High Court of Solomon Islands
(Palmer J.)
Civil Case No.: 1o.: 144 of 1996
Hearing: 30th July, 1998
Judgment: 3rd February, 1999
A. Radclyffe for the Plaintiff
Sol-Law for tfendant
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PALMER J.:
Island Construction Management Limited (the “Plaintiff”) is a company
engaged in sawmilling and logging. In early 1995
it entered into a
sub-contract with Mubu Sawmilling (a firm), to extract logs for mill
processing or export.
Mubu Saing (the Licensee) held a valid Milling Licence No. Tim >Tim 3/173
(see Exhibits 14 and 15). This is not in dispute. This entitled the
Licencee to mill timber from logs felled within the area specified in the
Licence
(see Clause 2 of the Licence). A footnote in the Licence [see
page 2, para. (iii)] authorised the Licensee to export a quota of 20,000 m3
of logs per year.
The Plaintiff’s ation under the sub-contract was to fell and extract
logs and transport them to the Mill site for
processing and or export.
The Defendant on the other hand runs a helicopter serwhich included
providroviding hire of heavy helicopters for haulage
of logs in the logging
industry (see Exhibit 43).
THE TIMBER MILL LICENCE:
A
number of points to be noted about the Milling Licence. It was issued on 9th
February 1994 for one year and renewed again for another year on 9th
February 1995. In April 1994, this Court ruled in Forest & Another v.
Mahlon Ali & Attorney-General, Civil Case No. 1/94, judgment delivered
12 April 1994, that it was unlawful for the holder of a Milling Licence to
fell
trees and remove them for milling without a valid timber rights
agreement. The footnote therefore which sought to authorise
the export of
logs under the said licence became invalid if not from
12 April 1994,
with effect from the date the orders of the Court in Forest’s Case
became known. Towards the end of 1994 (8 months later), it should have
been common knowledge in the logging industry, that the footnote
for what it
was worth, was invalid without a timber rights agreement duly approved by
the Minister. If not, by the time
the Milling Licence became due for renewal
on 2nd February 1995, [some ten (10) months later] there
would have been no basis in law whatsoever, for the inclusion of paragraph
(111)
of the said footnote.
The Commissioner of Forests had been a party to the Forest & Ano; Another v.
Mahlon Ali Case (ibid) and therefore would have known (ignorance is no
defence to the law) that unless a timber rights agreement exists for
the
felling and removal of trees, a milling licence did not authorise the same.
In view of his responsibility in policing
the Timber and Forest legislation,
he would have been one of the first persons to have known about this
decision and
its effect on the milling licences issued. Unfortunately the
manner in which this has been dealt with has been quite disappointing;
if
not bordering on carelessness. The inclusion of paragraph (iii) to the
footnote in the said Milling Licence of Mubu
Sawmilling for instance, should
never have been done, especially at the time the licence came for renewal.
This with
respect could only have caused confusion to the Licence holder.
<
EVENTS LEADING TO THE SIGNING OF THE AGREEMENT BETWEEN THE PARTIPARTIES:
In May 1995, the Managing Director of the Plaintiff Company, Mr. Lennea
entered into negotiations with the Managing Director
of the Defendant, Mr.
Grouse, for possible hire of a heavy helicopter to lift logs at Mono from
the stump to the log
pond or camp. This was to be done pursuant to the
sub-contract the Plaintiff had entered into with Mubu Sawmilling. The
Plaintiff relied on Mubu’s Milling Licence in turn for the milling and
export of the logs. It is also pertinent to note
that Lennea assumed that
whilst Mubu Sawmilling did not have a felling licence it was still alright
for the landowners
themselves to fell their own logs and supply them to the
mill for processing or for export.
On 4th May 1995, Lennea wro the Defendant and expresspressed his
intentions as follows:
“Dear Sir,
se accept this letter as a follow up to our discussions tods today regarding
(sic) our request to enter into negotiations
with yourselves for the
helicopter extraction of logs for our operation in Mono Western Province and
other locations
through out the Solomons where ICM is involved in lumber
milling.
We request a contract price per cubic meter from the stump to p to the dump
point.
Also give us a realistic time frame, accommodation requirements, minimum
guarantee requirement terms of payment etc. “[See
Exhibit “2”]
Grouse responded by letter dated 15th May, 1995 outl outlining his
requirements (see Exhibit “3”). At paragraph 2 of his letter he pointed out
that both of
their Ka 32 helicopters would not be available until about
early July. He also pointed out in paragraphs 3 and 4 that it would
take
about six weeks after receipt of initial payment under the terms of the
Agreement before the Helicopter could begin
operations on site. It would
first have to be brought over to Honiara before it could be delivered to the
Plaintiff to
commence operations at Mono. I quote in full the relevant
paragraphs as this is important in understanding the time frame in
which the
Helicopter was expected to be made available for delivery on site in
Honiara.
“The PNG programme, since the time of writing, has been bron brought forward and
both our available Ka 32’s are now under
contract until early July. It is a
little unfortunate that our negotiations could not have been concluded
earlier however
the longest lead time task is the placement of the supply of
helicopter fuel, fabrication of the fuel tank farm and its shipment
to site.
As helicopter fuel is the responsibinsibility of this company, together with
consequent contractual obligations to the
fuel supplier for a schedule of
payment, we are unable to execute the fuel contract until the Head Agreement
between
ourselves is executed and the initial payment satisfied. The fuel
company states that 4 -5 weeks will be required for the fabrication
of the
tanks and reticulation pipe work and a further 7-10 days for shipment from
PNG to site. The company tanker must
also be scheduled correctly for the
first unloading of fuel into the installation, this has been tied in with
your requirements
for the delivery of diesel fuel by the same vessel.
Different seaside manifolds and pipework for diesel and Jet A1 are
necessary, adding time for fabrication, however the cost of diesel delivered
in this manner is greatly reduced.
The fuel installation is expected to be in servicervice at the same time as the
helicopter will be available thus enabling production to begin about six
weeks from the receipt of initial payment under the terms of the Agreement,
contingent upon the fuel supplier meeting the fuel installation delivery and
certificate schedule.”
(Emphasis added)
The time frame indicated in the letter and reflected in the athe agreement
subsequently signed between the parties, was
about six weeks for the
Helicopter to be brought over and delivered at Honiara from Papua New
Guinea. The agreement executed on 16 May
1995, (Exhibit “I” and hereinafter
referred to as “the Agreement”) reflected that time frame.
TERMS OF THE AGREEMENT:
The Plaintiff seeks to rely on the terms of the Agreement. The Agreement in
essence required the provision of a Ka 32
helicopter (hereinafter called
“the Helicopter”), for the haulage of logs primarily at Mono, but there is
provision for
the helicopter to be used at other locations throughout
Solomon Islands where the Company might also be involved in timber
milling.
See Clause 3(c), of the Agreement which states as follows:
“During the term os agreement the Charterer mrer may position the helicopter
to any of its work sites within Solomon Islands
and bear the costs of such
positioning.”
This is consistent with was stated in the letter of 4th May,
1995 1995 (Exhibit “2”). Clause 2 of the Agreement refers to the date of
commencement and termination:
“The hiring created by this agreement shall commence on thon the 15th day of
July 1995 and shall terminate one year later. Provided that both parties
agree, an extension of this hiring may be undertaken by the
Charter giving
written notice to the Company three months prior to the termination date of
this agreement.”
[Emphasis added]
It is importantear in mind that the date fixed for commencement of
h hiring on 15th July 1995 took into account the time period of
about six weeks indicated in the letter of 15th May 1995 (Exhibit
“3”), when the helicopter would be made available; that, provided the
initial payment of USD37,000.00
stipulated under Clause 12(b) was paid
within seven days of signing, the Helicopter should be ready for delivery in
Honiara
on or about 15th July, 1995. Unfortunately, there was a
delay in the payment of that initial sum. Instead of payment being made
within
7 days after signing, it was paid on or about
7th
July 1995,
some six weeks after the due date.
EFFECT OF DELAYED PAYMENT:
Clause 12(b) of the Agreement not only required the paymenthe sum of
USD37,000.0000.00 within seven days of signing, it
also made the Agreement
conditional upon payment of the said sum. This meant the Agreement was
dependent upon payment of the said sum. That is, its existence or
enforcement depended upon the payment of the said sum within the stipulated
time period. Non-payment of the said sum
within the stipulated time period
amounted therefore to a breach of an essential term of the contract and
which entitled
the Defendant to treat the breach as a repudiation which
discharged it from further performance of the Agreement and to sue
for
damages.
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The evidence however as adduced did not su in any way that the
Defendant sought to exercise its right to have the
Agreement terminated for
the breach. Rather it showed conclusively that the Defendant affirmed
the contract by commencing action to have the helicopter ready for shipment
and delivery to Honiara.
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There was ho a vital time factor which affected the Agreement. It was
was
subjected to delay. By delaying payment, the
time period within which the
helicopter would be delivered was also subjected to delay. According to the
unchallenged
evidence of Grouse, mobilisation of the helicopter for delivery
commenced only after payment had been received on or about
14th
July 1995. Note payment was made on 7th July 1995. This meant
clause 2 of the Agreement couldn’t be compiled with in the circumstances;
that is for hiring to
commence by 15th July 1995. It has not been
challenged in evidence that the particular helicopter identified for the
purpose was located
at the said time in Singapore. Also that it would take
time for Grouse to sort out crews that were available and qualified
and to
make other necessary payments towards their pay and other charges. During
this time, he had gone to PNG to have
all these matters sorted out. By 18th
July 1995, (11 days after payment of the mobilisation charges) the
Helicopter was positioned in Papua New Guinea ready
to be shipped to Solomon
Islands.
respectful view the answer must be no. The date of commencmmencement of
hiring fixed for 15th July 1995 must be viewed within the context
of the whole Agreement, in particular Clause 12(b). It had been envisaged
that the payment of USD37,000.00, would go towards assisting the Defendant
on its mobilisation costs for delivery of the helicopter
in Honiara, but
that this would be refundable. The date of commencement accordingly had been
fixed to take into account
that mobilisation period and when the helicopter
would be made available in Honiara, assuming that payment was made on time.
The last date for payment of the said sum was 23rd May 1995. Had
payment been made on time, there would have been more than sufficient time
available for the helicopter
to be prepared and made ready for delivery at
Honiara. This is entirely consistent with what had been previously stated in
the correspondences between the parties.
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The Plaintiff therefore knew that the helicopter would have to be
transported from PNG and that it would take some 6-8
weeks before it could
be delivered in Honiara. The terms of the contract had been so worded to
take that time period
into account. By delaying payment, the date of
commencement was subjected to further delay. So even if the Plaintiff were
to insist on performance of the contract by that date, it would have been
physically impossible for the Defendant to comply.
THE LEGAL EFFECT:
In my respectful view what actuaook place was a variation; ion; instead of a
breach. The date of commencement was varied
by consent of the parties. If
not it is to be implied in the Agreement by the conduct of the parties.
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THE EVENTS AFTER 15TH JULY 1995:
t happened thereafter? The Agreement having been varied by d by the consent of
the parties so that commencement date was
now deferred, it is not in dispute
Grouse proceeded to mobilise the helicopter and by 18th July
1995, it had been brought over to Papua New Guinea (“PNG”) ready for
shipment to Honiara. What happened thereafter
is crucial to this case. On
the same date, an order was obtained from the High Court by the Plaintiffs,
John Havea and
Ivan Maike in Civil Case No. 178/95 against inter alia, Mr.
Lennea, (the Sixth Defendant), restraining him from entering Mono or
Stirling Islands to carry on the felling, extraction or sawmilling of
any timber (see Exhibit “4”). On or about the same day, word somehow reached
Grouse in PNG about that injunction. This news had a drastic effect on the
preparations and arrangements for shipment
undertaken by Grouse. In
evidence, it was made abundantly clear to this Court that he was not
prepared to allow the helicopter
to be used in operations which were
unlawful and not in compliance with the laws of this country. Grouse viewed
the imposition
of the injunction with graveness; that to proceed with the
Agreement at that point of time could result in him participating
in some
unlawful activity in Solomon Islands.
THE 1995 DIARY BOOK OF GROUSE:
Exhibit “31” is the 1995 Diary Book of Grouse. It contains the recorrecords and
notes of daily events which Grouse habitually
enters into his diary, if not
at the same time, in the evening of each day. At the entry for 18th
July 1995, the following was recorded:
“Ian Robertson called re my fax higx highly pissed off at contents especially
Prok Bank Guarantee status. I said that
my news was current and that the
injunction with it would be served shortly.”
This entry was consistent with the fact that an injunction had been obtained
from the Court on the same date. In the entry
for 20th July 1995,
he recorded the following:
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“Received copy of injunction on Kalu from Len - sent copy to Ian Robertson.”
Again this is consistent the fact that it would have taken a couple of
days fays for copies of the orders to be made available.
What happened thereafter
was crucial. On one hand we have the Defendant mobilising his helicopter
ready to be shipped
over from PNG on or about the same date, whilst on the
other hand, the operations intended to be undertaken at Mono were subject
to
restraining orders from the Court. Lennea was the Sixth Respondent named in
that injunction and therefore directly
affected by the order.
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THE EFFECT OF THE ORDER:
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It is important to appreciate the legal effect of that order on the
Plaintiff. I quote in full, paragraphs (1) and (2)
of the Order.
“1.
The Defendants their servants or agents be restrained from enom entering Mono or
Stirling Islands to carry on the felling,
extraction or sawmilling of any
timber or an action in any preparation for the same save and except the
attendance at
a valid timber rights meeting of the Famoa Area Council until
trial or further order.
2. The sale proceeds of any t already felled, extracted cted or milled prior
to the service of this order upon the First
Defendant, or Second Defendant,
or the Third Defendant, or the Sixth Defendant; shall be paid into Court or
into an interest
bearing account in the name of the Plaintiff's Solicitor
forthwith.”
Thd order can be described as a blanket restraining order; prr; preventing
inter alia, the Sixth Defendant (Lennea) from
entering the operation zone.
This meant even if the helicopter had been brought over to
Honiara and even if Lennea might have thought otherwise, it still could not
be used at Mono by virtue of the injunction.
To do otherwise would place Lennea, his servants or agents in contempt of
the Court Order.
This order was in place until 12 September 1995 when it was varied to enable
trees already felled to be removed and sold.
Lennea must be deeo have knowledge of the injunction from the date it
w was served on him; most likely a couple of
days after. That injunction is
crucial to the proposed operations at Mono because its effect is direct.
Lennea had two
alternatives open to him. He could insist on bringing the
helicopter over to Solomon Islands and using it elsewhere, or to
consent
that it remain in PNG until the issue on injunction be sorted out.
insist on bringing the helicopter to Mono would be tantamontamount to contempt
of Court. That he could not do even if he
might have thought otherwise. To
bring the helicopter into Solomon Islands in any event meant it would have
to be deployed
elsewhere. Unfortunately, there is no evidence to suggest
that this intention was expressly conveyed to Grouse in PNG and that
any
such request or instruction was given. The only evidence on this from Lennea
pertained to his denial in examination
in chief that he consented to the
helicopter being detained in PNG. I quote:
“Q. Around that time in July when you heard about the Court Order did you
discuss the matter with Mr. Grouse?
A. I believe we did, I thiI think with Lenny Palmer. Mr. Grouse was in PNG that
time I believe. I don’t know how much
discussions we had.”
“Q. Did you tell them that you noou no longer required helicopter in Solomon
Islands?
A. No, because we had spent a lot of money and tried to sort out legal
problems in there. So we definitely needed the
helicopter.”
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There was mention of an alternative location at Enoghae but the evidence
adduced showed that a helicopter was not needed
until about July 1996 (about
a year later). No other location was specifically mentioned as available
during the said
period. It is clear on the evidence therefore that the focus
was on the operations at Mono; nothing about use elsewhere. On
the question
therefore whether there is evidence to suggest that the Plaintiff insisted
on having the helicopter brought
over to Solomon Islands for use elsewhere
other than Mono, the answer must be no.
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Under cross examination, Mr. Lennea conca number of crucial points.ints. I
quote:
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“Q. You knew that ATL was not prepared to brin bring in the helicopter in breach
of the injunction?
A. Yes.
Q. You accepted that in truth?
A. Yes.
Q. You accepted that it couldn't come because you would sort out the
legality?
A. Yes.”
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Lennea thereknew that Grouse was not prepared to bring in the
hel helicopter in view of the injunction. In spite of this,
he did not give
specific instructions as to what alternative arrangements or sites he had in
mind in Solomon Islands
for the helicopter to be used if brought into the
country in any event. He also did not raise any direct objections about the
decision to redeploy in PNG. Nor did he seek to treat the redeployment as a
repudiation of an essential term in the Agreement
and thereby entitling him
to have the Agreement terminated and sue for damages. Instead his actions
point more to an
affirmation of that crucial decision to redeploy.
PROK BANK:
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Ian Robertson was the recognised represeve of Prok Bank. Prok Bank Bank
played a crucial role in the logging operations
of the Plaintiff. In
examination in chief, Lennea conceded Prok Bank was a partner in their
business operations and acted
as financier and manager of the operations.
They had invested substantial sums of money in the operations of the
Plaintiff
and so a lot was at stake. This would have entitled them in the
least, to have some, if not, a lot of say in how things were
to be done at
any rate. Also as financier and manager of the operations of the Plaintiff,
they were as interested in
ensuring that whatever was undertaken was
successful, with costs minimised as much as possible.
From clear and undisputed evidence before this Court, the amount of
USD37USD37,000.00 was funded by Prok Bank. The delay
in payment was due partly to
the delay in having Prok Bank process the funds for payment. This is evident
from the numerous
conversations recorded in the diary of Grouse concerning
arrangements for payment by Prok Bank (see entries in the 1995 Diary
for 31st
May, 6th June, 13th June, 19th June, 3rd
July).
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I
accept therefore the submission that Prnk stood in the position ofon of
agent of the Plaintiff
THE DECISION TO REDEPLOY THE HELICOPTER IN PNG:<
<
Thesion to redeploy appears to be the most logical, obvious anus and
reasonable thing to do in the circumstances. I find
on the balance of
probabilities the Plaintiff had consented to the helicopter being
redeployed in PNG whilst he tried to sort out its legality.
But even if it could still beed otherwise (which is not not feasible on the
evidence), that the helicopter should have
been brought to Solomon Islands
at any rate, it is clear on evidence, Ian Robertson of Prok Bank had
consented to the helicopter being redeployed in PNG to help alleviate
further costs to the Defendant.
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“I spoke to Robertson. He was surprised aboutabout the injunction because he was
under the impression that everything
was fine. I said it was undesirable to
send equipment. So decision was made to clarify the matter. We were in the
situation
where under the terms of our contract, as Lessees of the
helicopter, we were committed to pay minimum charges. So it was a
matter of
financial survival that we find some alternative equipment,…”
(Page 44 of transcript)
At page 45 he continued -
“I didn’t discuss it with Lennea but in t in discussions with Robertson, I told
him (that is, about the redeployment of
the helicopter). He agreed with me
because saw no other option.”
This has been virtually unchallenged.
It is clear on evidence therefore, the decision to redeploy was made by
G Grouse in consultation with Ian Robertson
of Prok Bank and with the
knowledge of Lennea. It was taken as a response to the unfortunate turn of
events surrounding
the operations on Mono Island; basically a sound and wise
decision to avoid unnecessary losses to the parties. Further it was
an
accepted fact that the Defendant had incurred expenses when arranging to
have the helicopter transported from Singapore
to PNG in preparation for
further shipment to Honiara for delivery to the Plaintiff. It was therefore
a somewhat important
decision for the Defendant that redeployment was
seriously considered in the circumstances. In his evidence before this
Court, Grouse states the decision was made a couple of days later.
One of the issues which has been raised in relation to the decision to
redeploy is whether it amounted to a breach. In
weighing and balancing all
the evidence before me, I am not satisfied the action of the Defendant in
redeploying the
helicopter in PNG was in breach of the Agreement. It was
made, if not with the consent of Lennea, with his knowledge and with
the
authority of Ian Robertson of Prok Bank. Bearing in mind that Prok Bank was
a partner in the business operations
of the Plaintiff, I am satisfied the
actions of Ian Robertson can be construed as amounting to that of an agent
and done
on behalf of the Plaintiff and therefore binding.
The injunction therefore had a further drastic effect on the commencement of
hiring of the helicopter. The date of commencement
of hiring was further
subject to delay whilst Lennea sought to have the legal issues sorted out.
The legal effect of
this is crucial to understand. In my respectful view,
there was a further variation of the Agreement. The date of
commencement was further deferred.
THE ALTERNATIVE ARRANGEMENTS OF THE DEFENDANT:
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In redeploying the helicopter in PNG the Defendant hired out its helicopteropter
initially to Clayfield Pty. Ltd. for
a period of 3 months and thereafter to
Barracuda Pty. Limited. (See Exhibits “35”, “36” and “37”)
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RE-MOBILISATION:
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On 12 September 1995, the Order imposed on 18th July 1995 was
s
varied to enable trees already felled to be removed. This meant Lennea could
now enter Mono but only to have the trees already felled removed, not
to fell any more trees. Any suggestions therefore that he could fell new
trees is without basis, although it appears
he did make an attempt to get a
felling licence but was refused by the Commissioner of Forests.
The decision to remobilise however appears only to have been made some two
months later. On 23rd November 1995, Grouse was asked by Lennea
to remobilise with a view to commence loading on 14 December 1995. This was
made after a buyer had been secured by Lennea (see Exhibit 16).
THE KAMOV 32 HELICOPTER:
One of the issues raised intion to this is whether this failure to
provide a hela helicopter when required, amounted to
a breach on the part of the
Defendant? The Plaintiff had submitted this was a breach. Unfortunately I
must disagree.
The Kamov 32 helicopter had been redeployed in PNG with the consent of the
Plaintiff. This I had found on the evidence
before me. Lennea thus knew the
helicopter would be hired out to other users. The legal consequence of this
is that it
became subject to contractual obligations to third parties
(Barracuda), so that if any decision was taken for remobilisation
it would
be subject to a release from the Barracuda contract. This was the problem
facing Grouse. Despite attempts by
him to have the helicopter released
early, Barracuda was unwilling to do so. It wasn’t thus the case where the
Defendant
was unwilling to provide the helicopter. He was willing and wanted
to, but couldn’t in the light of commitments he had entered
into. The only
time he could comply was when the Barracuda contract expired on or about 16th
January 1996. Unfortunately it became apparent that even after expiry of the
Barracuda contract, the helicopter could
not be made available immediately
as it would have been subject to service, including an engine change. The
earliest
the helicopter therefore would have been available would have been
towards the end of January 1996.
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The problem unfortunately was Compounded b commitment made by Lennea nnea to
have a shipment of logs dispatched by end
of December 1995 and arranging
shipping for that time when it had not been confirmed that the helicopter
was available
for that time.
In my respectful view the inability of the Defendant to make available a
helicopter when requested, did not amount to
a breach of the Agreement. It
wasn’t the case where the Defendant was unwilling to comply with his
obligations. It was
willing but unable to, due to circumstances beyond its
control, the helicopter simply could not be made available within the
time
period required. It was subject to release by a third party and further
subject to an engine change which would
cause further delay.
But even if it might be argued that there had been a breach I find the
Plaintiff had had waived his rights by agreeing to
enter into a new or
alternative arrangement for the use of a Skycrane helicopter to lift kwila.
EXHIBIT 16:
ibit 16 is the copy of the purchase order placed by Pacificcific Ocean Timber
Company Limited (the “Buyer”) for kwila logs
(latin name “Intsia Bijuga”).
Pacific Ocean Timber Company was the company with whom Lennea had entered
into an agreement
with for the sale of logs that had been felled at Mono.
The purchase order was dated 21st November 1995 and sets out in
detail the order of the Buyer. The quantity of logs required per year was
100,000 m3. The length of the logs were to be between 6 - 12
metres but may be reduced to 4 metres in length if in excess of 5 tons in
weight. It also required that the first shipment of 5,000 m3 be
made by end of December 1995.
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There is an interesting point that should be noted. According to a break
down of species recorded by Moses Aopuru (an
employee of ICM) dated 28th
November 1995, the total volume of kwila cut and in place was only about
74.60 m3 though I accept there were other logs still out in the
bush. This was estimated to be around 1,600 m3 by Lennea. This
however is still well below the amount of 5,000 m3 required by
the Buyer in its first shipment. Bearing in mind the variation did not
permit the felling of fresh logs,
it would seem virtually unlikely that the
order of 5,000 m3 for kwila logs would ever be met.
SKYCRANE NOVATION/VARIATION:
It is relevant to note that the decision to remobilise made on or about 23rd
November 1995 related directly to the order placed in Exhibit 16, for the
haulage of kwila logs. This had a direct bearing
on the decision to
remobilise. Whilst on one hand there were attempts to try and get an early
release for the Kamov 32
helicopter, Grouse was of the view that a larger
helicopter in any event would be required for the lifting of kwila logs, as
this had a greater density of 1:4, more than the lifting capacity of the
Kamov 32 helicopter for logs of similar size
with a density of 1:2:1. A
subsequent test carried out on a sample confirmed the density to be at 1:35.
It was thus eventually
agreed that a larger helicopter would be required.
But even if it might be argued otherwise, Grouse was adamant a larger
helicopter was required.
Thbsequently set in motion negotiations for a different helichelicopter to
be used other than the one mentioned in the
Agreement. Following
discussions, it was agreed Grouse would try and negotiate with Erickson for
a larger Skycrane helicopter.
It was however obvious from the beginning
the whole arrangement for hire of a Skycrane helicopter ultimately depended
on the terms set by and approval of Erickson. If Erickson did not agree
no skycrane helicopter would be made available.
THE ERICKSON DEAL:
Part of the requirements imposed by Erickson included the payment upfront of
mobilisation and fuel costs to be funded
by a red clause advance on the
buyer’s letter of credit. This included the initial payment of USD80,000.00
towards helicopter
fuel and transportation costs on 27th December
1995, with a further sum of SBD153,499.13 paid on 9th January
1996. Also on 27th December 1995, the sum of USD250,000.00 was
paid towards “mobilisation payment and part payment for the transport of
6,500m3 of logs forming the first shipment” (see Exhibit “8”).
Unfortunately, in sof these substantial payments, it appears Erickson
wa was never fully satisfied. It gave no approval
for the release of its
Skycrane helicopter. The proposed arrangement consequently fell through and
had to be abandoned.
By 8 January 1996, the Erickson arrangements were
shelved. The legal issue which Mr. Sullivan raises in respect of this
arrangement is whether there had been a novation or variation of the
original agreement?
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NOVATION:
The essence of “nov” is the rescission or extinguishment of a contract
a and the substitution or replacement by a new
one on new terms between the
same parties, or same terms but with a third party added (Ansons Law of
Contract 25th Edition, page 442; see also Chitty on Contracts 26th
Edition paragraph 1436). That can hardly be said to be true in this case.
The original contract was not extinguished
and replaced by a new one, nor
the parties changed.
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VARIATION:
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RE-ACTIVATION OF THE ORIGINAL AGREEMENT:
With the demise of the Erickson deal, the original agreement was reactivated
or reverted to again for the supply of a
Kamov 32 helicopter. Unfortunately
the same problem which affected its earlier release remained, Grouse could
not get
an early release from Barracuda Pty. Limited. A number of meetings
were convened to try and get things sorted out. One of these
occurred on 8
January 1996 in the Office of Misi & Associates. Present at that meeting
were representatives of ICM,
Lennea and Mrs. Lennea; a representative of
Prok Bank, Victor Shumilo; representatives of the Buyers, Phillip & Johnny
Ng; and representatives of ATL, Grouse and Mark Stafford. Records of copies
of the minutes of that meeting are contained
in Exhibit “40”. The contents
revealed what was discussed and the state of things at that point of time.
By then (8 January
1996) the Erickson deal was definitely out. Discussions
were more focused on reviving the original agreement, in view of the
shipping arrangements that had been made and potential demurrage charges if
the ship was delayed and returned dead freight.
One of the crucial items discussed was the availability of the Kamov 32
hel helicopter. After pointing out that getting
an engine change was delayed
over the Christmas/New Year period, Grouse gave a “best estimate” for the
positioning of
the Kamov 32 at Mono for “Friday pm”. Presumably this meant
Friday next. Following that meeting, Grouse and Victor Shumilo
left for PNG
on Wednesday 10th January. They were supposed to bring back the
helicopter on Friday 12th January 1996. Lennea also left for Mono
at the same time to prepare for the arrival of the helicopter and shipment
of
logs. This included making arrangements for the purchase of fuel and
transportation to Mono. In this regard 320 drums of Jet
Al fuel were
purchased and shipped to Mono via Markwarth Shipping Company (see Exhibits
“11” and “12”).
The unchallenged evidence of Grouse as to whatened at PNG is crucial.
.
His attempts to get an early release were again
unsuccessful due it seems to
the fact that Barracuda was in the middle of an oil well rig. That meant the
Kamov 32 was
no longer immediately available for positioning in Honiara.
Further it was pointed out in evidence by Grouse that by the time
it was
released from its contractual obligation with Barracuda it still had to
undergo an engine change and would only
be available by the end of January
1996. It is important therefore to understand that as far as the Agreement
regarding
the supply of a Kamov 32 helicopter is concerned, the date for
commencement of hire was further delayed to the end of January
1996. I have
already dealt with the question whether such delay amounted to a breach of
the Agreement and therefore do
not need to repeat what has been said. This
delay did not amount to any breach.
re was then it appears an attempt by Grouse to have the Agre Agreement varied
at this point to meet the urgent need of the
Plaintiff for a helicopter;
bearing in mind that there were shipping commitments that had been entered
into by Lennea
and so the provision of a helicopter immediately was
paramount at that time. The suggestion for a variation came about through
the offer of Victor Shumilo, representative of Prok Bank. He had offered
through contacts he had in Ladivostoch to try
and arrange for a helicopter
to be hired from a company there. The new arrangement would be for the
Plaintiff to deal
directly with that company but to operate in Solomon
Islands using the licence of the Defendant for a flat rate fee at 20%.
This
was subsequently communicated to Lennea and according to the evidence of
Grouse, accepted by him. Arrangements were
then commenced for the helicopter
to be mobilised and brought over. According to Grouse, arrangements for a
crew to come
through were commenced on 12 January 1996. On 13 January 1996
he waited for word to come through regarding the final crew and
a long line
for the helicopter. These appear to be the final arrangements before word
came through shortly after, that
the operation at Mono had been abandoned.
On 15th January 1996, he was told that Mono had been abandoned.
What happened was that the blanketraining order was re-imposimposed on 15th
January 1996. This is not in dispute. That apparently dealt the final blow
to the Mono operation despite the view of
Lennea that the Mono operations
were abandoned due to the unavailability of a helicopter. It is partly true
the Kamov
32 helicopter was not available immediately, but that did
not mean the Defendant was in breach. I have already ruled on this. The
helicopter would be available but
only towards the end of January 1996.
The real reason therefore for the abannt of the Mono operations wons was the
re-imposition of the blanket restraining
order, because even if a helicopter
was made available immediately through the new arrangements undertaken, it
could
not possibly be used at Mono. As for any suggestions that the
helicopter could be used elsewhere, there is little evidence
in support.
FRAUDULENT REPRESENTATION:
The Defendant alleges as part of its defence that Lennea had made a
frauduleudulent representation regarding the availability
of a valid timber
license covering Mono Island and permitting the export of round logs.
The law on fraudulent misrepresentation has been firmly established in the
case of Derry v. Peek (1889) 14 Asp. Cos. 337.
At page 374 Lord Herschell
sets out in a nutshell the elements of fraudulent representation. I quote:
“frs proved when it is shown town that a false representation has been made-
(1) knowingly, or
(2) without belief in its truth, or
(3) recklessly, careless whether it be true or false”.
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The falsresentation alleged was that Lennea claimed he had all
necessary licences and permits for log exports. Mr.
Sullivan submits Lennea
must have known that his representation was false. He relied on the fact
that:
(1) Lennea admits ICM had no licences or permits itself, and
(2) that in spite of what was said about the Milling Licence of Mubu
Sawmilling it had no valid licence to fell and export
timber.
It is not in dispute ICM had no timber licence to fell and export timber.
Lennea does not deny this. It has also been
established that Mubu Sawmilling
had no valid licence to fell and export timber. Mubu Sawmilling however had
a valid
milling licence. The confusion apparently arose from the belief by
Lennea (and I accept on the evidence before me a genuine held belief)
that whilst Mubu Sawmilling had no licence to fell timber, that was going to
be done by the Landowners themselves and
supply them to Mubu. It was a very
attractive proposition to Lennea though somewhat mistaken, because as events
were
to show, there were other competing landowners laying similar claims to
the same land.
More or less the same arguments wereed in the case of Forestorest and
Another v. Mahlon Ali and the Attorney-General CC 1/94 judgment
delivered on 12 April 1994, in which it was held that Mahlon Ali trading
as Hovah & Hardwood Enterprises, despite his claim being a landowner
that he could fell the trees himself and extract them for milling or export
through
his milling licence, it was held by the court that he needed a
separate licence to fell and export timber. In order to obtain
a felling
licence he needed a timber rights agreement from the landowners and duly
approved by the Minister responsible.
Mahlon Ali had no valid timber rights
agreement and so the footnote attached to his milling licence was struck out
by
the court. That judgment set the precedent that a person wishing to fell
and extract timber for milling or export, cannot do
so without a valid
timber rights agreement.
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Mubu Sawng fell squarely on all fours within the same category. It . It
could not fell and extract timber for export or
milling without a valid
timber rights agreement duly approved by the Minister under section 12 of
the Forest Resources and Timber Utilisation Act. The distinction however
which Lennea sought to highlight in evidence before the Court was that the
felling of trees
was not going to be done by Mubu Sawmilling but by the
landowners themselves. His argument was that Mubu Sawmilling did not
require
a timber rights agreement and therefore a felling licence, because the
felling of the trees was going to be done
by the landowners themselves. As
owners of the trees they were entitled to do what they want with the trees.
Unfortunately,
as pointed out, this did not work out as the claim of those
landowners was subsequently challenged by other landowners.
What is important to note this is that it raises doubt in my mind that
Lennea knea knew that Mubu Sawmilling needed a
separate licence to fell and
extract timber or that he was reckless whether that fact was true or false.
His belief was
that it was alright, that it was not unlawful for the
landowners themselves to fell their own trees and supply them to Mubu.
Further, it appears the advice or responses given out by the Office of the
Commissioner of Forests was not very helpful
either in terms of making clear
to him what the legal position was. This is reflected in the milling licence
issued to
Mubu Sawmilling still containing the same footnote earlier struck
out in Mahlon Ali’s Case (ibid), even when it came up for
renewal some eight
(8) months after the decision in Mahlon Ali’s Case had been given. It was
never deleted. That can
only have added confusion instead of clarity.
On the issue of the footnote permitting the export of a certacertain quota per
annum in the milling licence, Lennea admits
he was aware a similar footnote
had been struck off by the Court in Mahlon Ali’s Case (ibid). Unfortunately,
it seems
(and this is drawn from his evidence) he received confused and
mixed responses from the Office of the Commissioner of Forests
about the
effect of that decision. To some extent I do not find this surprising or
unusual. One would have expected the
Office of the Commissioner of Forests
to have issued some sort of circular, notice or a standard letter to all
current
milling licence holders advising them of the effect of the decision
of the Court. There was no evidence that this was ever
done. (Also note as
pointed out above the footnote was never deleted even when it came up for
renewal).
When all these are weighed e balance I am not satisfied it had been
established shed to my satisfaction on the balance
of probabilities that Lennea
was fraudulent in his representations about the licences needed for export
being in place.
He was unshaken in evidence when strenuously cross-examined
by Mr. Sullivan about his knowledge, belief and understanding of
the licence
to export timber being in place. He firmly believed (albeit mistaken) the
milling licence held by Mubu was
sufficient to enable a certain quota of
logs to be exported per annum, in spite of the decision in Mahlon Ali’s
Case.
That respectfully, is evidence that he did not know, or was reckless
that Mubu Sawmilling had no valid licence to export timber
under its milling
licence. When his subsequent conduct is also taken into account, that only
strengthens the view that
his representations were not fraudulent and
intended to mislead the Defendant. The defence of fraudulent
misrepresentation
accordingly must be dismissed.
BREACH OF THE ORIGINAL AGREE
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Paragraph 18(a) of the submissions of thendant:
this referred to the late payment of USD37,000.00. I have already dealt with
this matter in detail and do not need to
repeat myself. I do not find any
breach under this submission.
Paragraph 18(b)an>
this raised the submission that ICM failed to have any timber lawfully ready
for lifting at any time and failed to pay
the guaranteed minimum monthly
amount of USD200,000.00. From the undisputed evidence of Lennea there was
already on the
ground some 1,600 m3 of fallen logs. It should be noted too
however that in his letter to the Commissioner of Forests (see
File of the
Commissioner of Forests identified as Exhibit “A”, folio 14, para. 2) Lennea
states there were “…about 6,500m3 of Instia on the ground on
Stirling and Mono…”. In addition he states: “The rest of the timber
on the ground is on various locations on Mono and is mix species
approximately 6,000m3 in total.” It is not correct therefore
that ICM failed to have any timber lawfully ready for lifting at any time.
The evidence adduced
does not support this submission.
On the submission that ICM failed to pay the guarantinimum monthly
amountmount of USD200,000.00, the answer to this respectfully
is that the
Agreement was never and could not be commenced before it was terminated; the
Defendant therefore was never
entitled at any time to the guaranteed minimum
payment. Accordingly there was no failure on the part of ICM to pay that
amount.
Paragraph 18(c):
this raised the submission that ICM was in breach of its obligations by
requiring the helicopter for unlawful purposes
at all times. The first
argument raised by the Defendant was that ICM had no agreement with Mubu to
extract logs for
export (Ex. 18). Unfortunately this is a narrow
construction of the rights of the parties to enter into contract with each
other on mutual terms. There has never been any dispute between them and
neither been proved, that ICM had no agreement
with Mubu or any right to
extract logs for export or milling. The evidence rather showed it was an
accepted arrangement
between them that ICM would be responsible for the
extraction of logs whether for export or milling. The fact the agreement
between them (Ex. 18) is silent does not affect the fact that a term can be
implied, or in the alternative, that there
existed a verbal agreement
between them. This first argument has no basis.
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The second argument raised was that neither ICM nor Mubu had a valid licence
to fell and export. The fact that ICM had
no valid licence to fell and
export had never been denied by Lennea. Similarly it had not been denied to
a certain extent
by Lennea that Mubu had no valid licence to fell and
export. What apparently had caused confusion among logging circles it
seems
was the inter-relationship between the issue of a milling licence and the
rights to fell and export. Initially
it was held that it was alright to have
a milling licence without a separate licence to fell and export. This meant
timber
can be felled under a milling licence for milling as well as for
export under a quota system authorised by the Commissioner
of Forests.
Mubu’s milling licence was obtained on 9th February 1994.
Included in that licence was a foot note (para. (iii)) which permitted the
export of a quota of 20,000
m3 of round logs. At the inception of
the milling licence, this was perfectly valid. Further, it appears (there is
little
evidence to show otherwise) there was little dispute or challenge, to
the persons claiming ownership rights over the customary
land initially. It
was only after operations had commenced that land ownership disputes arose.
Also, it was only after
the decision in Mahlon Ali’s Case (ibid) had come
out on 12th April 1994 that the foot note was invalidated. Lennea
concedes he was aware of this, but there appear to be little or no direct
communication at all from the Office of Commissioner of Forests, concerning
the effect of this decision on the licence
held by Mubu. As pointed out,
there was no evidence to show that Mubu was ever directly informed by the
Commissioner
of Forests, either by letter or notice, cancelling the foot
note in its licence. As already noted there appear to be confusing
or mixed
responses to Lennea’s queries on this, which only added confusion to the
issue instead of clarity as far as
he was concerned.
<
Legally nevertheless, that issue han settled once and for all all in Mahlon
Ali’s Case. From 14th April 1994 therefore, it was unlawful for
Mubu or any other person without a valid timber rights agreement duly
approved
by the Minister, to fell and export timber. In that respect it
would be correct to argue that Mubu had no valid licence to
fell and export.
In spite of that, it is pertinent to bear in mind that the personal
knowledge, belief and understanding of Lennea of the
effect of this order as
already pointed out was not as clear cut and simple. I have referred to the
confusing responses
from the Office of the Commissioner of Forests coupled
with the fact that at no time was Lennea formally notified that the
foot
note was invalid and that it should be deleted. Further I had pointed out
the discrepant act in not having the foot
note deleted when the licence came
for renewal on 9th February 1995.
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To say therefore that the helicopter was red for unlawful purposes at s at
all times is not entirely correct. It has not
been proven to my satisfaction
on the balance of probabilities that when the Agreement was negotiated in
May 1995, Lennea
took cognizance of the effect of the decision in Mahlon
Ali’s Case. Also bearing in mind that Mubu had a valid milling licence,
it
does not necessarily follow that because there was no licence to fell and
export, that the use of the helicopter for
haulage of logs would be
subsequently unlawful. Bearing in mind that initially it was alight to use
the milling licence
for purposes of felling and export, and that already
trees had been felled (some 1,600 m3 or more than 6,000 m3
on Mono and Stirling Island), the helicopter would be required to haul those
logs at any rate. I fail to see how that
would amount to unlawful use. It is
also relevant to note that even when the injunction was imposed, it was
subsequently
varied to enable the Plaintiff remove and export the logs
already felled. That couldn't have amounted to any unlawful use of
the
helicopter.
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In addition, it is important to appreciaat the Defendant was requirequired
only to haul logs from the stump to the dump
point. There is nothing
particularly unlawful about that. The Defendant was not required to fell the
trees or to export
them, nor be a party to any of these activities. Those
were matters for the Plaintiff, Mubu Sawmilling and the landowners who
claimed ownership over those trees, to worry about and address. His (that is
the Defendant's) was a separate job altogether.
The third argument raised was that by 19th June 1995, Mubu’s
licence had already been suspended. Unfortunately the same reasons given
above also apply to this submission.
Trees had already been felled by this
time and hence a helicopter would be required at any rate to uplift those
logs.
The fourth argument raised pertained to the purported export of kwila logs
without a valid permit. This meant the Defendant
submits, the Plaintiff was
intending to use the helicopter for unlawful purposes. Unfortunately it is
clear on evidence
the Plaintiff had taken steps to have that matter sorted
out. Exhibit 26 is a copy of the letter of Lennea to the Commissioner
of
Forests seeking permission to export those logs (bearing in mind according
to his letter there was a substantial amount
of kwila logs already on the
ground). Further, folio 15 of Exhibit “A” for identification purposes
disclosed that a recommendation
had been given by the Principal Forest
Officer that permission be granted for the export of the logs already
felled.
It was not correct therefore to assume that no permit would have
been given in the event a helicopter had been made available.
The matter was
never pursued further because the blanket restraining order meant there was
no point in bringing in a
helicopter for Mono.
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I
do not agree therefore that the absence of a permit to fell and export kwila
meant no permission would subsequently
be given to have those kwila logs
already felled on the ground, to be extracted and exported such that the use
of the
helicopter would be unlawful.
Paragraph 18(d):
the submission sought to be raised under this ground was that kwila (Instia
Bijuga or ironwood) is a protected species
under The Forest Resources and
Timber Utilisation (Protected Species) Regulations 1990 and therefore
specific authority
was needed for its export. Respectfully however, I have
also already indirectly dealt with this matter above. Lennea appears
to have
been aware of this requirement and so had written under letter dated 4th
January 1996 for that very purpose for permission to export kwila. I am not
satisfied accordingly that this requirement
would have been deliberately
overlooked by the Plaintiff.
In concn, it is also pertinent to point out that it would not be
be
entirely correct to say that at all times the helicopter
was required for
unlawful purposes. When the injunction was slapped on, Lennea “agreed” that
the helicopter be redeployed
in PNG. He did not insist that it be brought
over to be used at Mono. He conceded it would not be right to do so. Only
when it was partially discharged and he was permitted to re-enter, to
extract logs already felled, did he seek to have the
helicopter brought into
the country again. Note, Grouse did agree and sought to make attempts to
bring over the helicopter,
but couldn’t only because of legal obligations to
third parties using the helicopter. If it was going to be used for an
unlawful purpose, surely Grouse would not have consented to the arrangements
for the helicopter to be brought over to the
Solomons. Respectfully, I find
no breach of the original agreement by the Plaintiff as submitted by the
Defendant.
NOVATION OR VARIATION:
The legal issues arising from this submission have already been dealt with
and I do not need to repeat myself
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FRUSTN - THE LAW:
The doctrine of frustration arises wheis alleged that a change ofge of
circumstances after the formation of the contract
has rendered it physically
or commercially impossible to fulfil the contract or has transformed
performance into a radically
different obligation from that undertaken in
the contract (see Chitty on Contracts General Principles 26th Edition
paragraph
1631). The learned Author in Chitty on Contracts had put forward a
test for frustration formulated from Davis Contractors Ltd. v.
Fareham U.D.C.
[1956] UKHL 3; [1956] A.C. 696, 729, and other cases (National Carriers Ltd v. Panalpina
(Northern) Ltd [1980] UKHL 8; [1981] A.C. 675, 693; Pioneer Shipping Ltd. v. B.T.P.
Tioxide Ltd. (The Nema) [1982] A.C. 724, 752 ) as follows:
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“If the literal words of the contractual promipromise were to he enforced in the
changed circumstances, would performance
involve a fundamental or radical
change from the obligation originally undertaken?”
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In that situation Lord Radcliffe in Davis Contractors Ltd (ibid)
states:
“…frustration occuenever the law recognises tses that without default of
either party a contractual obligation has become
incapable of being
performed because the circumstances in which performance is called for would
render it a thing radically
different from that which was undertaken by the
contract. Non haec in foe-dera veni. It was not this that I promised to do
…
There must be … such a change in the significance of the obligation that the
thing undertaken would, if performed,
be a different thing from that
contracted for.”
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Lord Reid he test for frustration in a similar way:
<
“The question is whether the contract which theh they did make is, on its trite
construction, wide enough to apply to
the new situation: if it is not, then
it is at an end.”
(Page 721).
In Nationaliers Ltd. v. Panalpina (Northern) Ltd., (ibid at page
age
700) Lord Simon restated the test as follows:
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“Frustration of a contract takes place when there supervenes an event
(without default of either party and for which the
contract makes no
sufficient provision) which so significantly changes the nature (not merely
the expense or onerousness)
of the outstanding contractual rights and/or
obligations from what the parties could reasonably have contemplated at the
time of its execution that it would be unjust to hold them to the literal
sense of its stipulations in the new circumstances;
in such case the law
declares both parties to be discharged from further performance.”
THE FRUSTRATING EVENT:
This brings me dress one of the crucial questions in this case. What
caused the contract to be frustrated? The Defendant
submits it was the
absence of all necessary licences and permits which was the real frustrating
cause of the events (the
series of injunctions) leading to impossibility of
performance. Respectfully however, I do not agree. The real frustrating
cause was the same old story - the dispute over land ownership by competing
customary land owners. That frustrated the
Agreement between the parties.
That meant even if the helicopter was to be made available towards the end
of January
1996, the Plaintiff would not be able to comply with his part of
the bargain in view of the blanket restraining order re-imposed.
In the judgment of his Lordship, Awich J., in the casJohn Havea and
Iva Ivan Maike v. Mubu Sawmilling (a firm) and Six Others, CC 178/95
judgment delivered on 12th September, 1995, his Lordship
identified at page 2 the serious issue as follows:
“The serious issue is whether Lotikeni and Defendants 3, 4 and 5 own the
land in question to the exclusion of Havea Maike
and Miriki, the Plaintiffs.
They (the Plaintiffs) have alleged ownership and the right to be consulted
as the basis for
their claim.”
Lotikeni and Defendants 3, 4 and 5 were the landowners who clai claimed the right
of ownership over the land in which
the trees were to be felled and supplied
to Mubu Sawmilling. The Plaintiffs were the opposing landowners over the
same
land.
Even if ICM and Mubu Sawmilhad all the necessary licences and permits,
there is e is no guarantee that the land would
be free from dispute and
litigation, hence absence of any injunction. The issue of all necessary
licences and permits
is no guarantee that the true customary landowners had
been identified and granted rights over the timber. This perhaps is
the
underlying weakness of the procedure set out for acquisition of timber
rights over customary land in sections 7 and 8
of the
Forest Resources and Timber Utilisation Act (Cap. 40).
As early as 1990, Commissioner Crome pinpointed this weakness with
simplicity and clarity in the case of Fugui & Another v. Solmac
Construction Company Limited and Others (1980) SILR 100 at page 106 and
107. I quote:
“All a licence amounts to, it seems, is a defence to a prosecution under s.
4(1) and the possibility that the true customary
owners of timber rights and
any persons by whose consent the exploitation of those rights can be sold or
dealt in, have
been traced as a result of the lengthy procedures under the
Act. No guarantee is given that the contracting customary owners
are the
true owners.”
The effect of this weakness, or flaw, if one wants to call it that, has been
felt over and over and over again in almost
all logging operations. To hear
of a logging operation involving a major logging company in the country that
has commenced
operations smoothly without some form of major land dispute is
very rare indeed. This has been the common thread in almost
all logging
operations over customary land. Disputes that occur in such logging
operations normally arise between landowners
themselves, and not with the
logging operator, and in many instances this had resulted in the Court
issuing interlocutory
orders restraining any logging operations until
determination of the issues outstanding between the landowners. Starting at
the High Court, the matter eventually usually winds its way back down to the
Chief's Committees and the Local Courts
for determination on matters arising
in custom, quite often on questions of customary rights over the land in
which the
trees were situated.
Any customary landowner therefore, claiming rights of ownership over the
land and trees, has the right at any time, to
challenge the ownership issue
in the appropriate manner, irrespective of the issue of licences and
permits. If successful,
this puts an end to the rights of the landowners
claiming rights over the trees and the issue of licences and permits; unless
the true owners themselves in turn decide to enter into a new and separate
agreement with the logging company.
In this case ther even if all the necessary licences and permits may
h have been issued, it would not have made much
difference to the fact that
the operation would have been subjected to litigation in any event, in that
the dispute ran
much deeper than the issue of the licences and the permits.
It related to the question of ownership and rights over customary
land and
the trees located on that land.
This with respect dispos the submissions raised in paragraph 26 and 29
of thef the Defendant’s submissions arguing that
the principles in Walton
Harvey Ltd v. Walker and Homfrays Ltd [1931] 1 Ch 274 (CA) and
Ockerby & Co. Ltd v. Watson (1918) 26 CLR 431 would apply so that the
Plaintiff would not be able to rely on frustration.
The principle in Walton Harvey’s Case was that where one one party has
special knowledge and so could have foreseen the frustrating event and
conceals that
knowledge from the other, the party with the special knowledge
is not discharged. The argument of the Defendant in the light
of this case
[para. 29(2)] was that Lennea, who must be taken to have known that ICM’s
legal position was in doubt, concealed
the fact that ICM was relying on
Mubu’s Milling Licence when he knew that the export foot note had been
invalidated by
the High Court.
In the evidence adduced before this Court however, I am not satisfied it had
been proven on the balance of probabilities
that Lennea concealed the fact
that he knew that the export footnote had been invalidated by the High
Court. He conceded
in evidence it was common knowledge among logging circles
that the footnote had been struck out in a particular case (Mahlon Ali’s
Case - ibid). However, he also pointed out in evidence when the matter
was expressly raised with the Office of the Commissioner
of Forests, the
advice given appeared to be conflicting and confusing. I had found this to
be so on the evidence before
me; that it caused more confusion than clarity.
I had also noted this was consistent with the fact that no notice, circular,
or letter, was issued to all licence holders advising them of the same. Also
when the licence came up for renewal some
eight months after that court
decision, the footnote was not deleted. My conclusions, that Lennea did hold
a genuine
albeit mistaken belief regarding Mubu’s Milling Licence to export
a certain quota of logs per year also apply to this submission.
His
subsequent actions too were consistent with this belief When these are put
together, I am not satisfied the submission
on concealment can be allowed to
succeed.
<
The second principle relied on in (ibid) was was that
where one party warrants or represents that the contract is entered into on
a particular basis,
that party will not be excused by frustration but rather
will be held to have assumed the risk that the contract could not
be
performed by reason that the presumed basis of the contract did not exist.
The argument of the Defendant (see paragraph 29(l)) was that ICM had
represented that it had all the necessary licences
and permits and the
absence thereof was the real frustrating cause of the events (the series of
injunctions) leading
to impossibility of performance. I have however already
dealt with this matter above when addressing the issue about what was
the
frustrating event in this case and do not need to repeat myself. The stated
principle in Ockerby’s Case does not apply in this case.
The third argument raised [para. 29(3)] that ICM was persistently in breach
b by insisting that ATL operate unlawfully,
has also been dealt with.
THE LAW REFORM (FRUSTRCONTRACTS) ACT 1943 (UK):
Does this piece of Uniteddom legislation apply in Solomon Islands? In
Scheduleedule 3 to the Constitution Clause 1 states:
“Subject to this Constitution and to any Act of Parliament, the Acts of the
Parliament of the United Kingdom of general
application and in force on 1st
January 1961 shall have effect as part of the law of Solomon Islands with
such changes
to names, titles, offices, persons and institutions, and as to
such other formal and non-substantive matters, as may be necessary
to
facilitate their application to the circumstances of Solomon Islands from
time to time.”
I
am satisfied the Law Reform (Frustrated Contracts) Act 1948 1948 is an Act of
general application and in force on 1st January 1961.
SECTION 2(3):
The Defendant argues that section 2(3) submits the operation of the Act to
specific contractual provisions dealing with
termination in such
circumstances. On this basis, it was submitted clause 20(b) of the Agreement
was intended, on a proper
construction, to ensure that ATL was paid its
minimum guaranteed sum up to the date of discharge by the terminating event.
Doesion 2(3) apply to subordinate the Act to clause 20(b) of thof the
agreement? Section 2(3) states:
“Where any contract to which this Act applies contains any provision which,
upon the true construction of the contract,
is intended to have effect in
the event of circumstances arising which operate, or would but for the said
provision operate,
to frustrate the contract, or is intended to have effect
the court shall give effect to whether such circumstances arise or
not, the
said provision and shall only give effect to the foregoing section of this
Act to such extent, if any as appears
to the court to be consistent with the
said provision.”
Section 2(3) seeks to give recogn to any provision under anyr any contract
which was intended to have effect in circumstances
where for instance, there
has been frustration. The question posed by learned Counsel Mr. Sullivan in
relation to Clause
20(b) is whether it falls within what is stated in
section 2(3) above. If so, he argues the minimum amount guaranteed should
be
paid.
Clause 20(b) reads:
class="MsoNoMsoNormal" style="margin-left: 36.0pt; margin-top: 1; margin-bottom: 1">
“Provided that both parties shall use their heir best endeavours to proceed with
this Agreement and provided further that
nothing herein shall release the
Charterer from its obligations to pay the Company all sums due to the time
of the condition
arising.”
p class="MsoNoMsoNormal" style="margin-top: 1; margin-bottom: 1">
The submns of the Defendant assumes that the Agreement was commencemenced on
15th July 1995. Unfortunately this Court's findings showed
otherwise. First, the commencement date was delayed due to late payment
of
USD37,000.00; bearing in mind that it would take about 6-8 weeks for the
helicopter to be positioned in Honiara from
PNG. It was then deferred by
consent, due to the injunction imposed on 18th July 1995. The
Kamov 32 helicopter accordingly was redeployed in PNG. The legal consequence
of redeployment was that
it became subject to contractual obligations to
third parties so that by the time the injunction was partially lifted and
the helicopter required on or about 23rd November 1995, it could
not be made available immediately, or within the December 1995 period and
early part of January
1996. The Agreement thus simply could not be commenced
within that period until the re-imposition of the blanket restraining
orders
signalled its demise. In other words, the Agreement ultimately was never
commenced until its termination on or
about 15th January 1996.
The Defendant therefore cannot rely on the provisions of the Agreement for
any guaranteed minimum payments.
SECTION 1(2):<
<
The appropriate section therefore which applied to this case is section 1(2)
of the Law Reform (Frustrated Contracts)
Act 1943. That section reads:
“All sums paid or payable to any party arty in pursuance of the contract before
the time when the parties were so discharged
(in this Act referred to as
“the time of discharge”) shall, in the case of sums so paid, be recoverable
from him as money
received by him for the use of the party by whom the sums
were paid, and, in the case of sums so payable, cease to be so payable:
Provided that, if the party to whom the sums were so paid or payable
incurred expenses before the time of discharge in, or for the purpose of,
the performance of the contract, the court may, if it considers it just
to do so having regard to all the circumstances of the case, allow him to
retain
or, as the case may be, recover the whole or an part of the sums so
paid or payable, not being an amount in excess of the expenses
so incurred.”
[Emphasis added]
It is not in dispute the Defendan incurred expenses. It is a is also not in
dispute the Plaintiff had made substantial
payments to the Defendant. The
central issue in contention is whether expenses had been incurred in, or for
the purpose of the performance of the
contract which would entitle the
Defendant to recover from the sums paid and whether the court should
exercise its discretion
in favour of a set off, in the interest of justice.
ere are five key elements for consideration: -
/p>
p class="MsoNoMsoNormal" style="margin-left: 36.0pt; margin-top: 1; margin-bottom: 1">
1. that the Defendant had incurred expensepenses;
2. before the discharge of the contract;
3. in performance of the cthe contract; or
4. for the purpose of the performance of the contract; and
hat it is just in all the cthe circumstances to allow the Defendant to retain
the whole or any part of the sums so paid
or payable.
GAMERCO S.A. -v- ICM/FAIR WARNING (AGENCD
(1995) EWHC QB 1; 1995 1 WLR 1226:
The case of Gamerco S.A v. ICM/Fair Warning (Agency) Ltd (1995) EWHC QB 1; 1995 1 WLR
1226 has been referred to on this particular issue. That case involved the
staging of a rock concert by one of the pop groups known
as Guns N Roses on
a sports stadium in Madrid. The Plaintiff were the promoters of the rock
concert in Madrid and had
paid upfront USD412,500.00. The concert was
scheduled to be held on 4th July 1992. Relevant permits for the
use of the stadium had been obtained but were later revoked when it was
discovered
the stadium was unsafe for use. Considerable expense had been
incurred on both sides. The Defendant naturally sought a set
off of all or
part of such expenses it had incurred under section 1(2) of The Law Reform
(Frustrated Contracts) Act 1943.
In his analysis of the issue of “recovery
and expense” Garland J. referred to three approaches that could be adopted
by him. These were: (1) the total retention approach; (2) the equal division
approach; and (3) the broad discretion approach.
In his assessment of these
approaches, he referred to a useful commentary of the legislation by Robert
Goff J. in the
case of B. P. Exploration Co. (Libya) Ltd. v. Hunt (No. 2)
[1979] 1 WLR 783. I quote (pp. 799-800):
p class="MsoNoMsoNormal" style="margin-left: 36.0pt; margin-top: 1; margin-bottom: 1">
“The Act is not designed to do certain things: (i) It is not designed to
apportion the loss between the parties. There
is no general power under
either section 1(2) or section 1(3) to make any allowance for expenses
incurred by the plaintiff
(except, under the proviso to section ](2), to
enable him to enforce pro tanto payment of a sum payable but unpaid before
frustration); and expenses incurred by the defendant are only relevant in so
far as they go to reduce the net benefit
obtained by him and thereby limit
any award to the plaintiff. (ii) It is not concerned to put the parties in
the position
in which they would have been if the contract had been
performed. (iii) It is not concerned to restore the parties to the position
they were in before the contract was made. A remedy designed to prevent
unjust enrichment may not achieve that result;
for expenditure may be
incurred by either party under the contract which confers no benefit on the
other, and in respect
of which no remedy is available under the Act.”
With specific referen section 1(2), Robert Goff J. states:
“There is no discretion in the court in respect of t of a claim under section
1(2), except in respect of the allowance
for expenses; subject to such an
allowance ... the plaintiff is entitled to repayment of the money he has
paid. The allowance
for expenses is probably best rationalised as a
statutory recognition of the defence of change of position. True, the
expenses need not have been incurred by reason of the plaintiff's payments;
but they must have been incurred in, or for the
purpose of, the performance
of the contract under which the plaintiff's payment has been made, and for
that reason it
is just that they should be brought into account.”
class="Mss="MsoNormal" style="margin-top: 1; margin-bottom: 1">
APPLICATION TO THIS CASE:
The act was terminated on or about 15th January 1996 1996. The
Defendant claims it incurred expenses before the discharge of the contract
in or for the purpose
of the performance of the contract and that in all the
circumstances it would be just to allow the Defendant to retain the
whole or
part of the sums so paid.
The first crucial issue is whether the so-called expenses of thof the Defendant
were incurred in or for the purpose of
the performance of the contract. What
is the meaning of the phrase “in or for the purpose of the performance of
the contract” in the context of this case. In order to answer that
question, it is relevant to have regard to the terms of the contract
itself
and what it entailed.
In a nutshell, the contract entailed the provision of a helicopter for
ha haulage of logs at Mono Island, Solomon Islands.
The contract was not for
the transportation and delivery of the helicopter at Honiara, Solomon
Islands. It is crucial
in my respectful view to make this distinction. These
are two separate matters. Anything done in or towards the haulage of
logs at
Mono Island would fall within the term “in or for the purpose of performance
of the contract”. What this meant
was that once the helicopter had been
delivered to the Plaintiff on site at Honiara, anything incurred thereafter
by
the Defendant towards ensuring that the helicopter was operable, suitable
and available, for purposes of haulage of logs, would
in my respectful view
qualify as something done in or for the purpose of the performance of the
contract. But anything
done prior to the delivery of the helicopter to
Honiara could not qualify.
ass="MsoNoMsoNormal" style="margin-top: 1; margin-bottom: 1">
It is important to appreciate the difference between costs incurred for the
delivery or positioning of the helicopter
in Solomon Islands, as opposed to
costs incurred in or for the purpose of performance of the contract. These
respectfully
are not the one and same thing. Costs incurred in or for the
purpose of the performance of the contract, in my respectful view
do not
include the costs of delivery to Honiara, Solomon Islands.
Secondly it is an express term in the Agreement the costs of
delivery tery to Honiara, Solomon Islands would be borne by the Defendant. See
Clause 3(a) of the Agreement
which states:
lass="MsoNoMsoNormal" style="margin-left: 36.0pt; margin-top: 1; margin-bottom: 1">
“At
the commencementhe agreement the Company shall meet the costs of
delivery of the Helicopter to the Charterer at
Honiara, Solomon Islands, and on termination therefore by efflux of time or
otherwise the Charterer shall re-deliver the
Helicopter to the Company at
Honiara, Solomon Islands.”
[Emphasis added]
It was common knowledge between the parties and an accefact, that the
helicoelicopter to be provided was not located within
the country. It had to be
transported from PNG to Honiara (the agreed home positioning site of the
helicopter). The Agreement
as drawn up accordingly took this aspect into
account. In other words, those expenses incurred in the delivery of the
helicopter to Honiara are those which the Defendant had expressly agreed to
bear under the agreement. It is a risk that he
had expressly agreed to bear
in exchange for the provision of a helicopter service in Solomon Islands.
This is fortified
by Clause 12(b) of the Agreement, which provided that the
payment of USD37,000.00 was refundable.
“It shall be the responsibility of the Charterer to bear the costs of
positioning of the helicopter from Honiara to the
work site and at the
termination of this Agreement, to bear the costs of redelivery of the
Helicopter to Honiara.”
Clause 3(b) couldn’t be any clearer. When read with clause 3(a), it is clear
where the delivery site is. This in my respectful
view is a crucial term in
the Agreement. It makes clear where the helicopter is to be collected or
returned and also
defines when responsibility arises. In other words,
responsibility and therefore liability commences and ends on delivery at
Honiara for each party. Anything beyond that must be borne by the parties
themselves.
class="MsoNoMsoNormal" style="margin-top: 1; margin-bottom: 1">
WOULD IT BE JUST IN ALL THE CIRCUMSTANC THE CASE TO ALLOW THE DEFE DEFENDANT
TO RECOVER THE WHOLE OR PART:
The second and final crucial issue to consider under the proviso is whether
er
it would be just in all the circumstances
of this case that the Defendant be
allowed to recover the whole or part of the sums paid. Taking everything
into account,
I am also not satisfied that any recovery should be allowed
save for the costs of fuel and transportation which the Plaintiff
had
received benefit of.
OROF THE COURT:
/p>
SMISS COUNTER-CLAIM OF THE THE DEFENDANT.
2. AWARD JUDGMENT MENT IN FAVOUR OF THE PLAINTIFF FOR THE SUM OF USD37,000.00,
PLUS SBD211,520.00
(SEE
EXHIBIT 12) TOGETHER WITH INTEREST FROM
22ND MAY 1996
(DATE ACTION COMMENCED IN THE HIGH COURT)
AT 5%.
3. COSTS OF THE PLAINTIFF IN F IN THIS ACTION ALSO TO BE BORNE BY THE DEFENDANT.
THE COURT
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