IN THE HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 110 of 1993

TOSHIO HASHIMOTO 
AND DAVID HAYWARD

-v-

JOHN SULLIVAN 
AND ROBERT VICTOR EMERY

Hearing: 6th May 1993 
Judgment: 17 May 1993 

K. Fleming Q.C. & I. Molloy for Plaintiffs 
R W. Gotterson Q.C. & G.H. Brandis for the Defendants 

R. Kennedy for Mrs. Tong and Infants Guardian Ad Litem 

(Palmer J.) There are three applications before me for my consideration. The first one is a notice of motion filed on the 30th April 1993 in essence for an order to sanction an agreement entered into between the Administrators of the estate of Sunny Wunson Tong (deceased) and Esthepia International Limited for the sale of the Administrator’s shareholding in Cape Esperance Company Limited. 

The second application is a notice of motion filed by Tosbio Hashimoto (First Plaintiff) and David Hayward (Second Plaintiff) in action civil case no. 110/93 on the 3rd of May 1993. That application in essence sought the following: 

(i) a preservation order relating to the share certificates and related documents representing the shares in Cape Esperance Company Limited. 

(ii) a restraining order against the Administrator’s from transferring or in dealing with the shares in Cape Esperance Company Limited; and 

(iii) in the alternative, that the proceeds of any such sale of the shares be withheld until such trial of the substantive issues in that case. 

The third application is one by way of summons by the Administrators (i.e. Messrs John Sullivan and Robert Victor Emery) for security of costs in Action no. 110/93. That summons was filed on the 6th of May 1993. 

The above three applications are all inter-related. The common denominator is the question of ownership of the shares in Cape Esperance Company Limited. The shares are registered in the names of the Administrators as owners, but the Plaintiffs in case no. 110/93 claim a beneficial interest. They submit that the Administrators hold the shares in trust for them. 

I will deal first of all with the question of injunction, then the application for sanction and finally the application for security of costs. 

The first important point to decide on the question· of injunction is whether there is a serious question or issue to be tried (American Cyanamid Company -v- Ethicon Limited 1975 A.C 396 at p. 407 paragraph G.). If there is none, then the application ends there (See CBS Songs -v- Amstrad, The Times, February 26, 1987). 

I need to be satisfied therefore that the Plaintiffs claim has substance and is real. I am not being asked to resolve conflicts of evidence on affidavit as to facts or decide difficult questions of law which would require detailed arguments and concentrated analysis and considerations. All I need to be satisfied is that the claim or issues raised are arguable and should be tried in the interest of justice. 

Mr. Hashimoto claims in essence that he has a beneficial interest in the shares in Cape Esperance Company Limited currently held by the Administrators. 

There are three grounds advanced for that claim. 

Under the first ground, it was submitted that the origins and the history of the various transactions and the surrounding circumstances showed that the, shares were always intended to be held in trust by Sunny Tong for Hashimoto. 

References were made to the provision of funds for the shares and in particular paragraphs 5, 7, 8, 9, and 10 and 11 of the affidavit of Hashimoto filed on the 6th of May 1993. 

In paragraph 5, Mr. Hashimoto stated that 

"Sunny Wunson Tong, ……. agreed with me (acting on behalf of Zhong Xing and myself) that he would enter into a similar agreement as Dalsol to purchase the said shares in Cape Esperance Company Limited and the said logging camp. Mr. Tong acknowledged to me, and to me on behalf of Zhong Xing, that he would hold the said shares and any other benefits under the said agreement on trust for Zhong Xing and myself." 

This is the first reference to an agreement whereby Hashimoto claims that there was an acknowledgment by Sunny Wunson Tong that when he acquires the shares he will hold them on trust for Zhong Xing and Hashimoto. And in return for that it was agreed that Sunny Wunson Tong would be appointed Managing Director and be paid a salary once logging started (see paragraph 6 of Hashimoto’s affidavit). 

Subsequently on the 4th of August 1987 an agreement was entered into for the purchase of the shares in Cape Esperance Company Limited and the logging camp from Kong Ming Khoo and Kayuken Pacific Limited. That agreement is marked exhibit ‘8’ in the annexure to Hashimoto’s affidavit. 

On or about the same time, (the 4th August 1987) the sum of US $150,000.00 was notionally transferred to Tong and from Tong to Khoo and Kayuken as part payment. The sum of US$150,OOO.OO had originally been advanced by Hashimoto to Khoo and Kayuken through another company owned by Hashimoto, Dalsol Limited for the same purpose of acquiring the shares and the logging camp, but that company had not been granted approval by the Foreign Investment Board. Payment therefore was re-channelled through Sunny Tong, who being a citizen of Solomon Islands did not require Foreign Investment Board approval for the purchase of the shares and the logging camp.

The balance of the purchase price as stated in the affidavit of Hashimoto was paid by Zhong Xing in late 1987. 

In paragraph 10 of Hashimoto’s affidavit he stated that he repaid Zhong Xing the money it had advanced towards the purchase price and in return he Was substituted as a beneficial owner of the property held on trust by Tong for Zhong Xing. He referred to a document, which was a declaration of trust signed by Tong in favour of Zhong Xing and was given to him by Zhong Xing. 

In paragraph 11, of Hashimoto’s affidavit he stated that on informing Sunny Tong that he had repaid to Zhong Xing the purchase price, Sunny Tong informed him orally that he would hold his interest and any benefits under the agreement of the 4th August 1987 on trust solely for Hashimoto. 

On the 25th of October 1990, a trust deed was entered into between, Sunny Tong and David Hayward and Hashimoto. 

In paragraph 11, of Hashimoto’s affidavit he explains why the deed of the 25110/90 were drawn up. 

Learned Counsel for Hashimoto points out that that deed merely reflected the longstanding arrangement between the parties that Sunny Wunson Tong would hold the shares in trust for Hashimoto. The agreement was made way back in 1987 and the history of events, the various transactions are all consistent with that agreement. The intention is so clear that the court should find a trust relationship in favour of Hashimoto. 

These factual submissions are quite persuasive and convincing at this stage but when contrasted with the legal arguments raised by the Administrators, its likelihood of success on its own is greatly reduced. However, when linked with the third ground raised, there would appear to be a substantial or serious issue. I will however deal with that when the third ground is considered. The submission on the first ground however should not be lightly discarded at this stage of the proceedings. In other words despite my view that the possibility of success on a legal point is reduced, they do raise arguable issues of fact which can only be properly ruled upon after they have been duly tested in a trial situation. 

As to the second ground, the Plaintiffs argue that the deed of the 25/10/90 created the trust. Tong became entitled to the shares pursuant to the consent order of the 17/10/90; exhibit ‘E’ of the annexures in Hashimoto’s affidavit. At that point of time, it was argued Tong became a beneficial owner of the shares. He had an agreement which was either enforceable as an order of the Court or by specific performances. 

The consent order of the 17/10/90 arose as a result of a compromise of an appeal reached between the litigants, Sunny Tong, Kayuken Pacific Limited and Khoo. Sunny Tong had obtained judgment against Kayuken Pacific Limited and Khoo in civil case no.44 of 1989 for a total sum of (SI)$640,000.00 plus interest at 15%. It was that judgment in which appeals and cross-appeals had been filed but then compromised and resulting in the consent order of the 17/10/90. 

The relevant paragraphs of the consent order are contained in the schedule to the order. Paragraph 6 reads: 

"The Defendants shall acquire and transfer to the Plaintiff and/or his nominee(s) one hundred percent (100%) of the shares in Cape Esperance Limited within thirty (30) days hereof:" 

Paragraph 7(1) reads: 

"The Defendant warrants that they are able to acquire and transfer the shares referred to in clause 6 hereof to the Plaintiff and/or his nominee(s)." 

And paragraph 12 reads: 

"Should any of the obligations herein not be fulfilled on or before the due date for performance thereof the Plaintiff shall be entitled to enforce performance thereof as if the terms herein contained constitute a judgement of the High Court of Solomon Islands." 

The important issue for determination by the court would be what the true import and effect of paragraphs 6, 7.1 and 12 were. Did they confer a beneficial interest in Sunny Tong? 
To answer those questions one needs to consider the status of the shares in Cape Esperance Company Limited as at 17/10/90. 

As at the 19/10/88, the date on which the High Court gave its judgment in consolidated proceedings No. 69 of 1987 and 206 of 1987 as to ownership of shares in Cape Esperance Company Limited, it was determined that Mr Bartholomew Buchanan owned 200 shares, Sagalu Exim 60 shares and Sam O’Young 40 shares. (see paragraph 67 and 68 of the joint affidavit of Messrs Sullivan and Emery) 

On or about 30th of November 1988 an extraordinary meeting of the Company (Cape Esperance Company Limited) was validly convened and the Articles of Association were amended and the shareholdings reclassified. Buchanan’s shares were reclassified as 200 ‘A’ class shares whilst ‘B’ class shares were issued to Moses Vataragini (600 shares), Vincent Kurilau (400 shares), and Hugh Bennett (400 shares). Sagalu Exim’s shares and Sam O’Young’s were classified as ‘B’ class shares. 

On the 12/10/90 therefore, the shareholdings were as follows: 

Buchanan $200 ‘A’ class shares 
	
Moses Vatanagini $600 ‘B’ class shares
	
Vincent Kurilau $400 ‘B’ class shares
Hugh Bennett $400 ‘B’ class shares
	
Sagalu Exim Limited $ 60 ‘B’ class shares
	
Sam O’Young $ 40 ‘B’ class shares 

The effect therefore of paragraph 6 was for the Defendants - Kayuken Pacific Limited and Khoo to acquire all those shares listed within 30 days and have them transferred to the Plaintiff and/or his nominee(s). 

It is clear that on the 17th of October 1990, the Defendants did not have ownership of the shares in Cape Esperance Company Limited. However, they did undertake to acquire them and have them transferred in 30 days and to warrant that they were able to acquire and transfer the shares. 

The case of The Queen -v- Australian Broadcasting Tribunal, ex parte Hardiman (1980) 144 CLR 13 at 31 was cited by Counsel for the Plaintiffs in support of the proposition that Sunny Tong had an agreement in terms of the consent order of 17/10/90 which could be enforced as an order of the court or by specific performance.

The relevant paragraph quoted is at page 31. It reads: 

"In those cases in which the vendor has been paid the purchase price and has delivered executed and registrable transfer of the shares to the purchaser, clearly the purchaser is the beneficial owner of the shares. Moreover, a purchaser who can by way of spec performance compel a transfer of shares under a contract is a beneficial owner of the shares. A contract for the sale and purchase of shares in a proprietary company such as Bell air Charter, more particularly a contract for the sale and purchase of the entire share capital of the company, is capable of specific performance." 

The Plaintiffs argument in essence is that the consent order of the 17/10/90 gave Sunny Wunson Tong a proprietary right to the shares in Cape Esperance Company Limited. The reason is because Sunny Wunson Tong had an agreement which he could either enforce as an order of the court or by specific performance. 

They also rely on the statement of Windeyer J. in Norman -v- Federal Commissioner of Taxation (1962) 109 CLR 9 at page 26, and I quote: 

"Assignment means the immediate transfer of an existing proprietary right; vested or contingent from the assignor to the assignee. Anything that in the eye of the law can be a chose in possession or a chose in action, can today be assigned, unless it be excepted from the general rule on some ground of public policy or by statute. But a mere expectancy or possibility of becoming entitled in the future to a proprietary right is not an existing chose in action. It is not assignable, except in the inexact sense into which, again to use, Maitland’s words, lawyers slipped when it is said to be assignable in equity for value. 

The distinction between a chose in action, which is an existing legal right, and a mere expectancy or possibility of a future right is of cardinal importance in this case, as will appear. It does not, in my view, depend on whether or not there is a debt presently recoverable by action because presently due and payable. A legal right to be paid money at a future date is, I consider, a present chose in action, at all events when it depends upon an existing contract on the repudiation of which an action could be brought for anticipatory breach." 

They argue that Sunny Wunson Tong had a legal right to be transferred the shares in Cape Esperance Company Limited based on the existing agreement in the consent order of the 17/10/90. 

If Kayuken Pacific Limited and Khoo do not comply with the terms of the Consent Order then Sunny Wunson Tong can sue for anticipatory breach. 

The third case referred to by the Plaintiffs is the case of Shepherd -v- Federal Commissioner of Taxation (1963) 113 CLR 385 at page 391 in the judgment of Barwick C.J. I quote: 

"However, a part of a chose in action can be assigned in equity. In my opinion, if the assignment of a part of the chose in action consisting of the promise to pay royalties is complete, it is effective to vest the appropriate part of the right equitably in the assignee, whether or not the assignment is for consideration or by way of gift. It is only if the don’ needs the assistance of equity to complete the gift, as distinct from enforcing the right that he can be met with the defence that equity will not assist a volunteer. Here, if there was an immediate gift of a proportion of the right to the royalties the donees need seek no assistance. If the deed upon its true construction evidences an intention presently to assign part of the right, the assignment would be complete within the doctrines of equity. If, on the other hand, the deed purports to assign the stated proportion of the royalties as after-acquired property the assignment would be ineffective in equity for want of consideration. The question therefore, in my opinion, is a narrow one, namely, whether upon is true construction the deed purports to assign part of the right to the royalties or of the royalties themselves as after-acquired property." 

What the Plaintiffs seek to show by this authority is that the deed of the 25/10/90 purported to transfer the beneficial interests of Sunny Wunson Tong to Hashimoto. They argue that on the true construction of that deed it "clearly evidences an intention presently to assign" the right of Sunny Wunson Tong to the shares. If that is correct then the assignment is complete within the doctrines of equity. 

The Administrators on the other hand contend that the peculiar facts of this case do not bring it within the principles stated in the case authorities cited by the Plaintiffs. The Administrators referred to the judgment of Windeyer J. in Norman -y- Federal Commissioner of Taxation (1962) 109 CLR 9 at page 24, and I quote: 

"(i) As to attempted assignments of things not yet in existence: As it is impossible for anyone to own something that does not exist, it is impossible for anyone to make a present gift of such a thing to another person, however sure he may be that it will come into existence and will then be his to give. He can, of course, promise that when the thing is his he will make it over to the intended donee. But in the meantime he may change his mind and when the time comes refuse to carry out his promise, even though it were by deed. A court of law could not compel him to perform it. A court of equity would not. Courts of equity never had the objections to all agreements about future interests that, until the seventeenth century, were deeply rooted in the common law. Equity did not share the view that such agreements were void on the ground of maintenance. But things not yet in existence could only be the subject of agreement, not of present disposition. And in relation to promises and agreements, equity has been faithful to its maxim that it does not come to the aid of volunteers. For equity a deed does not make good a want of consideration."

The administrator’s submission is that the agreement in the consent order of the 17/10/90 was mere promises and agreements. As at that date, neither Sunny Wunson Tong nor Kayuken Pacific Limited and Khoo held any beneficial interests in the shares in Cape Esperance Company Limited. As at that date the shares in Cape Esperance Company Limited were held by Buchanan, Moses Vatanagini, Vincent Kurilau, Hugh Bennett, Sagalu Exim and Sam O’Young. The Administrator’s contend that no matter how sure Kayuken Pacific Limited and Khoo were that they would be able to acquire the said shares, in fact so sure that they incorporated it into an order of the court, it still simply did not confer any beneficial interest on Kayuken Pacific Limited and Khoo, so that they in turn could assign that interest to Sunny Wunson Tong on the 17/10/90. According to the words of Windeyer J. the subject matter of the agreement had not yet come into, existence. And in the words of Kitto J. in Shepherd -v- Federal Commissioner of Taxation(1963) 113 CLR 385 at page 396, "the tree, though not the fruit, ...." must be in existence at the date of the purported assignment as "a proprietary right" of Sunny Wunson Tong, "which he was competent to dispose" of. 

The Administrator’s argue that the status of the shares on the 17/10/90 did not change right through to the 25/10/90. Accordingly, they argue Sunny Wunson Tong had no beneficial interest to transfer in the Deed of the 25/10/90. 

The Administrator’s would have a better chance of success in my view had the matter been as simple and clear as that. However, to make things even more complicated, there is submitted by the Plaintiffs a document marked exhibit ‘G’ in the affidavit of Hashimoto which purports to show a copy of a signed minute of a directors meeting of Cape Esperance Company Limited dated the 19/10190. The minutes recorded, (Khoo and B. Buchanan as present. It then stated: 

"The following share transfers were tabled: 

M. Vataragini to S. Tong or nominee 700 "B" Class Shares 
	
V. Kurilau to S. Tong or nominee 500 "B" Class Shares 
	
H. Bennet 10 S. Tong or nominee 500 "B" Class Shares 
	
Sagalu Exim to S. Tong or nominee 200 "A" Class Shares 

together with the new share certificates showing Mr. Tong’s holding of 1,960 shares in the Company. It was unanimously resolved to approve these transfers and to sign the new certificates under seal when they were prepared by Peat Marwick. 

The resignation of M. Vataragini and B. Buchanan (effective from 1/12/90) were tabled and accepted. The Secretary would be instructed to prepare the necessary forms registering these resignations. 

There being no further business, the meeting was declared closed." 

The proof and verification of this document is crucial. This is because it lends support and credibility to the assertion of the Plaintiffs that when the trust deed was executed on the 25/10190 Sunny Wunson Tong had a beneficial interest in the shares of Cape Esperance Company Limited and which by then (i.e. on the 25/10/90) he was capable of assigning to Hashimoto. 

There are other documents contained in the bundle of company papers submitted together as exhibit 3 in which the 3 shareholders, Moses Vatanagini, Vincent Kurilau and Hugh Bennell indicated their intention to dispose of their shares. Together with those letters of the shareholders are the original share certificates of transfers of the shareholders in which it was alleged it seems by Hashimoto that the share transfers were supposed to have been effected. Copies of these are also attached to the affidavit of Hashimoto as exhibit ‘F’. 

Then to add to all these, on the 6/5/93, the second day of hearing of this application, an affidavit of B. Buchanan was filed by the Administrators in which Mr. Buchanan denied any knowledge whatsoever of any directors meeting as recorded in the minutes of the meeting held on the 19/10190.

It is clear to me that there are conflicts of evidence which raise issues of vital importance in which only a full hearing would provide the court with the necessary detailed argument before a final determination can be maturely made. 

I do note that the Administrators have also cited several other cases in support of their contention that the trust deed of the 25110/90 is defective. These include, 

(i) Permanent Trustee Company -v- Sales (1930) 30 S.R (NSW) 391 at 393. 

(ii) Brennan -v- Morphett (190S) 6 CLR 22 at page 30 and 

(iii) Re Adroma pty Ltd (1987) 2 Qd. R. 134 at pp 147 - 149. 

It is not necessary at this stage to go into detail inrespect of these cases. It is sufficient to state that there are triable issues raised on this second ground as well. 

Finally, but not the least, I now turn to the third ground. This was submitted as an alternative submission to the first two grounds. It is argued under this ground that if it is held that the trust property was future property, then Hashimoto provided consideration for it. 

That consideration was the appointment of Sunny Wunson Tong as the Managing Director of Cape Esperance Company Limited and the promise of a salary when logging started. 

The Administrator’s argue that this could not be so because that was past consideration. 

However, it is my view that there is some merit in the submission of the Plaintiffs. According to their version, the agreement was made in 1987 between Hashimoto, Zhong Xing and Sunny Wunson Tong. It was agreed then that Sunny Wunson Tong would purchase the shares in Cape Esperance Company Limited and the logging camp and hold them in trust for Hashimoto and Zhong Xing. Hashimoto and Zhong Xing would then provided the necessary finance for the purchases. In return for this Sunny Wunson Tong would be appointed as the managing director and paid a salary when logging commenced. This is the agreement of which the proof of is crucial. 

The first attempt by Sunny Wunson Tong to acquire the shares in Cape Esperance Company Limited failed. I do not need to go into the details of that as it is adequately set out in paragraphs 61 - 68 of the joint affidavit. It is the second attempt by Sunny Wunson Tong to acquire those shares through the consent order of the 17/10/90, the purported transfers which were not fully completed (exhibit F in Hashimoto affidavit), and the purported Directors meeting of the 19/10/90 which it is being suggested by the Administrators here it seems that there was no consideration. However, it also appears to me that the Plaintiffs are making a distinction between these arrangements which were made between Sunny Wunson Tong and Kayuken Pacific Limited and Khoo for the acquisition of the shares in Cape Esperance Company Limited! The agreement between Hashimoto and Sunny Wunson Tong as alleged by Hashimoto was made in 1987 and is extant. The consideration has already been provided and accordingly the Administrators hold the shares in trust for Hashimoto. There is also another matter which perhaps should be addressed too then, and this is the effect of the death of one of the parties to that agreement, because it was while Sunny Wunson Tong was it seems in the process of acquiring these shares that he was murdered.

It is my view therefore at this stage too that there is merit in the submissions of the Plaintiffs on the third ground. 

In summary, the claims of the Plaintiffs is not frivolous or vexatious, neither can it be said that the chances of success are so remote that there an only be a hope. There is substance and merit to their claim which is serious enough and should be tried. 

On the submission of illegality raised by the Administrators that be shortly disposed of. If Hashimoto and Zhong Xing were involved in an illegal arrangement contrary to the provisions of the Foreign Investment Board Act (1984) then surely Sunny Wunson Tongs involvement with them must be tainted. The agreement that was entered into then by them in 1987 and the subsequent arrangements entered into in pursuance of that would all bear that taint. This was what was referred to by Mr. Flemming in his submissions. The subsequent actions of the Administrator’s are not alleged to be illegal. The taint had already been in existence right from the start and although the Administrator’s actions are proper they are still dealing with tainted property. This is the substance of Flemming’s submissions on that point. 

I have considered the remaining submissions of the Plaintiffs and the authorities relied on. They do also raise an arguable issue and should be brought on for trial. 

The crucial questions at this stage still remains. Should an injunction be imposed restraining the sale or transfer of the shares; and secondly, a preservation order be made for the shares? Having established that there are triable issues, the next question to consider is the adequacy of damages. 

Mr. Hashimoto states at paragraph 29 of his affidavit that he will suffer irreparable damage if the shares are sold. That damage he refers to more specifically in paragraph 30 of his affidavit as a monthly income for the next three years or so once logging commences, of about $200,000.00. And if the licence is extended then he stands to lose yearly incomes in terms of profits, of millions of dollars. 

Clearly, the Administrators of the estate do not have that amount of money to pay as damages and that the value of the estate is put at approximately $800,000.00 - $900,000.00 (in SI Currency). 

The Administrators on the other hand stand to lose out on a deal that they have entered into for $1.55 million (in US currency) if the injunction is granted. 

The Plaintiffs have declined to give any undertaking as to damages for the injunction but were prepared to do so inrespect of having all proceeds in the sale of the shares with-held. 

In the text by Burns, on "Injunctions - A practical Handbook", The Law Cook Company Limited 1988, referred to by Mr. Gotterson, at page 18, it states very clearly and I quote: 

"It is the usual practice of the court to require that the usual undertaking as to damages be given as a condition of the granting of an interlocutory injunction. ……The Court has no power to compel the Plaintiff to give an undertaking as to damages but, if it is not given, an order for an injunction will not, in practice be made." 

In Newby -v- Harrison (1861) 3 De G.F. and J. 287 at page 290 Turner L.J. stated: 

"The true principal appears to me to be this, that a party who gives an undertaking of this nature puts himself under the power of the court, not merely in the suit but absolutely; that the undertaking is an absolute undertaking that he will be liable for any damages which the opposite party may have sustained, in case the count shall ultimately be of the opinion that the order ought never to have been made." 

It is my view that in this particular case an undertaking is a pre-requisite, and where it is not given, and there being no satisfactory explanation or reasons given, the injunction should not be granted. This is especially so where the Plaintiff - Hashimoto resides outside the jurisdiction of this country, and has stated under oath that there is no substantive assets in this jurisdiction. 

The giving of the undertaking seeks to ensure that the status quo is maintained at an even keel pending final determination, and that whatever losses are incurred because of the injunction for instance, can and will be compensated for, if not fully, at reasonable terms. By not giving an undertaking, it leaves the Administrators at a very disadvantageous, position.

The question of the value or worth of an undertaking is of importance when the Plaintiff resides outside the jurisdiction of this country. 

In Harman Pictures N.V -v- Osborne and Others (1976) l W.L.R. 723 at page 739 paragraph C - D. Goff J. stated: 

"I must, however, impose terms for the protection of the defendants, and that is indeed conceded by Sir Andrew. As the Plaintiffs are not within the jurisdiction, I must require them to give security towards implementing any liability they may incur under their cross-undertaking in damages. It is impossible to quantify that at this stage, but they have offered $10,000, which is the figure I had independently conceived in my own mind. The injunction will therefore be conditional on the plaintiffs giving security in that amount to the satisfaction of the master within 21 days or such further time, if any, as the parties may agree or the master direct. Further, the defendant will have liberty to apply to discharge the injunction at any time." 

It is quite clear that the Plaintiffs will have to provide sufficient security for their undertaking. Perhaps that may have been a reason why no undertaking was given for the injunction. 

They are however, prepared to give an undertaking as to having the proceeds of sale of the shares in Cape Esperance Company Limited to be deposited in an interest bearing deposit account in the joint names of the Plaintiffs and Defendant’s solicitors. I will turn to this as the acceptable alternative arrangement. 

Under this ground the Plaintiffs seek to have proceeds of sale of any of the shares in Cape Esperance Company Limited to be invested in an interest bearing deposit in the joint names of the Plaintiffs and Defendants solicitors and that the interest be re-invested with the principal from time to time. 

The important question that is raised along with this is whether the Court should sanction the agreement entered into on the 29/4/93 between the Administrators and Esthepia International Limited for sale of the Administrators’ shareholding in Cape Esperance Company Limited. The application for sanction is contained in another separate Notice of Motion filed in civil case No. 32 of 1991 by the Administrators on the 30/4/93. 

It would be appropriate if I consider first this notice of motion before considering the issue raised in ground 3 of the Notice of Motion filed in civil case 110/93. 

The importance of the shares in Cape Esperance Company Limited and the interest engendered relates to a licence to fell trees and remove timber granted to Cape Esperance Company Limited, licence No. Tim/2/5/81 and issued on the 10/6/81. It is currently valid up until the 31st of May 1996. 

The prices of logs recently have gone up due to a shortage of supply in the world markets. (see paragraph 16 - 210) (joint affidavit). The market prices for logs now range from $100 (US) to $300 (US) cubic metre. Prior to this, the prices were around the USD 70.00/cubic mark. The company also has a Timber Rights agreement convening the whole of Ward 1 Guadalcanal’ 

From the report prepared by a Senior Forest Officer from the Ministry of Natural Resources (Exhibit C in joint affidavit of Messrs Sullivan and Emery) the actual forest cover over Ward 1 is estimated at 42,993 hectares. The overall volume per hectare 011 commercial timber species is estimated at 59 cubic metre per hectare. At an approximate price of say $100 (US)/cubic metre X 800,000 cubic metres of extractable timber, a rough figure of $80,000,000.00 can be produced from that area alone in total. This is the reason why the shares in Cape Esperance Company Limited are of great importance and interest. 

How did the Administrator’s become involved in the acquisation of the shares? 

It seem that Sunny Wunson Tong was in the process of acquiring the shares when he was murdered on the night of the 2nd of February 1991.

At the time of his death, the consent Order of the 17th October 1990 bad already been signed and endorsed by the High Court. This order in turn originated from a judgment order obtained by Sunny Wunson Tong in civil action 44/89 against Kayuken Pacific Limited and a Khoo. 

On the 21st of February 1991 Hashimoto was substituted as Plaintiff in lieu of the deceased in Action no. 44 of 1989. 

On the 21st of February 1991 the Administrators applied to the court to have that Order set aside. They were successful and were then substituted as Plaintiff in Action No. 44 of 1989. 

On the 25/3/91, the Administrators entered into a deed with Kayuken Pacific Limited and Khoo. Clause 9 (a) of that deed stipulated that: 

"The Defendants shall procure duly executed and stamped transfers in registrable form in favour of the Administrators of all the issued capital in Cape Esperance Company Limited." 

That deed is marked exhibit ‘I’ in the joint affidavit of Messrs Sullivan and Emery. 

Subsequently, share transfers were duly executed in favour of the Administrators. On the 9th of April 1991 a meeting of the directors company was convened and the share transfers approved and registered. As from that date, the Administrators effectively took control of Cape Esperance Company Limited. 

Meanwhile, Mr. Hashimoto intended to appeal against the judgment of the High Court in action No. 44/89. But before that was completed, on the 25/3/91 a Deed was entered into with Hashimoto by the Administrators in which Hashimoto ceded legal control of the shares to them. That deed is exhibited ‘S’ in the joint affidavit of Sullivan and Emery. 

Paragraphs 13 and 14 of that deed read as follows: 

"The Administrator’s covenant with Hashimoto that they shall not sell, encumber or otherwise deal with the said shares prior to the settlement of all disputes between the Administrators and Hashimoto without first giving 14 days written notice to Hashimoto of their intention to so sell, encumber or otherwise deal with such shares. 

14(a) In the event that it is determined whether by agreement or count proceedings that Hashimoto has a beneficial interest in the said shares or part thereof, the Administrators shall transfer those shares to which Hashimoto is beneficially entitled to Hashimoto or as he directs, subject to Hashimoto paying all stamp duty on any such transfer. 

(b) In the event that such transfer of shares results in Hashimoto gaining control of Cape Esperance Company Limited, the Administrators shall cause such directors to be appointed as Hashimoto shall direct." 

The question as to whether Hashimoto has a beneficial interest in the said shares has not yet been determined. But despite this the Administrators decided to give Hashimoto a 14 days notice of their intention to sell. That notice was issued on the 22nd of June 1992 and is marked exhibit ‘T’ in the joint affidavit of Sullivan and Emery. 

On the 29th April 1993, the Adtor’s entered into a conditional agreement to sell the shares in Cape Esperance Company Limited to Esthepia International Limited (Esthepia). 

They now come to this court for authorisation of that sale.

The first reason given is that unless the timber licence is worked soon, there is a grave risk that it will not be renewed and will be irretrievably lost. 

In paragraphs 120 to 122 of the joint affidavit it was pointed out that the Commissioner of Forest had threatened to have the licences cancelled, and was only stopped by an injunction obtained from this court. Since then the Commissioner of Forest has been most co-operative with the Administrator’s efforts to sell the shares. The Commissioner of Forests concern is that the logging operations should commence as soon as possible. The current co-operation enjoyed with the Commissioner of Forest should not be taken lightly and should be taken advantage of. 

The second reason advanced was the current co-operation of the Customary Landowners to the proposed sale. 

In a statement dated the 5th of May 1993, the customary landowners in Ward 1 expressed their reservations and preferences as to which company should carry out logging in their area. At page 2 of that statement, paragraph 4 it read: 

"Should a company other than SITE (Solomon Islands Timber Exports) be granted the Cape Esperance license, all landowners living within the concession will refuse permission for that company to operate on their land."

Paragraph 5: 

"In all the foregoing, you will readily understand that we do not wish to be difficult or unreasonable but we must protect our interests and ensure that we earn much needed income from the resources that are properly ours." 

On the evening of that same day, (Le. the 5/5/93) Messrs Emery and Sullivan held a meeting at the Hibiscus leaf Haus with the same landowners (with most of them) who had signed the first statement. 

Mr. Sullivan gave evidence in which he stated he explained as clearly as he could the reasons why the offer of SITE were not accepted, and why they bad accepted to sell to Esthepia, and he explained to them some of the benefits that the landowners stand to gain, especially in the proposal of Esthepia to set up a Veneer Plant. The meeting lasted for a good 3 hours. After that meeting it seems that the landowners were convinced of the benefits and advantages that could be opened up to them. They then signed a document (exhibit 2) in which they expressed their support for the sale. 

It is important to bear in mind that the co-operation of the landowners is crucial to any logging and timber licence that is granted. The fact that a timber licence is granted does not necessarily give an automatic right to log in the licence area. The area in which the licence has been granted is customary land. The agreement and cooperation of the customary landowners is something that logging companies should not take for granted. At this stage in the judicial development of settlement of customary land disputes - such disputes can hold up logging for years whilst the question of ownership are being sorted out through the available avenues of settlement. The mere fact that a judgment is given in favour of a particular tribe or individual and secured does not guarantee that the same area of land will not be opened up again to litigation by another tribe claiming ownership rights or different customary ownership rights over the same land. One only needs to look around the country to see many instances where logging licences are being held up because of fresh challenges to ownership over the customary land areas. The elaborate procedures set out under the Forest Resource and Timber Utilisation Act are supposed to settle that but in practice it does not seem to do that well. 

There is no evidence before me whatsoever that if the shares should be transferred to Mr. Hashimoto that he will receive the same co-operation from the customary land-owners. Perhaps that is a matter that Mr. Hashimoto does not want to apply his mind to now but the cooperation of the landowners is something not to be taken for granted. 

The question of what happens next is always a relevant consideration in such logging cases. 

The third reason advanced by the Administrators is that the terms of sale accepted by them is the most advantageous offered. The various offers that were made and considered by the Administrators were mentioned in paragraph 27 - 45 of the joint affidavit. The reasons why Esthepia’s offer was preferred and subsequently accepted were explained in paragraphs 133 - 147 of the joint affidavit. The reasons were as follows: 

(i) The net return to the estate will be the highest not withstanding it does not represent the highest gross offer; 

(ii) all the funds are expected to be obtained by October 1993 - the shortest period as compared with all other offers received. 

(iii) The sanction of the offer by the court will result in a non-refundable deposit of USD 155,000.00. So even if the purchaser did not get Foreign Investment Board approval, the estate will benefit from that deposit. 

(iv) It is more likely that Esthepia will obtain Investment Board approval. One of the things that the purchaser wants to set up is a veneer plant. 

(v) If the sale is delayed then it is unlikely that they will attract a similar price in the future. The reason is as pointed out earlier, that the licence is only valid up to May of 1996 and that the longer the delay the shorter the period of the unexpired licence, and it may not be as attractive now if one considers the likelihood that the licence may not be extended. Also it is possible that the factors causing the rise in price may change (see paragraphs 18-21 of the joint affidavit) and cause the value of the shares to be valueless. This is to be contrasted with the view of Mr. Hashimoto in which he said that the log prices should hold for the next 5 - 6 years. 

(vi) From the sale price a sum of USD 96,875.00 will be paid to Sagalu Exim Limited (see paragraphs 48-53) for the basis of the payment). The payments of such a sum will filter through to the original Solomon Island investors in the company. In the agreement signed on the 5th of May 1993 between the landowners and the Administrators clause 6 contemplated a further filteration of the funds through to the landowners. The Administrator’s also point out in paragraph 140 of their joint affidavit that Dettke and her family have conceded to them on the 20th of April 1993 their right to sell their shares. They did however point out that there are reasonable prospects that an agreement can be reached with Esthepia as to local milling of the timber. It should be pointed out here that Dettke and her family do consist of an influential group whose co-operation and agreement is something that should not be taken for granted. Then there is also the cooperation of the Guadalcanal Provincial Government that needs to be appreciated. Where the landowners are in agreement about such logging operations, then usually the Provincial Government’s also cooperate. 

(vii) Mrs. Tong and her family, the beneficiaries to the estate stand to benefit from the sale if the eventual outcome of the hearing is in favour of the Auditor’s. 

(viii) The requirements of the Commissioner of Forest will be met as has been slated. The Commissioner of Forest wants the logging to operate as soon as is practically possible. The Government and the landowners will stand to benefit at the current log prices. 

(ix) In paragraph 145 of the joint affidavit the Administrators state that full disclosure has been made to the purchaser and they are prepared to accept all the risks attached to the future operation of the concession. 

(x) The Administrators have incurred large costs in negotiating a sale. 

On the other side of the coin, Mr. Hashimoto however argues that if the court sanctions the sale, then Mr. Hashimoto will lose any chance that he may have of recovering his profits. 

I take note that Mr. Hashimoto has not in any significant way challenged the reasons for the sale of the shares by the Administrators. He has not shown that the sale price negotiated by the Administrators is inadequate or not acceptable. The Administrators did point out in paragraph 93 of their joint affidavit that Hashimoto told Mr., Emery that he should consider selling the shares for between $400,000.00 and $500,000.00 (US). 

He has also not shown that he would receive the same co-operation as the Administrators have obtained from the various interested persons in the logging operation; of vital importance is the cooperation of the landowners, Dettke and her family, the Commissioner of Forests, and the Guadalcanal Provincial Assembly. 

There is also a significant matter that was not mentioned in the reasons of the Administrators but which I am of the view is an important consideration. In 1987, Mr. Hashimoto sought to obtain Foreign Investment Board approval to purchase the shares in Cape Esperance Company Limited and a logging camp. The vehicle for that arrangement was to be a locally incorporated company, Dalsol Limited. That application was rejected by the Foreign Investment Board. 

In Mr. Francis Ramoifulia’s affidavit, filed on the 6th May 1993, the current secretary to the Investment Board of Solomon Island (formerly the Foreign Investment Board), he states at paragraph 3 and I quote: 

"An application for the Board’s approval was made by Dalsol Limited in 1987. The Board’s records show that Toshio Hashimoto had an indirect interest in Dalsol Limited. That application was rejected by the Board." 

and in paragraph 4:

"No further applications for such approval have been made by Mr. Hashimoto or any company in which he has had a declared interest and no such approvals have ever been given by the Board." 

The reason for that rejection is not stated, but I would have thought that it would have been in the interest of Mr. Hashimoto to state what that reason is and explain why he now stands in a better position to obtain Investment Board’s approval 

He already has what one might call a red mark against his name. He has not provided any suitable explanation. I am therefore of the opinion that it is not likely that he will get foreign investment approval. For this reason and all the reasons enumerated by the Administrators and considering the submissions of Mr. Hashimoto, I am of the view that the sale of the shares is in the best interest of all the parties. 

I am satisfied I have the authority to sanction the sale of the shares. In exercising that authority I must weigh carefully the conflicting interests of Hashimoto and David Hayward as against the duties of the Administrators to the beneficiaries and the estate. 

At this stage of the proceedings it is the courts duty to ensure that at the end of the day no matter what the outcome of the case should be, the parties should be placed in a position where had the judgment gone in their favour they would be compensated adequately for any loss reasonably sustained. 

The case advanced by Hashimoto is that he stands to sustain irreparable damage in terms of profits that he could have obtained through working the logging concession, if the sale is sanctioned. With due respects, that claim is highly questionable even at this stage of the proceedings. There are serious obstacles to overcome on that submission alone, (the reasons have already been given). The minimum loss if any is the money that he alleges he has expended for the purchase of the shares in Cape Esperance Company Limited and the logging camp, plus costs incurred in the application and interest. If he wins the case at the end of the day he should get at least a million US dollars. I hardly regard that as irreparable damage. But if an injunction is imposed and the Administrators should win the case, they would have lost out on a deal of USD 1.55 million. They may not get the same purchase price for the shares!, or the licence may have been revoked, the landowners frustrated and therefore uncooperative to any further deals. The Investment Board also would be reserved about any foreign investment involvement, and the shares would be practically valueless. There being no undertaking by the Plaintiffs, the estate will stand to lose much and the beneficiaries deprived of what would have been a valuable asset. 

But if the sale is sanctioned, and the Administrator’s should win the case, then the Plaintiff should be in a position to meet any damages for loss on his undertaking. 

The Administrator’s have acquired the shares for value. They are entitled therefore to deal with the shares as they consider fit and proper. If the court should hold that there is a trust, then the proceeds should be paid to Hashimoto. 

For the reasons stated I am satisfied that it is in the interest of justice that the sale should be sanctioned. However, the proceeds of sale are to be withheld on the undertaking as to damages provided by the first Plaintiff. Hashimoto does not reside in this jurisdiction and therefore any undertaking given will be valueless. On the authority of Harman Pictures N.V -v- Osborne and others (1961) W.L.R 723 at page 739 I will require that the first Plaintiff must provide security in the form of a bank guarantee or cash deposit from one of the commercial banks in Honiara to the value of AUD 350,000.00. This is to be lodged within 21 days from today. 

As to the application by summons filed on the 6th of May 1993 for security for costs, I am of the view that the security required for the undertaking in the sum of $350,0000.00 (AUD) would suffice to cover that. 

On the question of costs, I direct that the Administrator’s costs incurred in the negotiations, advertising and securing of the sale of the shares be paid out from the proceeds of sale of the shares, including to days costs. 

The costs of the Plaintiffs however are reserved. All further costs hereafter will be costs in the cause. 

(A.R. Palmer)
JUDGE