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Court of Appeal of Solomon Islands |
IN THE COURT OF APPEAL OF SOLOMON ISLANDS
Civil Jurisdiction
Case Appeal Number 007 of 2002
BETWEEN:
AEROLIFT INTERNATIONAL (IS) LIMITED
Appellant
AND:
MAHOE HELI-LIFT (SI) LIMITED
First Respondent
AND:
MAHOE SAWMILLS LIMITED
(Formerly Northland Kauri Limited)
Second Respondent
AND:
THE ATTORNEY-GENERAL
(Representing the Director of Civil Aviation)
Third Respondent
CORAM: Lord Slynn of Hadley (President), McPherson J.A., Ward J.A.
HEARING: 1st September 2003
JUDGMENT:
JUDGMENT
Aerolift International Limited, which is the plaintiff in the action and the appellant in this Court, is a company incorporated in the Republic of Ireland with its headquarters in Singapore. It is a joint venture between two foreign entities Kentwhich and Vladivostock Air, the latter being a Russian enterprise that supplies Russian manufactured aircraft including helicopters of the model Kamov KA32T, which is the subject of the contract in these proceedings. Mahoe Helicopters NZ Limited, now Mahoe Sawmills Limited, is a New Zealand incorporated company of which the directing mind and will at relevant times was Christopher Bergman, who with his brothers control or controlled that company. It is the second defendant in the action and the second respondent to this appeal, and is referred to here as Mahoe NZ. The first defendant and respondent is Mahoe Heli-Lift (SI) Limited, which is a wholly owned subsidiary of Mahoe NZ. It was incorporated in Solomon Islands for the purpose of this venture, described as “heli-logging”, which involved the removal by helicopter of logs from the sites where they had been felled for transportation elsewhere.
A written contract entered into in New Zealand between Aerolift (“the Contractor”) and Mahoe NZ (“the Company”) on 28 June 1995 recited that the Company was undertaking logging operations in Solomon Islands and wished the Contractor to supply a Kamov KA 32T helicopter with Russian pilots and support crew subject to the terms and conditions of the contract. By cl 1 of the contract the Contractors agreed to lease, and the Company to take on lease, such a helicopter with the option to lease a second aircraft of that kind. By cl 2, the Contractors were to deliver the aircraft and supporting spare parts to Honiara on about 7 July 1995, with certain specified equipment installed, and to provide a support crew of Russian pilots, flight and ground engineers, and a project supervisor/interpreter. They were to facilitate the indorsement of two western pilots (cl 2.6) and provide training support for them (cl 2.7).
For its part, the Company by cl 3 was, among other things, to pay for the training and indorsement of the western pilots on KA 32T helicopters; to provide and pay for fuel, airport services and other governmental charges arising from the operation of the aircraft, as well as for transportation, meals and accommodation for the support crew; to pay for all import duties, taxes, etc; to provide for the safety of the aircraft and spare parts; to procure and pay for an operator’s licence and third party insurance; to procure the grant of visas and permits for the crew (cl 3.14); and “to comply with the laws and lawful directions of public authorities of Solomon Islands”. The duration of the contract was 24 months from delivery in Honiara (cl 4) and there was provision in cll 5-8 for minimum hourly payments to the Contractor, target volumes, rates of charge, manner of payment, and so on.
The terms of the contract have been set out at some length here because its nature and characterisation is of some relevance to the legal issues on the appeal. In substance, it was simply an agreement for the hire of a chattel for reward involving the bailment of an aircraft with associated support staff. There was to be a bailment by Aerolift to Mahoe NZ, with a sub-bailment to Mahoe SI, which was incorporated to carry out the operations in Solomon Islands under a separate “Technology Agreement” entered into with its parent Mahoe NZ. Unfortunately, operations did not go as planned. The venture encountered problems partly it seems because the logs were in a condition that proved difficult to lift from the lift-site. Or it may have been, more simply, that Mr Bergmand a more attractive tive source of comparable aircraft, which he preferred, from another Russian company named Nefteyugansk. Whatever the reason, on 12 December Mahoe NZ repudiated the contract by letter in writing and and refused or failed to pay money due under it. It sought to justify its action on the ground that the helicopter provided by Aerolift was not the model specified in the contract; and it prevailed, quite wrongly, on the Solomon Islands Director of Civil Aviation to ground the Aerolift aircraft on that and other spurious grounds. As a result, damages were awarded to Aerolift against the Director for breach of statutory duty. On the issues of fact arising from the repudiation by Mahoe NZ, the findings of the learned trial judge were entirely in favour of the plaintiff; and in fact he referred the papers to the Attorney-General to consider whether criminal proceedings should not be taken against Bergman for perjury.
Neither that award of damages, nor any of the learned trial judge’s primary findings of fact against Bergman or Mahoe NZ or Mahoe SI, has been challenged on appeal. The second corporate defendant was, however, successful on grounds of law in defeating the plaintiff Aerolift’s major claims for payments due to it under the contract and for damages for repudiatory breach of contract; and, in the case of Mahoe SI, its claim to enforce against it certain irrevocable letters of bank authority which it had given to the plaintiff. It is the rejection of these claims that is the principal subject of this appeal.
The major claims for payments due and damages for breach of contract foundered on the basis of its illegality. The learned trial judge held that the written contract dated 28 June 1995 between Aerolift and Mahoe NA was prohibited by s 6 of the Investment Act (cap 142). It provides so far as material that:
“6. ... no foreign investor shall engage in any investment in Solomon Islands, unless the foreign investor is registered with the [Foreign Investment] Board and is in possession of a certified approval in terms of the Act.”
Aerolift was not so registered. The expression “foreign investor” is defined in s 2 to mean a person who is not a citizen of Solomon Islands. Aerolift was not a citizen but a body corporate in which a foreign investor held the whole ownership in the capital. About this there is no dispute. Mahoe SI was also a “foreign investor” within the definition in s 2. It was, however, registered with the Board and had obtained a certificate of approval under s 5(2) as an “approved enterprise”. The certificate was issued before the heli-logging operation began. One might be excused for thinking that, since Mahoe SI was conducting those operations with the necessary Board approval, the activities, such as they were, of Aerolift by means of which Mahoe SI’s operations were to be carried out (involving the hire of the helicopter) would also be covered by that approval. Otherwise the approval and its certification would be almost completely meaningless. But it was said that each of: (a) Mahoe NZ; and (b) Aerolift, who were alleged to be conducting those operations, and so engaging in that investment, were within the prohibition in s 6, with the result that their contract of 28 June 1995 was illegal and unenforceable.
It seems to us, however, that if the question is approached as one of determining the ordinary meaning of the words, Aerolift was not engaged in any investment in Solomon Islands. All it did was to hire out its helicopter with support crew and spares for reward for use in Solomon Islands. Lending one’s aircraft for use by someone else in return for a fee would not, according to ordinary language, be described as making an investment. A hire car company would not be considered as making an investment every time it hires out a car for purposes of a customer’s business even if it provided a mechanic as well.
The question is whether this conclusion is displaced by the provisions in the Act. There is no definition of the word “investment” in the Act, although the expression “foreign investment” is defined in s 2 to mean:
“an industrial, commercial, business or service undertaking carried on by a foreign investor.”
Section 11 of the Interpretation and General Provisions Act (cap 85) provides that, where an expression is defined in an Act for any purpose, then all grammatical variations and cognate and related expressions are to be understood in the same sense. Hence, it is said, the provision in s 6 is to be read as prohibiting any non-citizen from engaging in any industrial, commercial, business or service undertaking carried on in Solomon Islands without the Board’s approval and certificate. Directed as it is against engaging in any business undertaking, the prohibition is plainly capable of a very wide interpretation. In our opinion, however, it should not receive a broader meaning than is necessary to give direct effect to the evident policy of the Act, which is to monitor and control, as well as to encourage, foreign investment in Solomon Islands: see ss 4, 7 and 9, of which the latter provisions are concerned to provide or confirm incentives granted to foreign investors in the form of exemptions from impositions under tax and excise legislation.
In imposing its prohibition, s 6 of the Act, read in conjunction with the definition of “foreign investment” in s 2, uses the words “engage in”, “carried on”, “business” and “undertaking”. The expression “carrying on” used in conjunction with “business” was said by Brett LJ in Smith v Anderson [1880] UKLawRpCh 211; (1880) 15 Ch D 247, 277-278, to imply:
“a repetition of acts, and excludes the case ... of doing one particular act which is never to be repeated. That series of acts is to be a series of acts which constitute a business”.
Here it is, in our opinion, not possible to say that Aerolift was carrying on a business in Solomon Islands of hiring out helicopters. It was not engaged here in advertising or offering to do so to all or even to selected comers. Instead, it made a contract with a single customer in New Zealand for a fixed term bailment of a helicopter with crew for the purpose of enabling the customer Mahoe NZ to carry on a business, which it planned, of “heli-logging” in Solomon Islands. Under the contract, the only business involved was that of Mahoe NZ, which was to be conducted in Solomon Islands by Mahoe SI, to which it sub-bailed the helicopter under the written Technology Agreement to which Aerolift was not a party. Merely supplying a piece of equipment to enable someone, or to lend it to another, to carry on an approved business in Solomon Islands is not engaging in a business or service undertaking in these Islands. It is no different, for example, from supplying under contract a computer with back-up staff, or a ship with crew under charterparty, to someone for the purpose of his carrying on a business of his own.
To make good the proposition that the contract for hire of the helicopter falls foul of the statutory prohibition in s 6, Mahoe NZ is obliged to read the expression “engage in” as meaning something akin to “takes any part in” a business or business undertaking carried on by another. But Aerolift was not participating in any business being carried on by either or both of the two Mahoe companies. It was not a partner or principal in the business of heli-logging in Solomon Islands, and it stood to gain nothing directly from that business. Its legal right to be paid did not depend on the profits or financial viability of the business, and it invested nothing in it. The expression “engage in” ought, in our opinion, properly to be read as referring to engaging in the relevant business or business undertaking as principal, and not as including an independent contractor who does no more than supply equipment, or an employee, or a consultant who in that way assists a business which someone else is conducting or engaging in.
This in fact accords with the approach adopted by the Board itself in dealing with the application by Mahoe SI for approval under the Act. The approved activity is described in the certificate of approval ex 139 as being:
“To establish a company which will engage in providing helicopter services for sustainable serial harvesting of logs in Solomon Islands. Activity to be confined specifically to aerial logging. General Helicopter Services other than aerial logging is not permitted.”
Earlier in the certificate the “approved enterprise” is described as “Helicopter services for aerial harvesting of logs”. It was Mahoe SI that was chosen to provide the aerial logging services using the leased helicopter, of which under the sub-bailment from Mahoe NZ, Mahoe SI had possession. According to the certificate ex 139, it and not Aerolift was to be awarded the tax incentives under exemption 26 of the Customs Tariff.
The certificate ex 139 incorporates in para 7 the observation that “the leasing of helicopter(s) will require a Technology Agreement which the Board will need to approve. Submit draft agreement to the Investment Secretariat at your earliest”. This is a reference to s 19 of the Act, which is in the following terms:
“19. No investor shall enter into any technology or other external agreement without the prior approval of the Board.”
The expression “technology or external agreement” means an agreement “involving payments in foreign currency for royalty or professional services provided”. The term “investor” includes a foreign investor and so would comprehend not only Mahoe SI and Mahoe NZ, but also Aerolift as well as the Russian manufacturing company from which the helicopter in question had originally been bailed to Aerolift. Given literal effect, s 19 is extremely wide. Approached in that way, it attracts a correspondingly literal interpretation of its terms. What was to be paid by Mahoe NZ to Aerolift by way of hire under their contract of 28 June 1995 was certainly not a “royalty”, nor did it, according to the strict or traditional meaning of that term, involve payment for “professional” services provided, as distinct from the hiring fee for the helicopter together with certain technical services in Solomon Islands. But, quite independently of such a narrow approach to that question, the fact is that, in accordance with the Board’s advice, an approval and certificate (ex 140) to a technology agreement was obtained under the Act. It is dated 24 May 1995 (which is before the contract of hire with Aerolift was entered into) and was issued to Mahoe SI. The approved enterprise is described in ex 140 as “aerial harvesting of indigenous timber. Solomon Islands”, and the approved activity as being: “(a) to engage in sustainable aerial harvesting of round logs in the Solomon Islands”; and “(b) to enter into agreement with land-owners of harvesting of their logs”. In para 7, of the certificate the particulars of the approved technology agreement are described as:
“Technology Agreement with Mahoe Helicopters (NZ) Ltd for the provision of all management expertise, plant and equipment to the approved company for the sustainable harvesting of logs in the Solomon Islands.”
The Technology Agreement in question is ex 156. It appears according to the copy in the record to have been executed in or before May 1995 between Mahoe SI (called “the Company”) and Mahoe NZ (identified as MHNZ). It contemplated the provision by Mahoe NZ of heavy lift helicopters on an “all-inclusive” basis, with Mahoe NZ providing all support services required for the use of the helicopters and all management services needed for the aerial logging operations of Mahoe SI (cl 2.1 to 2.3). By cl 3, Mahoe SI was to pay Mahoe NZ for its services in US dollars at rates specified in that clause. In his reasons, his Lordship appears to have regarded this contract ex 156 as in the nature of a sham, describing it as “merely a paper arrangement, more a red herring, intended to divert attention away from the real thing”. It is not clear why the learned trial judge adopted this view of the contract; but he seems to have been influenced by the fact that Bergman was the directing mind and will of both Mahoe companies, and “instead of acting in his capacity as the Manager and Chief Executive of Mahoe SI, Bergman was acting all along for and on behalf of Mahoe NZ”. One would have thought that logically this would mean that, if Mahoe SI had the requisite approval under s 19 of the Act, it was in substance really Mahoe NZ that had obtained the approval; but his Lordship went on to say that Mahoe NZ:
“had no approval under section 19 to have that lease agreement [with Aerolift] implemented as a technology or external agreement, and yet that was exactly what it did. That is clearly a breach of the provisions of s 19 as well”.
There is, however, no reason to be found in s 19 for refusing to give effect to the Technology Agreement entered into between Mahoe NZ and Mahoe SI. Contracts between corporations having a common directorate are a feature of everyday commerce. They sometimes present difficulties of enforcement arising from the fiduciary duties owed by directors; but, unless undisclosed and challenged by a shareholder having standing to do so, they are as valid and enforceable as any other contract. Holding and subsidiary companies are, in the eye of the law, separate corporate entities and are entitled to enter into contracts regulating relations between them. Often they have some tax purpose in mind; but that does not affect the validity of their contract provided they make full disclosures to the revenue authorities at the appropriate time. There is no reason for suspecting that in entering into the Technology Agreement the Mahoe companies were intending to perpetrate a fraud on the revenue in Solomon Islands or New Zealand. On the evidence before the Court, the Technology Agreement should be taken at its face value as constituting a valid and enforceable contract between those two corporate entities.
The fact that the Agreement received the approval and certificate of the Board under s 19 means that it received approval for all purposes of that provision. An approval obtained by one party to an agreement (in this case by Mahoe SI) enures for the benefit of the other or another party to the agreement: cf Re Telephone Apparatus Manufacturers Agreement [1963] 1 WLR 463. It cannot be otherwise, especially where there are only two parties to the agreement. A bipartite contract cannot be approved as to one party but not the other. Moreover, if the helicopter technology being provided by Mahoe NZ to Mahoe SI comprehended (as it plainly did) the technology being supplied by Aerolift to Mahoe NZ under their contact of 28 June 1995, the certificate ex 140 necessarily involved approval for the services being so provided by Aerolift. They were a major element in the services being provided by Mahoe NZ to Mahoe SI under the Technology Agreement approved by the Board in its certificate ex 140.
The result, in our opinion, is that there was no breach by Aerolift of the prohibition imposed by either s 6 or s 19 of the Investment Act. But even if this conclusion is not correct, it does not follow that those statutory provisions have the effect of making the Aerolift contract, or the claims for payment or damages for breach of or for payment under its terms, either illegal or unenforceable. Neither s 6 nor s 19 of the Act provides that the consequence of entering into a contract in contravention of those provisions is to make the contract illegal or unenforceable; nor do they render the act of doing so a criminal offence or impose a penalty for doing so. There is nothing in the Act that prescribes such a result. The only express sanction against disobedience to the Act or its prohibitions is that the foreign investor is disqualified under s 7 from obtaining the taxation incentives envisaged by other statutes.
It may be that the Board or the Attorney-General acting on behalf of the Minister would be entitled to an injunction to restrain a foreign investor who was engaging in or carrying on a business or service undertaking contrary to the Investment Act. We are speaking now of the Act in the form in which it stood at the time in 1995 when these contracts or agreements were entered into, and not of the Act as amended by the Investment (Amending) Act 1996 (no 10 of 1996), which commenced operation on 8 March 1997 according to Legal Notice no 46 of that date. Under s 6(2) of the Act as amended, the Board may by notice call on a person to show cause why an undertaking should not be declared a foreign investment, subject to a right of appeal to the High Court. Liability to a fine of $50,000 is now imposed on conviction for breach of the provisions of s 6, or on default to imprisonment for two years. A new s 21 now provides for a similar penalty for contravention of any of the provisions of the Act for which no other penalty is prescribed. None of these provisions was in force at the time of the events giving rise to the claim in this action. The contract of 28 June 1995 was repudiated in December of that year.
The specific authority relied on for saying that a contract entered into in breach of s 6 of the Act is illegal and enforceable is the decision of Langole-Awich J in Ampo Company Limited v Tropical Forest Resources Limited (High Court CC 053 of 1995): judgment on 25 March 1997). It involved a foreign company which engaged under a contract with a local company in a logging business on customary land without first obtaining the approval required under the Act, and, indeed, continued to do so even after its application had been explicitly rejected by the Board. In the course of his reasons dismissing a claim by Ampo for breach of the contract, his Lordship, speaking of ss 5 and 6 of the Act, said (at p 12) that:
“Sections 5 and 6 were enacted with the intention of prohibiting a foreign investor from engaging in business before the country’s authorities have obtained information about the foreigner to do business in Solomon Islands in accordance with the policy in Solomon Islands. Violation of sections 5 and 6 defeats the public interest intended to be protected.”
So far his Lordship’ statement may well be unexceptionable. It is, however, the next step that is controversial:
“It should result in the court declining to enforce a contract entered into by a violator, an unapproved and unregistered foreign investor.”
In support of his conclusion, his Lordship there referred to a number of decisions concerned with illegality. It is right to say, however, that many of them were concerned not with the enforcement of contracts alleged to be illegal, but with the recovery of money or property paid or transferred under an illegal transaction. The applicable two legal principles are different, although each has the misfortune to have come down to us from Roman law in the garb of a Latin maxim. The first, which is the one with which we are concerned here, is expressed in the form ex turpi causa non oritur actio, which translated literally means that an action does not arise out of a base cause. It is what is said to be the source of the rule that precludes the enforcement of an illegal contract. The other, which prevents recovery of money or property transferred, is usually expressed in the form in pari delicto potentior est conditio defendentis. It means that when parties are equally guilty, the defendant is in the stronger position. It has no direct application to the Aerolift’s claim for payment or for damages for breach of contract, which are methods of enforcing a contract and not of recovering property parted with under it.
Neither of these Latin maxims is ever of much assistance in solving problems encountered in this branch of the law. The decision on which most reliance was placed in Ampo v Tropical Resources Limited was Alexander v Raysun [1936] 1 KB 169, 182, to which the statement by Langole-Awich J at p 6 of his reasons appears to be traceable. It is that “an agreement to do an act that is illegal, immoral or contrary to public policy ... is unlawful”. It must, however, be recalled that the unlawfulness of the agreement of lease of premises in that case sprang from the fact that it was entered into in the form of two agreements with the deliberate intention of deceiving the local rating authority by defrauding it into assessing a lower rate than would otherwise have been imposed had the truth of the agreement been disclosed. It was, strictly speaking, a case in which the parties conspired to commit a false pretence on the rating authority by fraudulently misrepresenting the relevant terms of the lease on which the assessment was based.
By contrast, the present case is one in which, if there is any illegality at all, it can only be because either: (1) the making of the contract itself was prohibited by statute; or: (2) the contract was performed in a manner which the statute prohibited; that is to say, that the contract is one that falls within either the second or the fourth of the categories identified by Gibbs ACJ in Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 411, at 413, as the four ways in which the enforceability of a contact may be affected by a statutory provision rendering particular conduct unlawful. In Yango, the High Court of Australia was concerned with a provision in s 8 of the Commonwealth Banking Act 1959 prohibiting a body corporate from carrying on banking business in Australia without having the authority of the Federal Treasurer under s 9. The prohibition was set in a statutory context similar in its general purposes to those of the Investment Act. Its policy was to control the activities of foreign banking enterprises in Australia; but with the difference that there the Act in question imposed a civil penalty of $10,000 for each day during which the contravention occurred, without making a contravention of s 8 a criminal offence.
In Yango, the plaintiff respondent, which was an American bank which lacked the authority of the Treasurer to do so, carried on the business of banking in Australia. In the course of doing so, it lent money on mortgage to the defendant which it later sought to recover by suing on the personal covenants in the mortgage. The High Court unanimously held that the contract was not prohibited by s 8 of the statute or unenforceable. The Court decided, first, that the act of entering into or a contract or covenant was not expressly made illegal or unenforceable; indeed, it was not even referred to in the statute. The same conclusion applies here. Neither s 7 nor any other provisions of the Investment Act expressly renders a contract illegal or unenforceable if entered into by a foreign investor carrying on a business or engaging in any “investment” in contravention of s 6 or entering into a technology agreement contrary to s 19. That being so, the second question in Yango was whether the Banking Act impliedly rendered the contract of loan by the plaintiff either illegal or unenforceable. On this, their Honours also concluded that it did not do so. It is true that s 8 prohibited a body corporate from carrying on any banking business in Australia unless possessed of the requisite authority; and also that entering into the contract of loan was an activity ordinarily involved in carrying on a banking business [1978] HCA 42; (139 CLR 410, at 423-424); but penalising an unlawful banking business by rendering all contracts entered into in the course of carrying it on was a disadvantage that outweighed the harm likely to be done by such conduct. In this case, as in that, it would mean that all contracts entered into by the person contravening the prohibition would be illegal and unenforceable not only by the contravener, but by anyone else, including employees and all others who innocently contracted with it. Parliament should not be assumed to have intended such a result, which would impose a penalty quite disproportionate to the seriousness of the contravention involved.
In the course of their reasons, their Honours placed some reliance on the presence in the Australian Act of the provision for a daily penalty of $10,000 as a legislative indication that it was to be the only consequence of contravening the statute. No such penalty is imposed by the Investment Act; but it is difficult to see that its absence here lends weight to an interpretation that would make the contract impliedly unlawful. If Parliament does not choose to impose such a penalty, or to constitute the prohibited act or activity a criminal offence, it is not for the Court to do so in reliance solely on its view of the “policy” of the Act. In the reasons in Yango, there are references to the decision in Cornelius v Phillips [1918] AC 199, in which it was held that a money lender who, contrary to the express provisions of s 2(1)(b) of the Money-lenders Act 1900 (UK) carried on business by lending money otherwise than at his registered address, was disentitled from enforcing a loan made by him in that way. Their Honours in the High Court of Australia distinguished that decision, essentially on the ground that there it was the plain intention of Parliament to make the money-lending contract in that case unenforceable at the instance of the money lender (see [1978] HCA 42; 139 CLR 410, 425, 433). It might equally be said that the legislation in that case was specifically directed to protecting the position of borrowers of money, and so might reasonably have been intended to deprive lenders of their contractual right of enforcement in the event of failure to comply with the express requirements of the Money-lenders Act 1900. There is nothing in the Investment Act 1990 that suggests that invalidating contracts made by foreign investors with others was part of a policy designed to enforce compliance with its provisions. It did not make the act of making the contract a criminal offence or visit it with a pecuniary civil penalty.
The contract entered into on 28 June 1995 between Aerolift and Mahoe NZ was therefore not one of which the formation or making was prohibited expressly or impliedly by s 6 of s 19. The remaining question on this branch of the appeal is whether the manner in which that contract was performed was prohibited by statute. The question here remains one of interpretation of the statutory provisions and in particular of the prohibition imposed by the Act. See St John Shipping Corporation v Joseph Rank [1957] 1 QB 267, 286, in the illuminating judgment on this subject of Devlin J. The question is answered by reference to much the same considerations as has already determined the result with respect to the preceding question. There is nothing anywhere in the Act to suggest that its provisions are directed at invalidating contracts which contravene its terms in the manner of performance. There is no reason for supposing that Parliament intended that, without a certificate of approval, Aerolift, as well as all those who made or carried out contracts with it, should suffer the disadvantage of having their agreements rendered unenforceable because of Aerolift’s non-compliance with ss 6 or 19. To say that it is part of the policy of the Act not to enforce any such contract because it was performed without a certificate is to ascribe to Parliament something that in the Act of 1990 it did not say. It would impose a penalty on the parties who performed such a contract that was out of all proportion to the seriousness of the contravention involved, which in its original form was neither made a criminal offence nor the subject of civil penalties under the Act.
The learned trial judge was no doubt correct at first instance in following the decision in Ampo v Tropical Forest Resources, which was a decision of co-ordinated authority; but we think that some of the statements in that case are too widely expressed.
The contract was not illegal or enforceable either as formed or as performed. In our opinion, the appellant was and is entitled to recover payments accrued due before repudiation under the contract, and damages after repudiation for the action of the second defendant Mahoe NZ in repudiating the contract in December 1995. In these circumstances it becomes unnecessary to consider Aerolift’s alternative claim for a quantum meruit against either of the first two defendants.
The next question for consideration on the appeal concerns the enforceability of the irrevocable letters of authority. In this instance the claim is against the first defendant Mahoe SI. What happened was that Mahoe NZ failed to make payments provided for and due to Aerolift under the contract of 28 June 1995. As a result, Aerolift refused to allow the helicopter to fly, which meant that Mahoe SI was unable to conduct its heli-logging operations. In September 1995, Bergman on behalf of Mahoe SI and McLellan, who was Aerolifts’ Singapore manager, agreed on a procedure that was intended to solve the problem. It was that Aerolift would permit the aircraft to fly and carry out logging operations if: (1) Mahoe SI irrevocably instructed National Bank of Solomon Islands Limited (NBSI) to debit its bank account and credit the bank account of Aerolift in Hong Kong with a specified sum as soon as Mahoe SI’s account was in credit in cleared funds to an amount equal to or greater than the sum that would be needed to meet the charge payable for using it; (2) the authority would not be amended without the consent of Aerolift; and (3) performance by NBSI of the instruction was subject to Mahoe SI receiving approval under the Exchange Control Act 1976 to remit funds out of Solomon Islands to Aerolift’s bank account in Hong Kong.
Each of the irrevocable authorities, of which there were six, contained in exs 24, 25, 27, 28, 29, 30 and 32 in the appeal record, were in the same terms but for sums varying from $50,000 to $135,000. The first two totalling $185,000 were paid into Aerolift’s Hong Kong bank account as agreed; but, although there were cleared funds in Mahoe SI’s account with NBSI sufficient to meet the others, they were not credited to Aerolift’s account in Hong Kong because of the failure of Mahoe SI to obtain approval under the Solomon Islands Exchange Control Act. The upshot is that those funds remain in the account with NBSI in Solomon Islands awaiting the outcome of this appeal.
Aerolift's claim to this money failed because, as the learned judge found, the irrevocable authorities were “devoid of any contractual obligation and devoid of consideration”. With great respect, we find this conclusion and the reasoning leading to it difficult to follow. The classic definition of consideration usually taken from Currie v Misa [1875] UKLawRpExch 11; (1875) LR 10 Exch 153, 162, requires that there be either benefit to the promisor or detriment to the promisee. In point of law, detriment to the promisee is sufficient, and such detriment existed here. Aerolift surrendered its liberty of action with respect to the helicopter by agreeing to release it and permitting it to fly on each occasion for a specified number of hours in return for Mahoe SI’s promise to provide the cleared funds and not to revoke its authority to the NBSI to credit Aerolift’s Hong Kong bank account with the sum payable for its use on each occasion. Releasing the helicopter to carry out logging operations was, as it was said in Australian Woollen Mills Pty Ltd v The Commonwealth [1954] HCA 20; (1954) 92 CLR 424, at 457, thus “at once the acceptance of the offer and the providing of the executed consideration for the promise”. There was therefore consideration in the form of that detriment to Aerolift in giving up its freedom of action and, as Mr Sullivan of counsel also contended, in the form of benefit to Mahoe SI in having the helicopter available to it for its logging operations. There is not the slightest doubt that the parties intended the arrangement to be legally binding as a contract, or a series of contracts, between them which were recorded in writing in the exhibits referred to on each occasion when such an arrangement was put into effect.
For some reason, which it is not altogether clear, the submission at trial seemed at this point to have degenerated into a debate about relations between the two Mahoe companies and their respective liabilities for payment under the contract of 28 June 1995 between Aerolift and Mahoe NZ. There can be no doubt that Mahoe NZ owed unpaid amounts to Aerolift under that contract, but there was no question of any assignment of that contract or of the indebtedness under it to anyone. It was not a matter of varying that contract or of novating it. By the terms of the irrevocable authorities, Mahoe SI (which was not a party to the contract of 28 June 1995) promised to provide funds in the manner agreed for transfer and crediting to Aerolift's bank in Hong Kong in return for having the use of the helicopter. It was immaterial to the liability of Mahoe SI under the irrevocable authorities that Mahoe NZ owed the same or similar amounts to Aerolift under the contract of that date. Mahoe SI agreed to pay the sums specified in return for having the helicopter back in operation for the logging work. It agreed to pay whether or not Mahoe NZ was or was not obliged to do so.
As we understand it, the total amount of the sums the subject of the irrevocable authorities exs 27, 28, 29, 30 and 32 (less taxes dues and costs, if any, payable to the Government of Solomon Islands), remains standing to the credit of the account of Mahoe SI with NBSI. There is an order of the High Court made on 21 September 2001 that the amount in credit in that account be paid out to the first defendant Mahoe SI, subject to its continuing to be restrained from disposing of it until determination of this appeal. The order for repayment to Mahoe SI was made on the assumption that the amount in the account with NBSI represented the amounts of payments due for the hire of the helicopter under the contract with Aerolift, and so were irrecoverable as being illegal; or, alternatively, that they represented sums deposited under the irrevocable authorities, which it had been decided at the trial not to be binding on the parties for want of consideration or otherwise.
The findings to that effect having now been reversed on appeal, it is necessary that para 1 of the order made on 21 September 2001 for payment to the first defendant Mahoe SI should be set aside. The amount in question, together with any accruals, ought now to be paid to the plaintiff Aerolift as money it is entitled to pursuant to the irrevocable authorities in question. It is, we are satisfied, in accordance with the principle in Barclays Bank Ltd v Quistclose Investment [1970] AC 567 that the money should be considered as being held on a primary trust for Aerolift in accordance with the intention disclosed in the irrevocable authorities. It remains, of course, to obtain the necessary approval under the Exchange Control Act 1976 to remit that money out of Solomon Islands to Aerolift's designated bank account in Hong Kong, or otherwise as Aerolift may direct. As we read para 4 of the irrevocable authorities, the obligation to obtain that approval lies with Mahoe SI; but, because we are now deciding that the plaintiff Aerolift is solely and beneficially entitled to that money, it would no doubt be open to the plaintiff itself, as between it and Mahoe SI, to make application for and obtain the necessary approval in that behalf if it elected to do so. Alternatively, it may be competent for the plaintiff to compel Mahoe SI to do so as the trustee of the funds in question.
The final matter for consideration concerns a further claim in the action against the first defendant Mahoe SI for damages arising out of its “colluding” through Bergman with the Director of Civil Aviation to ground the helicopter. The Attorney-General as representing the Director was sued under the Crown Proceedings Act as the third defendant in the action for unlawfully grounding the helicopter. As the learned trial judge observed, the claim fell into two parts: (1) for damages up to 12 December 1995; and (2) thereafter until some time in July 1996, when after some delay the helicopter was finally released to Aerolift in response to an order of the High Court.
December 12, 1995, was the date of the second defendant Mahoe NZ’s letter of repudiation of the contract with Aerolift of 28 June 1995, which terminated both that contract and the right of Mahoe NZ to possession of the helicopter under the bailment constituted under the contract, and consequently also of the sub-bailment to Mahoe SI. Until that date, Mahoe NZ was entitled as against Aerolift to immediate possession of the aircraft, and accordingly Aerolift itself had until then no right or title to claim against the Director for damages for wrongly depriving it of possession of the aircraft. We consider that the learned judge was correct in his conclusion on this aspect of the claim.
In relation to the period after 12 December 1995, the decision was that Aerolift was entitled to recover damages for the period from January to July 1996 against the third defendant for negligence and breach of statutory duty on the part of the Director, with the amount of such damages, if not agreed, to be assessed. The Attorney-General has not appealed against this judgment or order. However, after judgment in the action had been given on 14 September 2001, counsel for the parties made additional submissions in writing, which were the subject of a further decision or judgment given on 6 September 2002. In the reasons delivered on that date, the learned trial judge dismissed a claim by Aerolift against Mahoe SI as a tortfessor jointly liable with the Director for damages in the amount awarded against the Attorney-General for the Director’s action in wrongfully depriving Aerolift of possession of the aircraft for the period of seven months from January to July 1996. This claim was dismissed on the ground that Mahoe SI could “not be held liable for something which was not within its duty to discharge”. By that, his Lordship meant that the statutory duty and its breach were exclusively the responsibility of the Director, and nothing, it was said, could “exonerate him from his duties or shift the responsibility” to Chris Bergman or Mahoe SI. His Lordship held that the Director alone was responsible and must bear the consequences of the negligent action and the damages which flowed from it.
Aerolift now appeals against the decision refusing to hold Mahoe SI liable as joint tortfeasor with the Director. Miss Gordon, who appeared as counsel for the Attorney-General on the appeal, supported Aerolift in its appeal on this point. Given the liability of the Director for negligence or breach of statutory duty, it is difficult to see why Mahoe SI was not held jointly liable for the damage sustained by Aerolift as a result. Persons are joint tortfeasors when their shares in the commission of a tort are done in furtherance of a common design. Stated succinctly, there must be “concerted actions towards a common end”: The Koursk [1924] P 140, 151-152 (Bankes LJ). Actions are concerted towards a common end when the parties agree to achieve or attain common purpose and act in accordance with that purpose. For example, searching together for a gas leak using a naked flame is a concerted enterprise, which renders both participants liable for the consequent explosion and damage that follow: Brooke v Bool [1928] 2 KB 578.
At the trial, a considerable amount of evidence was directed to showing that Bergman acting on behalf of Mahoe SI had succeeded in prevailing on the Director to exercise his statutory powers, without proper justification, to order that the helicopter be grounded. It was this action by the Director which led to his being held liable in damages for negligence and breach of statutory duty under the relevant Aviation Act. The judge’s finding on this aspect of the case was that “the only plausible conclusion was that there was collusion between Bergman and the Director to have the Aerolift helicopter grounded and removed from service, so that the Nefteyugansk helicopters could be substituted”. There was, his Lordship found, “a consensus in the minds of Bergman and the DCA to have the [Aerolift] helicopter removed or grounded even when it was obvious there was no basis for it”. The finding, and the evidence in support of it, make it clear that a stage was reached at which Bergman was able to persuade the Director to do whatever he (Bergman) wished in relation to the Aerolift helicopter. In that respect, Bergman and the Director were involved in concerted action towards a common end, which made them each liable as joint tortfeasor for the damages that flowed from their actions. Breach of statutory duty was characterized as a tort in Geipel v Peach [1917] 2 Ch D 108, 114.
It is of course true that Bergman and Mahoe SI were not under the statutory duty which the Act imposed on the Director, and they did not have the authority to exercise his statutory power. It does not follow that Mahoe SI is incapable of being held liable for the damages resulting from their joint actions. A woman who persuades a man to rape another woman is jointly responsible both criminally and civilly for the injury inflicted by him even though she is herself incapable in law and obviously in fact of committing the act involved. It is in any event not easy to see why the Director and Mahoe SI were not jointly responsible in detinue or conversion for the loss to Aerolift resulting from the wrongful seizure and detention of the helicopter between January and July 1996. An attempt by the Director to justify his actions by reference to his statutory powers would necessarily fail in the light of the trial judge’s explicit finding that there was no basis for grounding the helicopter and that the Director had acted ultra vires in doing so. There was therefore no reason in law for refusing to hold Mahoe SI jointly liable for the Director's actions after 12 December 1995 and for the losses sustained by Aerolift as a consequence of the grounding and detention of the helicopter during the period from January to July 1996.
The result is that the appeals should be allowed and the judgment and orders made below should be varied to the following extent:-
Adopting as the starting point the scheme of the orders made on 14 September 2001:
(A) Against the first defendant Mahoe Heli-Lift (SI) Limited:
(B) Against the second defendant Mahoe Sawmills Limited:
(C) Against the third defendant Attorney-General representing the Director of Civil Aviation:
The orders numbered (C)1, (C)2 and (C)3 are not disturbed.
(D) Bergman:
The order numbered 1 is not disturbed.
(E) Perjury:
The orders numbered 1 and 2 are not disturbed.
(F) Funds restrained:
The order numbered (F)1, as amended by order no 1 made on 6 September 2002, is set aside. Order that, until paid out to the plaintiff or as otherwise directed by it, or until further order, the first defendant by itself, its servants or agents or any of them, be restrained from parting with or disposing of the funds referred to in (A) 1 standing to the credit of the first defendant’s account with the National Bank of Solomon Islands.
The first and second respondents are ordered to pay the costs of and incidental to this appeal of the appellant plaintiff.
Lord Slynn of Hadley
President
B. H. McPherson J.A.
G. Ward J.A.
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