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Galego Resources Ltd v Kalena Foundation Resources Development [2014] SBCA 23; SICOA-CRAC 21 of 2014 (17 October 2014)

IN THE SOLOMON ISLANDS COURT OF APPEAL

1. Following a claim filed on 25 March 2014 seeking specific performance of a Technology and Management Agreement signed 12 March 2014 and a permanent injunction against the Respondent to this appeal against logging, there was heard, inter partes, an urgent application for interlocutory relief. That application was granted and relief ordered against the Respondent.
   
2. On 30 April 2014 there was filed an application to set aside the above orders, heard on 15 May 2014 and granted. It is against that decision the Appellant brings the matter to this Court.
   
3. The reasons for that decision appear at page 10 of the Appeal Book. The application was supported by two sworn statements of John Kilatu who set out the fact that the Respondent had on 30 April 2014 entered into a further Technology and Management Agreement with a different contractor and sought to continue logging utilising a contractor called MSL Import and Export Company Limited. The application was opposed inter alia by a sworn statement from Patrick Kilatu who deposed to being the person responsible for Mare log pond which the Appellant, according to him, have been using without permission or payment. Amongst the various material appears the notion that the Commissioner of Forests has revoked the authority previously granted to the Appellant to proceed with harvesting.
   
4. In his reasons, the learned judge set out what he saw as triable issues. We respectfully agree with his identification of those issues. The Appellant seeks to enforce the agreement and the Respondent seeks to have the agreement declared null and void. There is clearly a serious issue to be tried. It would be wrong at this stage to make any findings as to whether the agreement remains or ever was enforceable and we express no view on that.
   
5. Then it is necessary to consider the balance of convenience. Whilst the learned judge appears to embark on that discussion it is not clear quite what his findings on that were. He concludes by removing the temporary relief and so it must be safe to conclude that he found the balance of convenience with the Respondent.
   
6. If the Respondent is not restrained by order from logging, it seems clear that the new contractor will be required to proceed with that enterprise. Indeed having signed with another contractor the Respondent may well be anxious to resume activity. Whilst the standard Technology and Management Agreement provides for stoppage due to court orders outside of that the Respondent may be in breach of the agreement if the new contractor was not allowed to proceed.
   
7. A failure to restrain would therefore defeat any claim for specific performance of the agreement as the logging by the time of conclusion of this case would have perhaps been completed and, if not, then substantially altered from its present state.
   
8. The object of this agreement as far as the Appellant is concerned was to make a commercial profit. To the Appellant the agreement was nothing more than that. In those circumstances it could well be said that damages will suffice in the event that it is ultimately successful in its claim. To the contrary it is submitted that the Respondent has no asset other than the value of the trees to be harvested. That is amply demonstrated by the material showing cash advances to landowners whilst logging did continue, although most of that material relates to an earlier period of time and an earlier agreement. There is one item that relates to this short period and it is the payment by the Appellant at the request of the Respondent for a Business Licence.
   
9. The March 2014 agreement which is the subject of these proceedings was not the first entered into by these and other parties. After completing the Timber Rights process the Respondent first engaged a company called New World then contracted directly with the Appellant, swopping horses mid-stream to engage MSI then reverting to the Appellant and now again with MSI. The learned trial judge noted the constant change of contractor and expressed the view that such behaviour might cost the Respondent in the long run.
   
10. From the exhibited material it is notable that the total said to have been expended by the Appellant in excess of $5 million. That appears in the sworn statement of Eddie Kong and is said to be set up costs. That amount is disputed by the Respondent not because it appears to them excessive but because they maintain that the Appellant was already in situ. It raises another issue, however, which is the high cost of setting up and clearing out. This has significance in terms of liability of the Respondent in the event that this appeal fails and the Appellant is required to remove its equipment. In the event that the Appellant is ultimately successful in the action in the High Court it will no doubt become an issue that the costs of moving out and moving back in again is a proper cost of carrying out the agreement. Equally if MSL move in at a further costs and then are required to move out MSL might be looking to the Respondent for indemnity for those costs.
    
11. It is also worthy of note that the usual undertaking as to damages is absent from the order set aside in these proceedings. That undertaking was given and remains in force and will be again required if this appeal is successful. The fact of the undertaking, in our view, should be apparent on the face of the injunctive order. It should not be necessary to locate the undertaking itself or the evidence of it from within the court file.
    
12. Damages are said by the Appellant not to be an adequate remedy as the Respondent company and its owners, the landowners, have nothing by way of assets to settle any award. The Respondent submits that there will be assets if logging is permitted. That shows that the value attributable to the timber on the land is indeed the only asset available to the Respondent. As more and more potential costs and claims for damages are incurred by the Respondent the pool available for damages is quickly being dissipated.
    
13. It is the position of the Appellant, if successful, that no logging will take place until the conclusion of these proceedings in the High Court. It is to be hoped that the proceedings will be handled with some expedition in those circumstances. Nothing was said by the Respondent to suggest that the Appellant would not be in a position to comply with any undertaking as to damages.
    
14. In the event, we conclude that the balance of convenience favours the Appellant. Damages would not, in our view, be an adequate remedy as such an order would, more than likely, result in a judgment that could not be satisfied. In those circumstances, this appeal is allowed and the order setting aside the relief granted below vacated. The interim relief is restored with the usual undertaking as to damages accepted and an important part of that order.
    
15. In submissions, the Appellant sought the same orders as were granted in the Court below but the passage of time may have altered the position on the ground. As an example we are now told that the new contractor has already landed material and equipment and that might indicate a need for an order for them to remove material. There is insufficient material to indicate the appropriate order there and so in the order disposing of this appeal we grant liberty to apply for any necessary or consequential orders to a single judge of the High Court. Equally the parties to this appeal may in the course of time determine that their best interests may be served by taking a different course to a contested trial on these matters and liberty should be equally available to seek a variation based on that different course.
    
16. The orders of this Court are therefore as follows:-
    

Appeal allowed

On noting the usual undertaking for damages filed by the Appellant, the Respondent, its contractors, tribesmen, agents, servants, employees and relatives are hereby restrained from landing machineries and equipment and from carrying out any logging activity under the Respondent's A10516 licence on lots 9 and 12 on Kalena Customary Land New Georgia Western Province until trial or further order.

No logging operations to take place on Lot s 9 and 12 of Kalena Customary Land until trial or further order.

Costs of this appeal to be paid by the Respondent to the Appellant such costs to be agreed or taxed.

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Goldsbrough JA
President of the Court of Appeal

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Williams JA
Member of the Court of Appeal

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Wilson JA
Member of the Court of Appeal