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Linear Perspective Ltd v Attorney General [2011] SBHC 18; HCSI-CC 157 of 2009 (29 March 2011)

IN THE HIGH COURT OF SOLOMON ISLANDS
(Chetwynd J)

Civil Claim No. 157 of 2009

BETWEEN

LINEAR PERSPECTIVE LTD
First Claimant

-And-

ORION LTD
Second Claimant

-And-

ATTORNEY GENERAL
(Representing Commissioner of Forests)
First Defendant

-And-

PATUDOKA ASSOCIATION
(Martin Pirivolomo and Collin Rugebata T/A)
Second Defendant

-And-

MILTON ULEVAE, BLESS VAKULALA
And MIMRO GRENVILLE
(as Representatives of Patulavata landowners)
Third Defendants

-And-

PACIFIC METRO LTD
Fourth Defendant

Mr Tegavota for the First and Second Claimants
Mr Kama for the Second Third and Fourth Defendants
No appearance for First Defendant

Date of Hearing: 21st February 2011
Date of Judgment: 29th March 2011

1. On 21st February I heard submissions on two preliminary issues of law. The two issues basically dealt with the same question. I am asked to determine whether the Timber Rights Agreement entered into between the First Claimant ("Linear") and the Third Defendants ("the landowners") dated 12th May 2003, "still remains a valid agreement" or alternatively whether the, "agreement has been validly terminated" by the landowners. In essence I am being asked to determine the status of that agreement.

2. It is necessary to look at the history of the agreement. Sometime in the late 1990's or early 2000 the landowners of Patulavata Land and Todoka Land decided they wanted to have their land logged. They decided to form a business to be known by the name of Patudoka Association ("the Association"). The business name of the Association was registered on or about 10th February 2000. The Association submitted a Form I [1] application to the Commissioner of Forests ("the Commissioner") and that in turn was sent to the Provincial Secretary of Choiseul Province on 3rd November 2001. A timber tights hearing took place on 11th March 2003 and the Form II notice was issued on 13th March 2003. There was no appeal against the determination made by the Provincial Executive.

3. In the meantime the Todoka landowners decided not to pursue the matter and withdrew from any negotiations. As a result the Association decided to change its name from Patudoka Association to Patulavata Association ("the New Association"). The change of name was registered in June 2003. On 1st July 2003 the New Association wrote to the Commissioner explaining the change. The letter went on to say that the New Association was incorporating a registered company named Linear Perspective Limited ("Linear") and they asked for the licence to be issued to Linear. A timber Rights Agreement was entered into on 12th May 2003 between the landowners and Linear. This is the agreement at the heart of the application before me.

4. Strictly speaking, under the Forest Resources and Timber Utilisation Act ("the Act") the Commissioner should have sent the application back to the beginning of the process under the Act because clearly Linear was a new legal entity. In fact it was not incorporated until 24th September 2003. However, the Commissioner took the pragmatic view, which is difficult to fault, that Linear was Patulavata Association, was Patudoka Association, was the landowners.

5. In late September 2003 an agreement was entered into whereby Linear was to be sold to the Second Claimant ("Orion"). The sale clearly was in the mind of the New Association when they wrote to the Commissioner in July. They should have told the Commissioner what they intended to do. The New Association, the landowners to all intents and purposes, seriously misled the Commissioner. The deceit appears to have been deliberate. All along the landowners had been telling the Commissioner they intended to be the "owners" of the legal entity that was to be granted the licence. If the Commissioner had been told the truth, if the Provincial Executive had been told the truth, both might have come to entirely different conclusions in their parts of the process under the Act. Be that as it may, I am not being asked at this time to deal with the validity of the licence, I am asked to make determinations about the agreement.

6. Given my comments above, can similar considerations apply to the agreement? In other words were the parties to the agreement clear about who they were dealing with? I do not believe there was any possibility the landowners were deceived or unclear about the parties to the agreement signed 12th May 2003. I have not the slightest doubt they were aware at that stage Linear was going to be sold to Orion and that in fact their agreement would be with Orion.

7. A licence was issued to Linear by the Commissioner on 1st December 2003. It was for 5 years.

8. There appears to be no dispute logging operations, meaning the felling of trees, did not commence on the land. The First and Second Claimants explain the reasons in Prince Taupongi's sworn statement filed 16th September 2010. Basically the land where trees were to be felled was "landlocked" meaning access road and log pond agreements had to be negotiated first. Those were eventually signed on 7th and 8th March 2008. Prior to that Linear had signed a joint venture agreement with the Fourth Defendant ("Pacific Metro") on 7th November 2007.

9. On 19th September 2008 Chan Chee Min wrote to the Commissioner asking for a renewal of licence No. A10139. The letter was on Linear Perspective Ltd's notepaper but was signed on behalf of Orion. Clearly Orion were not entitled to have the licence renewed. The licence is clearly denoted as being, "Not Transferable". The Commissioner apparently did not reply and so Prince Taupongi wrote again. The letter dated 24th March 2009 is exhibited to his sworn statement as TP19 at page 77. Lawyers were instructed by Linear and they wrote to the Commissioner on 3rd April 2009. It is not clear whether that letter spurred a reaction or not but in any event the Commissioner wrote to Linear on 14th April 2009 (see TP21). Amongst other things, see below, the Commissioner explained that he had responded to earlier letters but had sent a reply to the wrong postal box number. The Commissioner wrote to the lawyers on 22nd April 2009 (TP22).

10. As is set out in the Commissioner's replies, the landowners in the guise of Patudoka Association had written to him on 1st December 2008 (TP23). That was followed up by another letter dated 14th January 2009 (TP25). The landowners per se had entered into a Timber Rights Agreement with Patudoka Association on 12th January 2009 (TP27). It is not clear if a copy of the agreement had been sent to the Commissioner. On the same day the Association entered into a Technology and Management Agreement with Pacific Metro.

11. On 26th February the Secretary to the Patulavata Association wrote to Linear indicating the new Association had decided to terminate the logging agreement between them and Linear (TP 26). They did so on the basis Linear no longer held a valid licence to log.

12. Those are the basic facts upon which this application is grounded.

13. Returning now to the "original" timber rights agreement, it contains several provisions as to its termination. The first is contained in clause 2. It provides for a commencement date for logging operations. Logging operations are required to start six months from the final approval by the Forestry Department. The term "final approval" is further defined as being when the logging plan has been approved by the Commissioner. If logging operations are not commenced within the time set out, "this agreement shall become null and void".

14. In clause 3 the parties otherwise set out the duration of the agreement. It remains in force until execution of a completion certificate or until it is terminated through breach of its provisions.

15. Then there is clause 38 of the agreement which contains provisions for the termination of the agreement by notice. It says the Company (in other words the logging company) can terminate the agreement by giving the landowners 3 months written notice of breaches by the landowners and the action needed to rectify the breaches (paragraph 38(a)). The landowners can terminate the agreement by notice if the company becomes insolvent or is wound up, if it's logging licence "is cancelled" by the Commissioner or if it breaches any terms of the agreement. In the latter instance, the landowners must give three months written notice of the breaches and what is required to rectify them.

16. Mr Tegavota says, using my judgment in the Takolu case [2], that because there was a licence there was a valid agreement. He argues that just because the licence expired on 1st December 2008 it does not mean the agreement also expired as a result of clause 3. Also quoting my own judgment in Tokolu, Mr Kama argues the opposite. He says where the licence expires there can be no agreement.

17. Mr Tegavota also argues the Commissioner "is bound to renew" the licence if the agreement is valid and, he also says, the agreement can only come to an end, "after a completion certificate is executed or the agreement is terminated through breach of its provisions".

18. As for the first point in paragraph 17, that is not correct. There is no specific mention in the Act about the procedure for a renewal of a section 5 licence except for a reference in the fees regulations where the fee for "the renewal of a section 5 licence" is set out. In my view an application for renewal is made to the Commissioner under section 5. It is clear from section 5(1) the Commissioner may' "either accept the application or reject it". The Act gives him wide discretion when dealing with the application subject to the proviso set out in the final paragraph of section 5(1). With an application to renew, just as in the initial application for a licence, the Commissioner can only exercise his discretion if there is an agreement as set out in section 5(1)(c).

19. As for the second point, as I have said above (see paragraphs 13, 14 and 15) there are 3 provisions for the termination of an agreement. There are other ways the agreement can come to an end other than as set out in clause 3.

20. Mr Kama argues that the agreement must come to an end when the licence expires. This must be the case he says because the issue of a licence is predicated on there being a valid agreement. I do not accept that either.

21. It has long been settled the form of agreement, "shall be in such form as prescribed in Form 4 of the Schedule" [3]. The form of agreement in Schedule 4 does not contain a reference to the specific length of the agreement except as mentioned above. Clause 3 contains the only reference to duration in the agreement. Bearing in mind the agreement between the landowners and Linear was entered into before 2005 when new regulations were made, there may be a possible inconsistency with the Schedule 4 form and the description in Schedule 2 following the heading Form of Agreement For Timber Rights [4]. An agreement for the sale of timber rights under section 12 of the Act is required by (f) of the latter to include a provision for "The agreed duration of the agreement to purchase timber rights and for its determination or extension...". I was not addressed on that point, neither was I addressed about any differences between the "old" regulations and those that came into force in 2005. If there is an inconsistency it may have been addressed in the new regulations and in any event it is for the Minister to deal with under section 44, not this court.

22. It would appear from the wording of the Schedule to the (old) regulations the parties could agree the duration of the agreement but the Commissioner decides the length of the licence. If the landowners have agreed one period and the Commissioner decides another there could be a conflict. It is difficult to see how the Commissioner can fetter the landowners freedom to negotiate because the statutory requirements under the Act, "contain a strong element of social and economic purpose aimed at protecting customary landowners and the environment from undue exploitation" [5]. It is equally difficult to see how the landowners could shackle the Commissioner in the exercise of his discretion. The meaning and purport of the agreement must be construed in isolation to the terms of the licence.

23. Whilst I should be flattered that both parties cite my own judgment in Takolu to support their claim, all I said in that case was there could be no licence issued by the Commissioner if there was no valid agreement for timber rights at the time of issue. The case is not authority for saying the agreement is dependent on the terms of the licence. This point was considered in the Gandly Simbe case at paragraph 17 of the judgment when the Court of Appeal said that the overall conditions to be imposed can be provided for in the agreement or in the licence.

24. If there is any remaining doubt, section 40 of the Act settles the matter. It says;

No licence or permit issued under this Act shall convey or be construed to convey any right which the Government does not have and in particular no such licence shall convey nor be construed to convey any right or authority to enter any private land nor take any action with respect to anything without the authority of the owner of that land or thing.
The licence cannot give the licensee any greater rights than those set out or granted to him in the agreement for timber rights.

25. The answer to the two issues for determination can be set out at the same time. I have no evidence Linear satisfied the provisions of clause 2 of the agreement. There is no evidence the Commissioner approved a logging plan. There is no evidence there was a logging plan. There is no evidence at all about any logging plan. If one had not been submitted and approved before the licence expired clause 2 must come into effect. Linear could not submit a logging plan after 1st December 2008 because it had no licence. The licence had expired. It is difficult to contemplate the Commissioner approving a logging plan when the company presenting it has no licence to log. It is possible clause 2 became effective on 2nd December 2008 and the agreement was rendered "null and void".

26. In any event there is uncontested evidence the landowners gave notice to Linear under clause 38 of the agreement. The letter dated 26th February 2009 gave notice of a breach, the fact that Linear had no licence because the one issued to it in 2003 had expired. Linear could not satisfy its obligations under the agreement without a valid licence. This was a fundamental breach of the agreement. It had 3 months from 26th February 2009 or whenever the letter was "served" on the Company to remedy the breach. It did not remedy the breach. The agreement came to an end on a date three months from the service of the notice.

27. The answer to the questions for determination are, there is no valid agreement between Linear and the landowners. If the agreement had not come to an end by reason of the provisions in Clause 2 then the process for terminating the agreement commenced with the notice contained in the letter dated 26th February 2009 and ended three months from the date Linear was served with the notice. Linear failed to remedy the breach alleged in the notice within that three months. The agreement was validly terminated.

Chetwynd J

^[1] Pursuant to section 7(2) of the Forest Resources and Timber Utilisation (Amendment) Act 2000
^[2] Success Co Ltd v. Takolu Timber Ltd and Ors Civil case 80 of 2009
^[3] See for example Gandly Simbe v. East Choiseul Area Council and Others Civil Appeal case 8 of 1997
^[4] See page 1477 of Volume III of the Revised Laws of Solomon Islands
^[5] See Gandly Simbe ibid