisdiction.” In the present interlocutory application, it would not be right to exercise the Court’s wide power in such a manner which would have serious effect on the parties’ substantive rights.

Further, in view of the order granting stay of execution of the defendant’s judgment in CC55 of 1999, it would only be right that any form of enforcement of that judgment be also stayed. Any order of payment in the form of security to satisfy that judgment would not be compatible with the order granting a stay of execution of the same. In the circumstances, the order sought for security of payment of the judgment in CC55 of 1999 is without merit and refused.

Order of the Court

Having considered the application by both parties, the order of the Court is as follows:

1. The execution of the Judgment in CC55 of 1999 dated 9 November 1999 is stayed pending the determination of the present action, CC33 of 2000, on the condition that the plaintiffs prosecute their action in the said CC33 of 2000 with diligence.

2. The proceeds of the sale of the vessels concerned be paid into Court forthwith to abide the judgment of the Court in CC33/2000.

3. The plaintiffs shall within 28 days from the date of this order, pay into Court the sum of SBD150,000.00 as security for the defendant’s costs in CC33 of 2000.

4. The order sought by defendant for security for payment of the judgment in CC55 of 1999 in the sum of SBD916,147.24 is refused.

5. Each party to bear its own costs of these applications.

(Sir John Muria)
CHIEF JUSTICE