[1984] SILR 77

IN THE HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 27

AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD

v

MATOBA MINES LIMITED

High Court of Solomon Islands 
(John Freeman, Registrar) 
Civil Case No. 27 of 1984

10 May in chambers at Honiara
Judgment 11 May 1984

Garnishee order - money paid over to solicitor by judgment debtor - whether to be attached - whether money received as trustee or as stakeholder.

Facts:

The judgment creditor company (“ANZ”) agreed with the judgment debtor company (“Matoba”) to start a mining enterprise together. Under the terms of their agreement a third company were to pay $20,000 into “the trust account of Matoba’s solicitors”, to be paid out to Matoba’s ‘A’ class shareholders “on the commencement of actual mining operation”. The $20,000 was in fact paid by the third company to Matoba, who passed it on to their solicitor. Owing to events beyond the control of either Matoba or the third company, mining never started. ANZ obtained judgment against Matoba in default of defence for approximately $11,000 and applied for a garnishee order attaching that much of the money in their solicitor’s hands.

Held:

The third company entrusted the $20,000 to Matoba’s solicitor as a stakeholder to pay it out under the agreement or return to the third company if that was impossible. So Matoba could not maintain an action against their solicitor for the money, nor ANZ attach any of it in his hands.

Cases considered:

Stumore -v- Campbell & Co. [1892] 1 QB 314 (CA)

Andrew Radclyffe for the Judgment Creditor 
Andrew Nori for the Judgment Debtor

John Freeman: This is an application by the judgment creditors (“ANZ”) to attach a sum of money in the hands of the garnishee, Mr Nori who is solicitor to the judgment debtors, a Solomon Islands Company (“Matoba”). Matoba owe ANZ $10,987.15; Mr Nori is holding $20,000.

Who is Mr Nori holding the money for? It is agreed that, if Matoba could not successfully sue him for its return, then this application must fail. (In such a case the money would not be owed to Matoba, so could not be claimed by ANZ to pay their debt).

The background is shown in Mr Nori’s affidavit. A third, Australian company (“Bass”) agreed with Matoba to start a mining enterprise. It was to be a joint venture, as required by Solomon Islands law. Bass agreed to advance Matoba $50,000, $30,000 to pay their creditors and $20,000 to be paid into “the trust account of Matoba’s solicitors”. The $20,000 was to be paid out to Matoba’s ‘A’ class shareholders “on the commencement of actual mining operation.” This has never happened, owing to certain stipulations made by the Solomon Islands Government.

Bass for some reason paid the whole $50,000 direct to Matoba, who very properly paid $20,000 into Mr Nori’s trust account as agreed; he gave them a receipt accordingly. Now Bass have given him other instructions: if he holds the money on trust for Bass, he must comply with them; if for Matoba, he is liable to pay it back to Matoba on demand.

Counsel for ANZ referred me to the case of Stumore v. Campbell & Co. [1892] 1 QB 314 (CA). There the deceased judgment debtor had put money in the hands of the defendants to the garnishee summons, (his solicitors) for the purpose of paying it out together with a bill of exchange in satisfaction to the judgment creditors. This never happened, as the judgment debtor died before he could execute the bill of exchange. The judgment creditors applied to attach the money, but the Court of Appeal held that the purpose for which it had been placed in the solicitors’ hands having failed, they were bound to return it to the person who entrusted it to them.

So it seems to me that I must ask myself two questions. First, who really entrusted the money to Mr Nori? Was it Matoba, or were they just acting as forwarding agents for Bass’ money? Next, what was the real purpose of handing over the money? Was it to hold on trust for Matoba as their solicitor, or to hold as a sort of stakeholder under the terms of the agreement between Matoba and Bass?

I have no doubt I am entitled to consider the purpose of the agreement in order to decide on the realities of the situation. The purpose was clearly that a trustworthy person such as Mr Nori should hold the money as an earnest of Bass’ desire to do further business with Matoba. He was not however to pay it out until the further business had started. This never happened, owing to events beyond the control of either Bass or Matoba.

I have no doubt that Bass rightly regarded the $20,000 as their money unless and until mining started. It was of no significance that they entrusted it to Mr Nori through the medium of Matoba, nor that the agreement described him as “Matoba’s solicitor (sic)”. The whole arrangement has all the characteristics of a deposit held by a stakeholder, and that is what I hold the $20,000 to be.

It follows that as the purpose for which the deposit was held has become impossible through outside events, Mr Nori would be obliged to deal with it as Bass asks, not to repay it on demand to Matoba. So I cannot make the order of attachment asked for by ANZ.

No order as to costs.