Treasury Timber Ltd v Asia Pacific Investment Development Ltd [2016] SBHC 94; HCSI-CC 318 of 2013 (28 June 2016)

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Mr J. Zama for the First and Second Defendants
No one for the First and Second Claimants

Faukona PJ: This Court sat on 22^nd April 2016, purposely to hear the Claimants application for summary judgment. Unfortunately, neither the Claimants nor their Solicitor was present. The Court having satisfied that notice to attend was issued on 28^th December 2015, that the Claimants had ample time to prepare and attended Court on 22^nd April 2016 to prosecute their application. There was no formal excuse for non-attending and Court was not informed of any reason for not attending Court.

2.	In their failure, I have permitted the Counsel for the Defendants to proceed with his submissions. I now decide those submissions.

3.	The first Defendant is a company incorporated under the Companies Act on 15^th July 2008. The second Defendant owns (99%) of shares in the first Defendant.

4.	Previously the first Defendant held a Felling Licence No. A101001, issued by the Commissioner of Forest on 27^th January 2010, covering rikiki land being Perpetual Estate PN 019-001-14 situated at Gaomai, Shortland Islands, Western Province.

5.	The first Claimant is a Company duly incorporated under the Companies Act and is carrying on the business of logging. The second Claimant is one of the shareholders and directors of the first Claimant.

6.	Having being in possession of the felling licence, the first Defendant commenced logging operation on or about June or July 2012. At that time, the first Defendant was using machineries owned by Benlux Machinery and Marine Supply (SI) Limited. The machineries were part of a business owned by the second Defendant which entitled him to have an interest in the first Defendant.

	Oral Agreement:

7.	In the claim, the Claimants claim that the second Claimant and the Second Defendant entered into an oral agreement (the Agreement).

8.	One of the terms of the agreement is that the first Claimant shall be a logging contractor for the first Defendant under Felling Licence No. A101001. In consideration, the first Defendant shall pay to the first Claimant the export proceeds of every shipment after it deducted export duty (25%), royalties (15%) Licence fee of (USD8) per cubic meter of logs exported.

9.	There were five shipments already been made? In spite of that, and as alleged, the first Defendant only made four payments to the Claimant. The third and the fourth payment were fluked when the cheques were dishonoured upon presentation at the bank. The total amount of the dishonoured cheques was $2,789,045.04.

10.	Despite numerous requests by the first and second Claimants, in respect of unpaid balance, the first and second Defendants failed to pay, therefore, in breach of the oral agreement and or refused to pay.

11.	The Defendants deny engaged in any agreement with the first Claimant as a “subcontractor” of the first Defendant under the operation of Felling Licence No. 101001. However agreed that there existed a profit sharing of 50/50% arrangement that after each shipment, the parties would share the residue profits after all the heads had been deducted.

12.	The Defendants further avert that the profit sharing arrangement was never intended to form a binding agreement between the parties. The reason being that both the second Claimant and the second Defendant were, at relevant time, business partners who had equal shareholding with the first Claimant. Hence, any agreement whether oral or written was not necessary.

13.	It would appear the central focus of argument by the Defendant, is based on the fact that since there was no subcontracting agreement, they are not liable. And they cannot be liable, as they avert, would breach the Foreign Investment Board (FIB) approval and the approval by the Commissioner of Forest under Clause 27 of the Felling Licence No A101001. If that has been done, it definitely breached the terms and conditions of the licence by the first Claimant and the first Defendant, rendering the first and second Claimants unable to claim any benefit.

14.	This case is about profit sharing arrangement between two business men who held equal shares in the Claimant. The two business men held equal shares in the Claimant. The question to pose is the profit sharing arrangement premises on the oral arrangement. If by way of subcontracting, the law in the Forest-Resources and Timber Utilisation Act is clear, as well as Clause 27 of the license. That there ought to be a technology kind of agreement between the parties. That agreement would set out the obligations and the liabilities of the parties. It would set out the benefits each would obtain or acquire under certain and agreed terms. Apparently there was nothing of that nature in this case.

15.	Would that be perceived as an overriding status that would prevail over the oral arrangement which the parties agreed, that it did take place, which the Defendants describe as having no legal status? I would, in my respectable view, say no. The oral arrangement, if there was, emerged from business dealing by two business men who had equal shares in a business entity. That can be treated differently from any subcontracting venture which is different and premise on different terms and conditions. Subcontracting concerns devolving of task. It has its own terms and conditions and has its own profit sharing clause. In this case profit sharing arrangement under equal shareholding in an entity is absolutely different from any clause under any subcontracting arrangement which is fixed and not amenable to be manipulated by one party.

16.	Therefore, the argument demeaning and relying on an illegal contract is not valid. Whether such illegal contract exists or not, does not effectuate the oral arrangement made by the 2 business men. It brings us to a point that the case authorities refer to by the Defendant in paragraphs 14 and 15 of the submissions are not consequently redundant.

17.	With the conclusion I arrive at, it would also render the principle of gentleman’s agreement as inappropriate to rely on. As I have reiterated, the oral agreement for equal profit sharing is a business agreement by two business men. It garmented by legal mantle. If the second Defendant felt that the first or second Claimant had no interest at all with the logging operation by the first Defendant, the second Defendant would not have agreed to such verbal agreement. The consideration if one should search for is the fact that the second Defendant had an equal shareholding in the first Claimant. And the second Claimant and the second Defendant are Business Partners so far as the first Claimant is concerned.

18.	It would appear from the reading of the materials before me, and the submissions made by the Counsel for the Defendants, the Claimants stand a strong Case. However, the fact is that they including their Solicitors had failed to attend the hearing date, has diluted their case to zero. The application for summary judgment was filed by them and ought to appear to prosecute their application, hence, I must find against them. This Court must affirm in its approach and applying the law. Should a party or Counsel for the party failed to appear on a date been fixed and there is proof that parties and Counsels being issued with notices, the Court may proceed and give judgment against the absent party.

19.	On the issue of Defendant’s counter-clam, I have to say there was no counter claim at all being filed. What the Defendants describe as counter claim is merely their reason for opposing the Claimant’s application for summary judgment. Again there is no relief sought but an alternative order should the decision is in their favour.

20.	Having said that I hereby make the following orders.

	Orders:

	1.	The Claimants’ application for Summary judgment dismissed.

	2.	Refuse to grant order sought by the Defendant in paragraph 31 (1) (a) of the submissions.

	3.	Refuse to grant order sought by the Defendant in paragraph 31(1) (b) of the submissions.

	4.	Cost of this hearing is awarded to the Defendants.




	The Court.

High Court of Solomon Islands

Treasury Timber Ltd v Asia Pacific Investment Development Ltd [2016] SBHC 94; HCSI-CC 318 of 2013 (28 June 2016)