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Samlisan (SI) Ltd v Toranto Connection (SI) Ltd [2019] SBHC 42; HCSI-CC 442 of 2011 (4 June 2019)

HIGH COURT OF SOLOMON ISLANDS

IN THE HIGH COURT OF SOLOMON ISLANDS
CIVIL JURISDICTION

Civil Case Number

SAMLIMSAN (SI) LIMITED
Claimant

TORANTO CONNECTION (SI) LIMITED
First Defendant

GREAT WOOD (SI) LIMITED
Second Defendant

Date of Hearing: 13 November 2015, 16 November 2015, Ruling on 22 January 2016, 4/4/2017, Mr Rano filed notice of change of advocate, 9 April 2018 Mr Rano was sick for 6 days, 16 May 2018, 17 May 2018, written Submission 20 September 2018 and 4 October 2018. Oral submissions 8 March 2019.

Date of Judgment: 4 June 2019

Mr W Rano for Claimant
Mr. R Kingmele for the Second Defendant
First Defendant not taking acting Role

JUDGMENT

Faukona PJ: A claim in category A was filed by the Claimant on 29^th February 2012. The second Defendant filed its defense and counter-claim on 27^th June 2012.

2. The Claimant is claiming that three heavy machineries which it owned was wrongfully detained in the possession, custody, and power of the second Defendant. The machineries are: one Kamatsu 70 LE 66076, one Kamatsu 70 LEJ 10392, and one CAT 966E 10z18535. Those machines are now under dispute in this proceeding.
3. The reason for alleging that those machines were wrongly detained is that whilst they were hired by the first Defendant for logging operations under a verbal agreement, they were intended and subsequently sold to the second Defendant through a purchase agreement which the Claimant, though had notice of, fail to receive any proceeds from the Defendants.
4. On the other hand, the second Defendant denies the Claimant being the owner of those machines. What transpired was an agreement to purchase which only involved the first and the second Defendants, which by law the second Defendant became an honest purchaser for value.
5. The fundamental arguments in this case circles around the notion that the second Defendant claims it purchased the machines from the first Defendant. The Claimant attested that the three machines it owned were sold among other machines the first Defendant sold to the second Defendant and received no proceeds out from that transaction.
6. In between is the first Defendant, which perhaps after selling all the machines left the country. There was no defense filed by it. It raises the issue whether the claim was actually being served. It may be the case that the owners of first Defendant had left and could not be located even in their own country. This indeed has left behind a core arguments which could have been well verified by the first Defendant, in particular to the issue whether it did hire the Claimants three (3) machines. If so, affirm whether it had sold those machines to the second Defendant.
7. Here we have two extreme parties arguing their rights without the central figure present to unveil the truth and to assist the Court made its decision. Hence the Court is rather left in the dark. In any event, the materials which are available will be critically assessed and analyzed in an attempt to find a conclusion.

Link between first Defendant and Wood Target (SI) Ltd.

8. In the statement of case filed with the claim the Claimant averred that in paragraph (2) the first Defendant used to trade under a company name called Wood Target (SI) Limited. In paragraph (3) it stated that on or about 2009, the Claimant entered into a contract with the first Defendant whilst it was trading as Wood target (SI) Ltd.
9. The Claimant’s description of the first Defendant as business entity in 2009 was not the same. Paragraph (1) described the first Defendant as trading under Wood target. That simply means that at that time the first Defendant was yet being registered as a legal entity so that it could trade independently. However, as the Claimant asserted it acquired the authority of another entity, which was registered with a corresponding business interest.
10. The description in paragraph (2) is different as well. It related to the first Defendant was trading as Wood Target but not under a business name and entitlement. In such circumstances the first Defendant must be authorized under a specific agreement with Wood Target before it can indulge in such business activities, if not, to trade as Wood Target is illegal which in the eyes of the law was invalid. No such contract or MOU documentations are available to ascertain such relationship. The second Defendant denies in paragraph 5 (b) of its defense that the first Defendant and Wood Target were not the same entities in law. As such any link between both in terms of business dealing must be reflected by a written agreement or MOU. In the absence of such, a subsidized commonality in terms of shareholding or directorship contain in a document from the Company House would suffice as an appropriate document of proof.
11. However, there is an indirect formal link expose in Exh. 12, 13 and (11) between Pacific Crest Enterprise Limited and the second Defendant. In Exhs1. 12 and 13 were documents from the Company Haus which reflected the common person in both companies was Mr Steven Ng, and both Companies major business defines were Forestry. The contact email for the second Defendant was Forestry. The contact e-mail for the second Defendant was jkjang8888@hotmail.com. That must be an actual person giving instructions on behalf of the second Defendant in this case.
12. Exh. (11) was an MOU endorsed by Mr Steven Ng, a common Director of Pacific Crest Enterprises Ltd and the claimant. The MOU accredited on the understanding that the two machines known as KOMATSU 70LE 66076 and KOMATSU 70LE T10392 be kept in Pacific Crest’s yard. If Mr Steven Ng the common denominator as a Director of Pacific Crest and a contact person in the second defendant then by inference he should be aware of the two machines, and who the owners were. But that was on 21^st September 2011 the date of MOU. The MOU further stated that those machines were not to be sold and their storage with Pacific Crest possession must not attract any charge and rental.
13. Mr Jong Joon in his sworn statement filed on 20^th July 2912, testified that he was a company director of the second Defendant. If Mr Jong was a director of the second defendant, and Mr Steven Ng who was the Director of Pacific Crest Enterprises (SI) Limited, and also a contact person of the second Defendant see “Exh. 13,” according to company House document, then Mr Jong would have some knowledge of the MOU.
14. Perhaps this could be identified as an area of connection unless Mr Ng had replaced Mr Jong as being a director or other responsible position in the second Defendant Company. If Mr. Jong still remains in the company he would acquire knowledge of those two machines the subject of the MOU after being endorsed on 21^st September 2011.
15. Even so, the machines identifications that appeared in appendix (1) attached to the Sale and Purchase agreement endorsed on 13^th September 2011, by the first and the second Defendants, were not the same except for one machine that is Komatsu 70 LE. J10392, but without the year (1998). However, I have noted in the letter “D” was also left out from the identification number in the MOU.
16. All in all, there is only one machine which its identification numbers were common to both documents. The other two machines were totally different. It would appear therefore, the only machine that could probably own by the Claimant among the list in Appendix I attached to the purchase agreement, was the bulldozer Komatsu D70. LE J10392, which could have been hired by Pacific Crest Enterprise as reflected under the MOU and none other.

Title to the machines or ownership.

17. As expected, there is conflicting evidence related to the truth of whether the Claimants own the three machines or not. The Claimant says it does. The second Defendant denies it and submits the machines were owned by the first Defendant.
18. What matters in a civil suit, as required by law is who carries the legal obligation to prove. In all civil cases the Claimant does on the balance of probability. Therefore, it is not legally required that second Defendant ought to proof that the first Defendant did not own the machines. It is the Claimant to proof that it owns the machines on the balance of probability.
19. Hence, I am persuaded to study the exhibits more closely and thoroughly. Firstly, it ought to be noted from the claim itself the identifications in terms of engine no, chassis no and model no. Paragraph 5 of the claim has description of the 3 machines, they are;
    1. Komatsu 70LS 66076
    2. Komatsu 70LE J10392
    3. Cat 996E 10z 18535.
20. In respect to the first machine in Exh. 5 as identified by the certificate of vehicle registration in Malaysia. The certificate identifies the machine as a Komatsu, model no. D70E-LE bulldozer with chassis no. 45563, and engine No. 6D125.298 97. Those identifications are all matched up with the certificate of vehicle registration by the Transport Department of Malaysia in Exh. 5. The only missing letter was “E” between “O” and L in the model name, and of course the same bulldozer. I think those are minor errors but the chassis numbers and engine number are correct.
21. Exh. 1 was an invoice dated 2^nd September 2003. It was sent by the Mother Company to the Claimant related to the purchase. The price in the invoice was $10,800.00 (maybe in US$). That amount was paid and a receipt was issued to the Claimant on 30^th August 2003 for $10,800.00, see Exh.2.
22. On the second machine which is a Komatsu 70 LE J10392 with a chassis no. D70 LE-J10392 according to the certificate of vehicle registration of transport Department of Malaysia, see Exh 6. On that certificate the engine number is 6D125 1003448. Both numbers appeared equivalent in the invoice description issued by the Claimants mother company in Sarawak, Malaysia. The invoice was purposely an information of intention of sale of the machine to the Claimant at a price of $45,000.00, see Exh. 3.
23. Exh. 4 was the receipt of sale of the machine to the Claimant for $45,000.00.
24. The third machine which is a Cat 996E S/N 35502632 as appeared in the invoice for sale Exh. 7 with a sales price of $230,000. The price was paid by the Claimant on 19^th October 2003, see receipt as Exh.8.
25. Unfortunately the identification figures that appeared in the invoice is different from those appeared in the claim in paragraph (5).
26. From documentary evidence it appears the Claimant had truly purchased the two Komatsu machineries. Their engine and chassis numbers are the same as the numbers in the documents in possession by the Road Transport Department of Malaysia, in terms of certificate of vehicle registration. There is doubt as to the third machine, the Cat, purchased by the Claimant was the same as the Cat claimed by the Claimant in paragraph 5 of the claim. The identification numbers are totally different.
27. From the facts as emanated from the documents, the significant issue arise, are the two machineries purchased by the Claimant actually imported into Solomon Islands? In other word were they being transported to Solomon Islands at all?
28. The Counsel for the Claimant actually relies on Exh. 9, that is the Bill of Landing and Exh. 10 Custom and Excise entry form. The rational purpose of the bill of lading is that it shows the number of items shipped from which port and the name of the ship. Noted on the document is the address of the shipper which was wrong. According to the bill of lading the port of loading is Miri Sarawak and the port of discharge is Solomon Islands. The bill of lading was dated 22^nd October 2003.
29. The Claimant avers that the two Komatsu machines were part of the consignment of 6 units Komatsu that were shipped on Vessel Rinto 2/BG East Ocean. And the wheel loader was among 4 units of wheel loader that were shipped on the same vessel.
30. In an attempt to identify those individual machineries is Exh.10 which is the custom and excise entry form. I do not seem to identify those machines because of insufficient description. There are two items in the column of description of goods which related to two machines. One is a “used caterpillar,” and the value which custom used to calculate duty from is 509,837.00. The price cannot be one of the two Komatsu because one cost RM45, 000.00 and the other cost of RM10, 800.00. If SI$509, 837.00 was equivalent to RM230, 000.00 then it must be that Caterpillar that was shipped. Again without evidence of exchange rate used that cannot be taken as certainty and conclusive evidence.
31. The other item spotted is the “used Grader Komatsu”. Whether that machine is one of D7LS 66076 Komatsu or D70LE J10392 as stated in the claim. If one of the two Komatsu was not the grader then that item did not have any identity corresponding to the 2 Komatsu as claimed. In fact the Komatsu machines were bulldozers and not a loader.
32. It may be the case that the Claimant had purchased the machines from its mother company in Malaysian but the problem of uncertainty is whether those three machines were imported into Solomon Islands. An outstanding incident is that one of the Komatsu’s was bought on 3th August 2004. See Exhibits 3, 4 and 6 and the Claimant asserted it was shipped to Solomon Islands under the bill of lading Exh. 9 dated 22^nd October 2003. That position cannot be true. The Kamatsu was purchased 10 months after the shipment the Claimant relies on. It is quite difficult to ascertain whether those machines were imported into Solomon Islands, or may be still in Malaysia.

Notice.

33. The Claimant is asserting that the first and second Defendant had prior knowledge of the Claimant’s machines when it enquired about it. The first Defendant has had since 2009 when it borrowed the machines with subsequent intention to purchase.
34. Any expectation of prior knowledge by the first Defendant might have been the case when the Claimant made enquiries. However, no ambiguity should be left suspended if the Claimant and the first Defendant intended to create a legal relationship concerning the borrowing or the hiring of the Claimant’s machines by the first Defendant. In this case there was no documentation to proof any such relationship. The claimant is relying on verbal agreement. It is my humble opinion that the creation of a legal agreement or contract was necessary, and ought to be encouraged. In particular where two incorporated entities wish to enter into a business dealing, like hiring or borrowing of machines. There is no such document to affirm any hiring or borrowing of the Claimant’s machines by the first Defendant.
35. Therefore, prior knowledge of the machines may exist, but significantly, there is no firm evidence renders such knowledge as presumptive and incapable to support a claim, in particular since 2009.
36. The perception that Mr Wong and Mr Pau arranged and appeared at Mr Jongo’s office on 3^rd September 2011 for a meeting, can well suggest that both knew of the agenda to discuss with Mr Jong. Without doubt the first Defendant would know. If not, then it can be presumed it was silently in possession of such knowledge of the Claimant’s machines.
37. However, it would be difficult to ascertain whether the second Defendant had prior knowledge of the Claimant’s machine before 3^rd September 2011. It is difficult even to suggest or nevertheless to assume. It is verily clear there is no evidence to point to that fact. Unless the first Defendant conveyed to the second Defendant of any prior knowledge as to the ownership of the three machines, by the Claimant, the day before when the one million dollars was paid as a deposit upon signing of the agreement.
38. It is more probable that the first Defendant would have prior knowledge of the Claimant’s machines. Their meeting on 3^rd September and why Mr Pau was included into the scene spoke volume which can be inferred that Mr Pau might have some interest in the discussions. But that did not equate to the second Defendant’s position unless there is evidence to proof the notice of ownership was relayed to it by the first Defendant prior to 3^rd September 2011.

Oral agreement on 3rd September 2011.

39. The question to pause is whether there was an oral agreement concluded by the parties on 3^rd September 2011. After controversial contention as to the proper date of the meeting, it is finally concluded, that there was a meeting of all the parties representatives on 3^rd September 2011. The question is what was finally agreed upon at the meeting. There were conflicting contentions. The claimant says there was an oral agreement for sale of its machines and payment to be made directly to it by the second Defendant. And that Mr Jong agreed to pay the Claimant.
40. The Second Defendant denies that was the position; the topic of discussion was business in general. The topic was they discussed the preparation of the agreement for sale of the machines and how the agreement would be signed. There is evidence that Mr Pau wanted to discuss the machines further but Mr Wong rebuked him and stated that he would sorted out with Mr Wong’s other business partner. The question of ownership of the machines was not discussed.
41. Rhetorically, Mr Jong, in my perception, appeared to be neutral when they discussed the preparation for the sale of the machines. When the discussion began to grow deeper into how the agreement be signed, Mr Wong then stopped the discussion. It appeared Mr Jong was a willing party to discuss anything concerning the machines at what depth, was cut short by Mr Wong for reason himself would know, why? Mr Wong could have had in mind a hidden agenda which he would not like Mr Jong to hear or raised by Mr Pau in their discussion. That gave rise to the very fact that Mr Jong indeed had no prior knowledge that the Claimant owned the three machines that will be included in the sale. The question now left is, had Mr Pau and Mr Wong discussed the machines on a later date?
42. If there is evidence he had notice on the day the one million dollars was paid, then the issue about ownership will be discussed as Mr Pau had the rights to insist restraint the sale to the second Defendant, or suggested an option.
43. In cross examination Mr Pau did not object the machines being sold to the second Defendant but agree with an answer “Yes” in Court. That answer is more favorable to the second Defendants case rather than the Claimant.
44. In a situation where two sets of evidence are positioned in the extreme, then it is legally convenient to accept one and cannot be both. The only evidence which may taint the facts is the date the oral meeting which the second Defendant had confused himself. Of course it can’t be 11^th of September 2011. That would run contrary to the fact that the purchase agreement was signed on 12^th September 2011 in Singapore.
45. The Claimant persisted that the oral agreement on the 3^rd September 2011 contained an important term which was conceded that its machines be sold and payment should be paid directly to it.
46. It would appear to me that term was an important one, probably plus others being the outcome of the meeting. Such terms should be reduced to writing under the guidance of S.33 of the Companies Act. That provision though statistically provides option under certain circumstances in particular S.33 (c) of Act. However, it would be relevant in this case that the term required the oral agreement on 3^rd November 2011 be reduced to writing. The face value of that option is that it is not easy to dispute agreement in writing. Secondly the agreement was made by multi-million or legal entities. To enjoy free flow of business activities between such entities, it is desirable that a written contract must be made.
47. If the provisions were complied with then confusion as to date of the agreement is not necessary, and no party is placed under greater onus to proof, everything is self-expository on written form.
48. On another basis, if the oral agreement was treated as a preliminary one, the future agreement written in form should reflect the terms discussed in the oral session. In this case the written agreement did into reflect the terms the Claimant relies on. It was not required because it was a sales agreement between the first and the second Defendants and had nothing to do with the Claimant.
49. The same can be said related to the payment of one million dollar. It was an agreement between the first and the second Defendant, a position well documented by the Court, that if the those machines were indeed hired and kept by the first Defendant, with the intention to purchase, then it was knowledge known to the first Defendant. There is no evidence to show the second Defendant was aware of the Claimants ownership of the machines.
50. I find there is no oral agreement reached by three parties on 3^rd September 2011, and had been entered as such by the court.

Sale and purchase agreement of 12th September 2011.

51. The submissions insisted the second Defendant had notice of the three machines which the first Defendant did not own. Earlier on I ruled there was no evidence to proof prior notice had been possessed by the second Defendant before paying the one million dollar on 2^nd September 2011. That is unacceptable because it is succumbed by assumption.
52. Earlier I also conclude there is high possibility that even without the second Defendant had prior notice of the machines; the payment was done on 2^nd September 2011. That could obviously reflect without any legal obstruction the application of the principle ‘honest purchase in good faith’ for value without the knowledge of the owner.
53. The strong argument advance by the Claimant is that the machines were not owned by the first Defendant. That can definitely be answered by the first Defendant, but cannot be imposed upon the second Defendant to unilaterally accept. The first Defendant was supposed to be the main player in this case. His absence render questions and issues imposed upon the second Defendant whose case is fundamentally different from the first Defendant, hence cannot be expected to defend.
54. Another significant point is, had the Claimant and the first Defendant endorsed a written agreement at the initial stage, when the machines were hired by the first Defendant. It would have been easy to determine their rights and obligation in a Court of law. Contributed by the fact that the first Defendant was not taking active role in this case and no judgment was entered against it in its absence, is quite difficult to ascertain the truthfulness of the evidence before this Court.
55. The Counsel for the Claimant then refers to the principle in Rowland v Divall^[1]. The Principle in that Case upholds honest purchaser for value. In this case the Claimant asserts the second Defendant had prior knowledge of the Claimant’s machines and by making payment in full, the titles in those machines will automatically transfer to it, hence an illegal transaction.
56. One amazing approach was that Mr Pau’s evidence at the meeting on3^rd September 2011 lacked any detail. As a business experience man he could have gave details about the agreement reached at that meeting. He even failed to show any document that his company had title to the machines. As I would reiterate again when the second Defendant paid for the three machines there was no knowledge of any interest by the Claimant in the machines. It is not the case, therefore, that the Claimant was ignored though it may have the title to the machines, thus no point in acknowledging it. To accept that the second Defendant was convicted after making enquiries with friends as to the ownership is an error. Whoever supplied information must provide evidence in a proper manner otherwise it was hearsay. In any event the second Defendant denies it knew that the Claimant owned 3 machines right from the start of this case.
57. All in all the Claimant is attempting to enforce upon the second Defendant to accept that it had prior knowledge before the first installment of one million dollar was paid. Legally that cannot be accepted. The Court will insist that any issue litigated in Court require evidence to proof or disprove and not unduly placing upon someone of what he does not know, that must come to its own limit. It is the function of the Courts to decide the truth of an issue.

Illegal contract.

58. The Claimant raised the issue that the contract between the first and the second Defendants was intended to circumvent the Income Tax Act, therefore must be illegal.
59. The argument is that by failure to disclose the initial part payment to the Claimant and that a subsequent payment would be made in Singapore. In effect the first and the second Defendant had led the Claimant to believe that its machines be paid; that is fraud.
60. Well, with due respect that is a new issue which had never been pleaded at all. In Nimelia v SI Home Finance Ltd^[2] the Court recorded;
    • “The Claimant cannot come to court and seek relief of what has not been pleaded and particularized, or any party for that matter. The Court will not grant unless they are pleaded and on record”.
61. That assertion cannot be accepted. The submissions by the second Defendant were stress to the point. None of those allegations were put to Mr Jong in cross-examinations. The issue is raised for the first time in the written final submissions. It was never pleaded during pleading stage.
62. The second argument is that the first and the second Defendants had chosen to execute the contract in Malaysia and to make payments in Singapore, had deprived the Crown of income tax. A tax would have to be paid if it was executed in Solomon Islands. The Counsel refers to two domestic cases and one English case. In any event that submission was never pleaded in the claim and therefore must not be permitted to form part of Claimant’s submissions and be considered.

Memorandum of Understanding.

63. This issue had not been part of the Claimant’s submissions. Properly could have been left out due to itself not being an issue. However, the MOU was executed by Pacific Crest Enterprises (SI) Limited and the second Defendant. One of the persons whose signature appears on the agreement is Mr Steven Ng. Mr Ng was the contact person for Pacific Crest and the second Defendant – see Exh. 12 and 13.
64. As it appears, the Counsel for the second Defendant submits that Mr Ng did not obtain authority from the second Defendant to execute the MOU on its behalf. The Claimant would have called Mr Ng but did not do it for the reason known to it alone.
65. It is noted the MOU was dated 21^st September 2011, six days after, the second Defendant paid the balance price for the machines to Toronto. Of course the MOU was irrelevant to the issue between the Claimant and second Defendant. The date of execution was relatively by gone; the second Defendant had already become the legal owner of the machines.

Conclusion.

66. This case comprise of two parts. The first relates to the ownership and importation of the machines by the Claimant into Solomon Islands. The Court has found that the chassis numbers and model numbers of the machines bought by the Claimant in Malaysia did not match the machines shipped to Solomon Islands under the bill of lading. Description of manufacture was there but there is no specific evidence to point out those are the machines bought by the claimant and which were shipped to Solomon Islands. I found there is no evidence to match and conclude the machines bought by the Claimant from Malaysia were never shipped to Solomon Islands at all.
67. The second apart of the case is the sale and purchase part which involved the second Defendant as the buyer of the machines from the first Defendant.
68. It could have been an easy task if an initial written agreement was executed by the Claimant and Toronto in respect of hire purchase when the machines were hired by the first Defendant. It could have been easier further if the first Defendant was present in court to affirm the machines. In the absence of that, the perception the Court has on the Claimants case is gloomy. The Claimant attempted to pressure the second Defendant to acknowledge that it had prior knowledge of the three machines before the first transaction of a million dollar took place. Since there is no firm evidence to affirm such belief, it is mere assumption which has no proof.
69. In such circumstances, lack of prior knowledge of the real owner renders the second Defendant as a honest buyer for value. In any course that option is still in favor of the second Defendant including lack of evidence to proof the rest of the issues. I must therefore dismiss the claim in its entirety.
70. In respect to the CAT machine which Mr Pau has admitted in court is in the possession of the Claimant, judgment is hereby granted in favor of the second Defendant in relation to its ownership. That machine must forthwith deliver up to the second Defendant.

Orders:

(1) The claim is hereby dismissed in its entirety.
(2) Grant orders that the Claimant deliver forthwith to the second Defendant the CAT Machine.
(3) Grant order that the Claimant pay damages for the use of the CAT from 21^st September 2011 up to and including the date of payment to be assessed.
(4) Costs incidental to this hearing be paid by the Claimant to the second Defendant on standard basis.

THE COURT.
JUSTICE R FAUKONA
PUISNE JUDGE.

^[1][1923] 2 KB 500.
^[2] [2008] SBHC 69