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Premium Balsa Products Ltd v Attorney-General [2000] SBHC 34; HC-CC 231 of 1999 (31 August 2000)

HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 231 of 1999

PREMIUM BALSA PRODUCTS LIMITED,
(VERNON SMITH Joined)

-V-

THE ATTORNEY GENERAL
(On behalf of the Investment Board of Solomon Islands)

High Court of Solomon Islands
(Lungole-Awich, J)

Date of Hearing: 25th April 2000
Date of Judgment: 31st August 2000

Mr R Teutao for the plaintiff
Ms J Gordon representing Attorney General for the Defendant

JUDGMENT

(Lungole-Awich, J): Premium Balsa Products Limited, cited originally as the sole plaintiff, came to Court by originating summons although it had applied for and obtained leave of the Court to commence application proceeding for the order of certiorari to secure the relief it wants. Leave of court is required to commence certiorari proceeding - see Order 61 rule 2 of the High Court (Civil Procedure) Rules. Nothing was technically wrong in abandoning the certiorari proceeding, it was merely a question of the solicitor not making up his mind early enough about the form in which he would commence his client's case. The only discomfort that must now follow is that in any event, the costs, if any, relevant and up to the time leave was obtained are granted to the defendant.

In many jurisdictions applications for certiorari order, mandamus order, prohibition order and many other orders against administrative decision or action are brought simply by notice of motion applications, prior leave of court is not necessary. Some people criticise that procedure which omits the requirement for leave as leading to the court getting inundated with baseless applications against administrative decisions.

The Orders Asked For

Premium Balsa Products Limited asked the Court for declaratory orders that the decision of the Foreign Investment Board, taken on 21.10.1998, withdrawing "Certificate of Approval No. 52/95," dated 1.11.1996, issued under s:6 of the Investment Act, Chapter 142, and the Board's subsequent decision of 9.4.1999, "to maintain" the decision to withdraw the certificate are, "unlawful and void". In addition Premium Balsa Products Limited asked for consequential declaration that the certificate has remained valid to date. For a non national to engage in business in Solomon Islands, a certificate of approval of foreign investment is required under s:6 of the Investment Act, Chapter 142 in the Statute Laws of Solomon Islands. If the three declaratory orders are granted, Premium Balsa Products Limited hopes that it will resume carrying on its timber planting, harvesting and exporting business and one Mr Vernon Smith, a foreign national, will continue as a director in Premium Balsa Products Limited. He has enormous, almost absolute power, in the conduct of the affairs of the company.

Premium Balsa Products Limited was cited as the sole plaintiff, and the proposed declarations sought described the certificate of approval as belonging to Premium Balsa Products Limited. Learned counsel Mr R Teutao for Premium Balsa Products Limited, presented the case as if the certificate of approval, No. 52/95, had been issued to Premium Balsa Products Limited, and learned counsel Ms J Gordon appearing on behalf of the Attorney General representing the Foreign Investment Board, the defendant, opposed the case also on the assumption that the certificate had been issued to Premium Balsa Products Limited. The fact is that certificate No.52/95, exhibit VS1 varied as in exhibit VS2, was not issued to Premium Balsa Products Limited, it was issued to Mr Vernon Smith and remained his at the time the decision was taken to withdraw it. I considered it a mistake, but an honest one, that Premium Balsa Products Limited was cited as the sole plaintiff instead of or jointly with Mr Smith. Although Mr Smith incorporated Premium Balsa Products Limited through which he made his investment and carried on the businesses authorised in his certificate, the law must not be lost sight of that Mr Smith and Premium Balsa Products Limited are two distinct persona. That is the first elementary rule of Company Law known even to non lawyer business people - see s:16 of the Companies Act, Chapter 175, which adopted the rule about distinct corporate personality from the Common Law case, Salomon v Salomon and Co. Ltd [1897] AC 22. An incorporated company is not even an agent or trustee of those who incorporate it or become its members from time to time; that is the rule in Macaura -v- Northern Assurance Co. Ltd [1925] AC 619.

The defendant did not take issue about Premium Balsa Products Limited being cited as the sole plaintiff and Premium Balsa Products Limited or Mr Smith did not at any time apply to have Mr Smith substituted or joined as a plaintiff together with Premium Balsa Products Limited. Nonetheless I took the view that the case was commenced in the name of the wrong plaintiff, as Mr Smith was not even joined as a plaintiff. It was my view that the error must be corrected in order that the Court may determine the real matter in dispute, the withdrawal of Certificate No. 52/95 issued to Mr Vernon Smith, not to Premium Balsa Products Limited. I called parties back to Court and informed them about the intention of the Court to act under Order 17 rule 2 of the High Court (Civil Procedure) Rules which allows the Court to correct honest error or uncertainty in citing plaintiff, by substituting or adding plaintiff. I invited parties to point out any point or prejudice that may arise and they would like the Court to consider. Both parties simply agreed to the intended amendment. I decided to amend by ordering that Mr Smith be added as the second plaintiff, and that the originating summons be amended to conform to the amendment made. I was persuaded to retain Premium Balsa Products Limited as a plaintiff because the decision to withdraw the certificate would have direct impact on the business of the company. The law has now developed to require the decider to hear even a person who has only legitimate expectation when statute does not expressly give him the right to be heard - see Schmidt -v- Home Secretary [1969] 2 Ch. 149 and McInner -v- Onslow - Fane [1978] 1 WLR 1520 [1978] 3 All ER 211.

The Facts

The facts of the case are summarised in the following paragraphs. On 1.10.1995 Mr Smith, an intending foreign investor, obtained "Certificate of Approval No. 52/95," from the Foreign Investment Board. The certificate authorised Mr Smith to carry on business in Solomon Islands - see s:6 of the Investment Act. At application stage Mr Smith proposed that he would incorporate Premium Balsa Products Limited in which a citizen, Ms Annie Anilabala, would be a director, and that he would carry on his business through the company. Mr Smith indeed incorporated Premium Balsa Products Limited and carried on the businesses approved in his certificate through the company.

Later on 11.11.1996, the certificate of approval of Mr Smith was amended by enlarging the businesses that he could carry on and therefore the company could carry on. The enlarged businesses were stated in the amended certificate as: "To plant Balsa trees and produce sawn Balsa wood for export, harvest and market other species of woods". The exact places in Solomon Islands at which the business operations would be located were subject to approval by the relevant provincial authorities. There were other conditions in the certificate, not particularly relevant to this case. All the conditions were not to be changed or altered without prior approval by the Board. In the Act, the word, "provisions", was used to describe conditions in a certificate of approval.

By June 1998 the Foreign Investment Division of the Ministry of Commerce and Primary Industry was receiving reports from citizen business people associated with Mr Smith that he personally, and Premium Balsa Products Limited were engaged in business activities that contravened provisions in the certificate of approval. The Division does administration for the Board. The Division seemed to regard Mr Smith and the company as one, sometimes it addressed letters to Mr Smith and other times to the directors of Premium Balsa Products Limited. As the result of the report from people, the Division advised Mr Smith in a letter dated 24.6.1998, that a report about incidents of contravention of provisions in the certificate was being compiled by the Division for consideration by the Board. Following that, a letter dated 14.8.1998 was sent to the directors of Premium Balsa Products Limited informing them that the company had contravened provisions in the certificate by engaging in businesses outside the scope authorised in the certificate. The incidents of contravention were stated in the latter. The non approved businesses alleged to be the contravening businesses were other timber businesses, renting out properties and farming and selling cash crops.

The company's solicitor replied in a letter dated 20.8.1998, denying the allegations of contravention of the provisions. He informed the Division that the allegations concerning K-Tug Funds and the charter of a vessel, the LC Vitu, had been sufficiently explained before, the allegation concerning Rad Enterprises had been considered by the Board before and concluded. The solicitor denied the allegation about farming cash crops, explaining that the crops were grown by citizen employees for their own use and benefit. Despite the solicitor's response, the Board sent a letter dated 21.10.1998, informing the directors of the company that certificate of approval, "of the company" had been withdrawn. The Board of course meant certificate No. 52/95 issued to Mr Smith.

Apparently the allegations relayed by the letter of 14.8.1998 was only subsequently compiled in an internal departmental report dated 31.8.1998. The report would then have not been sent to Mr Smith or the company before they were informed about the withdrawal of the certificate. That might have became the basis of the complaint by the plaintiffs' first and second solicitors that the plaintiffs were denied the right to, "a fair hearing", a right provided for in s:15 (2) of the Investment Act. The Board, after the receipt of the contention of the solicitors, wrote a letter dated 5.2.1999, to the directors of the company, inviting the company and its solicitor to attend the Board's meeting on 26.2.1999. An undated, document headed, "ATTACHMENT A1," recording in detail allegations against the plaintiffs were forwarded with the letter of invitation. The contents of the attachment included the contents of the report dated 31.8.1998, and more. The company was asked to answer, "questions," about the allegations therein described as, "the five significant points raised in our investigation."

The meeting intended for 26.2.1999 was postponed and took place on 3.3.1999. Mr Teutao, the second solicitor for Mr Smith and the company, was informed about the postponement. The solicitor and Mr Smith attended the meeting on 3.3.1999 and put the case of Mr Smith and of the company to the Board. Mr Smith now says that other directors of the company and witnesses were not allowed to attend and testify at the meeting.

Following the meeting, the Board decided, "to maintain the previous decision to withdraw", the certificate. Mr Smith alleges that the decision, "to maintain" the withdrawal, was taken on 9.4.1999, not on 3.3.1999, the day of the meeting, and only following a meeting of the Board with Ms Anilabala, who at the time was no longer a director of the company, and 6 other persons. Mr Smith goes on to allege that Ms Anilabala was, in his absence, allowed to give further allegations to counter the representation made by him on 3.3.1999 and that he was not informed and was not heard on those further allegations which he says were the basis of the Board's decision "to maintain" the earlier one withdrawing the certificate. He also alleges that Ms Anilabala had personal "domestic" reason for telling lies against him and the company she had been removed from. Mr Smith described Ms Anilabala as his former wife.

The Law Applicable

Under s:15 of the Investment Act, the Board is authorised to withdraw a certificate of approval of a foreign investor if the investor fails to comply with the provisions of the Investment Act or the provisions of the certificate of approval. Before taking action the Board is required to inform the foreign investor of the nature of the contravention of the provisions, and to afford the foreign investor adequate opportunity to present his case to the Board. The full provisions of s:15 are:

"15. (1) Where any approved enterprise fails to comply with the provisions of this Act or the provisions of the certificate of approval, the Board may -

(a) direct the respective Ministries to withdraw, alter or disallow any or all incentives granted; or

(b) withdraw the certificate of approval.

(2) Before taking any action under subsection (1), the approved enterprise shall be informed in writing of the nature of the contravention or non-compliance and be afforded an adequate opportunity to present its case, and the Board may, if it thinks fit permit an opportunity for the contravention or non-compliance to be corrected."

Note that for the purposes of this judgment, approved enterprise is taken to mean approved foreign investment.

In the section, the Legislature imposed a procedural precondition to be complied with before a certificate of approval of enterprise may be withdrawn. The Court must determine, taking the Investment Act as a whole, whether the Legislature intended the precondition in s:15 (2) to be regarded as peremptory or merely as directory. If the precondition is regarded as peremptory, the result of such a precondition is that the administrator or tribunal will be acting outside its power if it fails to comply with the precondition. That rule has been described by Lord Diplock as procedural ultra vires in, Council of Civil Service Unions -v- Minister for Civil Service [1983] UKHL 6; [1984] 3 All ER 935 or [1985] AC 374. Usually the more serious the effect of the decision or action on the person likely to be affected, the more likely such a provision will be regarded as peremptory. I repeat, however, that the question is decided primarily on the construction of the provisions in the Act as a whole, to determine the purpose of the Act. In a New Zealand case, Simpson -v- Attorney General [1955] NZ LR 271, a statutory provision about time required for general election warrant to be issued by the Governor General was interpreted to be only directory and not peremptory so that the late issuing of the warrant did not render the general election invalid. The justification for that interpretation was that to hold otherwise would mean there would be no parliament and there would be a vacuum, the Legislature could not have intended that.

In my view, another way of looking at s:15 (2) is this: The right of a foreign investor to know the particulars of the case he faces and his right to opportunity to present his side of the case, provided for in s:15 (2) are together, one aspect of the two aspects of the Common Law rule that everyone has right to natural justice, the right not to be condemned without a hearing; expressed as audi alteram partem. The other aspect of natural justice is the rule against bias, more accurately, I would rephrase as the rule against appearance of bias; the rule that no one is to be a judge in his own cause, expressed as nemo judex in causa sua; it is not at issue here. The inclusion in s:15 (2) of the right to know the case and be afforded opportunity to be heard is therefore to be regarded as an entrenchment of the rights and serves as notice to those given responsibility under the Act that disregarding the rights will vitiate or render their decision or action invalid. The provision must be interpreted as peremptory because even without including the rights in the Act, the rights would be available under the general principle of natural justice.

Determination

Do the facts in this case establish the plaintiffs' case that s:15 (2) has not been complied with by the Board when it took the decisions to withdraw the certificate of approval issued to Mr. Smith?

The decisions of the Board were taken on two occasions; that on the first occasion was conveyed in a letter dated 21.10.1998, and that on the second occasion was taken on 9.4.1999, after the meeting on 3.3.1999 and conveyed by the Division's letter dated 12.4.1999. The plaintiffs have asked for declarations vitiating both decisions. The above question must be answered about both decisions. The question comprises two parts, namely; were Mr Smith and the company, prior to each of the decisions, not given the particulars of the alleged incidents of contravention of the provisions of the certificate, and were they not afforded opportunity on each occasion to present their case against the allegations?

Determination
(Proposed Declaratory Order 1)

It is my finding of fact that before coming to Court, the Board had conceded the contention of the plaintiffs' solicitors that the Board's decision on the first occasion was taken without compliance with s:15 (2) of the Investment Act. I have reached that finding because according to correspondence exchanged, the Board was prepared to give Mr Smith and the company a second chance to put their case to the Board so as to resolve the argument about lack of opportunity to be heard. In particular, after the first decision had been conveyed to Mr Smith and the company, the Division sent a letter dated 5.2.1999, inviting the directors of the company and their solicitor to attend the meeting intended for 26.2.1999. Forwarded with the letter was the "attachment 'A1'," in which the allegations and findings of the Division were detailed. The plaintiffs were invited to answer in that meeting the allegations and findings made following investigation. The Board obviously took that step so as to correct any failure that might have occurred in giving particulars of the alleged incidents of contravention and any lack of opportunity to be heard; the Board, in my view, intended to settle the argument about lack of opportunity by calling another meeting. It thereby repudiated its first decision and was to decide the matter anew taking into account the representation to be made by the plaintiffs at the meeting intended for 26.2.1999. Although the letter of the Board dated 12.4.1999 written after the meeting on 3.3.1999, stated that the Board decided to maintain its previous decision, the subject of proposed declaratory order 1, the previous decision had actually been abandoned, the Court cannot make any declaration about non existent decision. Proposed declaratory order 1 is refused.

Had the Board not conceded that it contravened s:15 (2) when it took the first decision and abandoned it, I would have, on the sum of the contents of prior correspondence between the Division and Mr Smith and the company, decided that Mr Smith and the company had been adequately informed about the nature of the activities regarded as incidents of contravention, and had been given adequate opportunity to present their case before the first decision was taken. One example is the letter of the Division dated 14.8.1998, outlining the contravening activities and asking for explanation. The letter was sent before the first decision was taken and communicated, and also before the internal report was compiled. Opportunity required under s:15 (2) for a foreign investor affected to present his case does not mean that the opportunity must be in a formal hearing such as in a court of law nor is it to be by oral hearing. R -v- Harrow L B ex parte D [1990] 3 All ER 12 is an example. In the case in England, a mother under investigation for child abuse was refused attendance at a conference with a social worker and others, but was invited to make written submission. The Court of Appeal in England decided that she was afforded opportunity to be heard - see also Local Government -v- Arlidge [1915] AC 120, Board of Education -v- Rice [1911] UKLawRpAC 18; [1911] AC 179 and Hanley Simata -v- Goldie College Board HCCC 89 of 1997.

Determination
(Proposed Declaratory Order 2)

The second decision which the Board said, "maintained", the first was actually a new decision, although it was to the same effect as the first, namely, to withdraw the certificate of approval. The plaintiffs do not contend that no or insufficient particulars of the allegations of contravention were provided before the meeting intended for 26.2.1999, but held on 3.3.1999. Indeed the contents of "attachment A1" sent to the plaintiffs before the meeting were so exhaustive, it would have been impossible to say that sufficient particulars had not been supplied before the meeting on 3.3.1999. Even from the other exhibits attached to the affidavits, I am persuaded that the sum of the contents of letters sent earlier to Mr Smith and the company had brought all the allegations of incidents of contravention of s:15 (2) to their attention before the meeting.

The plaintiffs relied on two contentions to impugn the second decision, namely, that some directors of the first plaintiff and some witnesses were not allowed in the meeting on 3.3.1999, and that particulars of allegations of contravention made by Ms Anilabala and 6 others subsequent to the meeting were not given to the plaintiffs, they were not given opportunity to reply to the allegations.

About the first contention I have to say this: In the first place, Mr Smith and the solicitor had been given before the meeting on 3.3.1999, the allegations intended to be discussed at the meeting, they attended the meeting and made representation. That was full compliance with s:15 (2) by the Board. In the second place, in the affidavits filed for the plaintiffs there was no deposition that at the meeting or earlier, the plaintiffs' solicitor had informed the Board that they had other directors of the company and witnesses that they wanted the Board to hear. That is significant especially when one of the allegations which had been made known to Mr Smith and the company was that the citizen proposed as a shareholder and director of the company at the time application was made for the certificate of approval and who was entered on the certificate was changed without the approval of the Board. If any directors or witnesses wanted to be heard in support of their case, they could have informed the meeting or got Mr Smith or their solicitor to inform the Board at the meeting. It is expecting too much from an administrative authority to go out of its way to ask that witnesses be called, it is enough if it informs the person at risk that he may present his case, it is up to the person how he presents his case. I find as a fact that Mr Smith and the solicitor were adequately informed and were afforded opportunity to present the plaintiffs' case, and that at the end of the meeting on 3.3.1999 they were satisfied with the opportunity afforded them. The plaintiffs' first contention that other directors and witnesses were refused audience and therefore opportunity was not given to the plaintiffs at the meeting on 3.3.1999 fails.

About the second contention, I start by extending it to mean that the plaintiffs contend that the Board based its second decision on new allegations made by Ms Anilabala and 6 others on 9.4.1999 after Mr Smith and the company had presented their case to the Board or that the Board partly based its decision on the new allegations. The contention was therefore a complaint that the plaintiffs were not given the particulars of the new allegations and were not given opportunity to put their case to meet the new allegations. The plaintiffs' submission on the point of law would be that because of that, s:15 (2) was not complied with when the Board took the second decision.

My first reaction to the second contention was that I would accept the submission of Ms Gordon that the Board having afforded the plaintiffs and their solicitor adequate opportunity to present their case on 3.3.1999 and having taken into account their representation, did not contravene s:15 (2) of the Act despite the fact that the Board subsequently heard Ms Anilabala and 6 others. My reaction was based on the rule in R -v- Harrow LBC ex parte D [1990] 3 All ER 12, McInnes -v- Onslow Fane [1978] 3 All ER 211, Board of Education -v- Rice [1911] UKLawRpAC 18; [1911] AC 179 and Hanley Simata -v- Goldie College Board of Management HC-CC 89 of 1997. In all the cases, the law is stated that the opportunity to be heard need not be in the nature of a court hearing or take any particular form, administrative authority may obtain information in any way it thinks best, but always giving a fair opportunity for correcting or contradicting any relevant information.

After more careful consideration I realised that the submission of Ms Gordon had much merit only in as far as the allegations in A1 were concerned. The submission lost its merit when the contents of A1 were compared with the information supplied by Ms Anilabala and 6 others. The allegations in A1 were about other timber export businesses, renting out property, farming and selling cash crops and changing the citizen director of the first plaintiff. The particulars were supplied to the plaintiffs before the meeting on 3.3.1999 and before the Board met with Ms Anilabala and 6 others. On the other hand, the information obtained from Ms Anilabala and 6 others is deposed to at paragraph 31 of the affidavit of Mr Fred Maetoloa. The paragraph reads:

"31. At that meeting [of 3.3.1999] the Board did not make a decision on the status of Premium Balsa Products Limited. It deferred its decision to a future date with the intention to request the local Balsa tree growers to give account on how the project was progressing. On 9/4/99 the Board gathered information from several Balsa tree growers and the former Premium Balsa Products Ltd shareholder regarding the progress of the Balsa plantations. No new allegations or statements were made against Premium Balsa Products Ltd."

From the comparison it is clear that what the Board heard from Anilabala and 6 others was different from the allegations in A1. What the Board heard from Ms Anilabala and 6 others had not been put to the plaintiffs before, so that I may say that the Board was merely seeking clarification arising from representation already made by the plaintiffs' solicitor. Paragraph 31 of Mr Maetoloa's affidavit states that the Board postponed its decision so that it could get information about the progress of the Balsa project first. That was not one of the allegations in A1 sent to the plaintiffs. It was not one of the incidents of contravention described in the Board's letter of 5.2.1999 as the, "five significant points raised from ... investigation," which five points the plaintiffs were supplied with and asked to answer and the plaintiffs made representation in reply to. In fact the progress of the Balsa project was never put to the plaintiffs at any time before or after the Board had met with Ms Anilabala. When the Board received information about the progress of the Balsa project from Ms Anilabala and 6 others, the effect was to introduce totally new information into consideration by the Board.

The effect of the new information, the progress of the Balsa project, on the Board when it took the second decision withdrawing the certificate cannot be ignored. The Board must have regarded the information as material since it considered that it was necessary for the Board to postpone taking the decision so that the information could be received first. It follows that the information should have been provided to Mr Smith and the company and they should have been asked to present their case in reply as required under s:15 (2) of the Act. I have to conclude that the Board took the second decision in contravention of the procedure required. The plaintiffs have proved contravention of s:15 (2) in as far as the Board took into account the information about the progress of the Balsa project, the information obtained from Ms Anilabala and 6 others, and the Board did not put the information to the plaintiffs. That justifies a declaration vitiating the second decision.

In the end I think it is just for me to grant proposed declaratory order 2. I decline though to use the phrase, "unlawful and void" used in the proposed declaration. That is because the consequence of the term void might have not been intended as the consequence of contravention of s:15 (2). In London and Clydeside Estates Ltd -v- Aberdeen DC [1979] UKHL 7; [1979] 1 All ER 876 [1980] 1 WLR 182, the House of Lords highlighted the risk in using terms such as void and voidable in Administrative Law where the jurisdiction of the court is to ensure the proper exercise of powers by public authorities. The declaratory order that I grant is:

The decision of the Investment Board taken on 9.4.1999 following the Board's meeting with Ms Anilabala and 6 others was in contravention of s:15 (2) of the Investment Act, Chapter 142 in the Statute Laws, the decision is to be regarded as vitiated.

Determination
(Proposed Declaration Order 3)

Proposed declaratory order 3 is refused. The effect of the order would be to bring into issue the consequence of the expression "unlawful and void", used by the plaintiffs in the proposed declaratory order. The consequence of the expression was not canvassed during the case.

Costs

I have already ordered costs against the plaintiffs in any event, upto the time leave was obtained. I now have to consider that order together with the fact that the plaintiffs have been successful in one of the three declaratory orders they sought, and the fact that they lost in up to five of the six grounds advanced, especially the fact that any decision the Board might have taken before hearing Ms Anilabala and 6 others would have passed the test of s:15 (2). The overall order for costs appropriate is that parties bear their own costs. The order for costs up to the time leave was granted has been taken into account in the overall order.

Delivered this Thursday the 31^st day of August 2000
At the High Court
Honiara

Sam Lungole-Awich
Puisne Judge