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Treasury Timber Ltd v Lau Hui Kwong [2023] SBHC 108; HCSI-CC 141 of 2021 (17 October 2023)

HIGH COURT OF SOLOMON ISLANDS

IN THE HIGH COURT OF SOLOMON ISLANDS
CIVIL JURISDICTION

Civil Case No. 141 of 2021

BETWEEN

TREASURY TIMBER LIMITED
Claimant

AND:

LAU HUI KWONG
First Defendant

AND:

GLOBAL (SI) LIMITED
Second Defendant

Date of Haring: 3 October 2023
Date of Decision: 17 October 2023

Mr Donald Marahare for the Claimant
Mr Desmond Nimepo for the First and Second Defendant

Judgment

Bird PJ:

1. This is a Category B Claim filed by the Claimant on 30 March 2021. A Defence was filed by the First and Second Defendants denying the Claim of the Claimant on the basis that the money claimed was not a personal advance of the First Defendant but a business undertaking between the Claimant and the Second Defendant through the First Defendant.
2. The facts of the case are the following:
   1. The Claimant is a company duly incorporated under the Companies Act 2009 and conducts business in the forestry sector;
   2. The First Defendant owns the Second Defendant;
   3. Southern Forest Industry is the holder of felling license no. A 101114;
   4. The Claimant executed a Technology, Management and Marketing Agreement (TMMA) on 21 September 2019 with Southern Forest Industry;
   5. The Claimant paid the First and Second Defendants a total of $500,000.00 over the period from 19 to 26 September 2019,
   6. The Claimant filed for reimbursement of $500,000.00. The proceeding is a debt recovery case.
3. From the above facts, the issues that the court must determine at trial are the following:
   1. Whether or not the $500,000.00 paid to the First and Second Defendants was a cash advance or funds in exchange of the TMMA;
   2. Was there an oral contract existed between the Claimant and the Defendants? If so what are the terms? If so is the oral contract enforceable?
   3. Were the Defendants privy to the contract existed between the Claimant and the Defendants;
   4. If not, then the Claimant is entitled to the reliefs sought.

The Claimant’s case

4. In his opening address, Mr Marahare of counsel for the Claimant says that this case is a debt recovery case. Cash advances totalling S500, 000.00 was requested by the First Defendant from the Claimant. The Claimant advanced to the First Defendant that sum of money between the period 19 to 26 September 2019. He relies upon the sworn statement of Wen Yee Yew filed on 21 May 2021 at trial. Mr Yew was called to be cross-examined in court upon the contents of his sworn statement.
5. The only witness who was called to give evidence on behalf of the Claimant was Wen Yee Yew, the Operational and Spare Parts Manager. Mr Marahare of counsel relies upon the following documents in support of his client’s case:
   1. Claim Category B filed on 30 March 2021;
   2. Sworn statement of Wen Yee Yew filed on 21 May 2021;
   3. Request for further and better particulars filed on 21 May 2021;
   4. Response to request for further and better particulars filed on 19 June 2021;
   5. Documents contained in Court Book 2 filed on 24 August 2023.
6. Mr Marahare of counsel also placed reliance upon the amended agreed facts enunciated in paragraph 2 of this judgment. The evidence in support of the claim of the Claimant is summarised as follows viz, the Defendants confirmed receipt of the SBD$500,000.00 from the Claimant. The payment was in a form of cash advances. The first two cash advances were made on 19 September 2019 for the sum of $40,000.00 and $100,000.00 respectively. Another advance was made on 23 September 2019 for the sum of $160,000.00 and the final advance of $200,000.00 was made to the Defendants on 26 September 2019. The total cash advances was to the sum of $500,000.00. Mr Yew stated that the First Defendants undertook to repay the cash advances to the Claimant but he never did thus the filing of this claim. The respective cash advances are contained in annexure marked “WYY-4” to the sworn statement of Wen Yee Yew filed on 21 May 2021.
7. Mr Yew denied in cross-examination that the $500,000.00 was for consideration of Maka concession pursuant to the TMMA executed by the Claimant and Southern Forest Industry dated 21 September 2019. He stated that the Maka concession is a separate issue that was dealt with under the MOU signed between the Claimant and the Second Defendant dated 21 September 2019. He also stated in evidence that the Claimant has never operated logging in the Maka concession area under felling license no. A101114 since the execution of the TMMA and the MOU because of land disputes.
8. As per the MOU executed by the Claimant and the Second Defendant, the incentive for offering the Maka concession area was for the payment of USD$5.00 per cubic meter for FOB price of logs exported from that concession. That incentive is expressly stated as a term of the MOU between the parties. It is noted that there is no specific provision in the MOU for the payment of $500,000.00 to the Defendants as consideration for the Maka concession.

The First and Second Defendants case

9. On behalf of the First and Second Defendants, Mr Nimepo of counsel contends that the payment of $500,000.00 by the Claimant to the First Defendant was in consideration of the giving of the Second Defendant’s logging rights of their Maka concession area to the Claimant under felling license no. A101114.
10. The First Defendant, Mr Lau Hui Kwong was called to give oral evidence in court. He relies upon the contents of his sworn statement filed on 9 June 2021. Mr Kwong confirmed he is the owner of the Second Defendant. He admitted receiving the $500,000.00 from the Claimant but said that the money is for payment for subcontracting its TMA with Southern Forest Industry to the Claimant over Maka concession area. So the money was for payment of deposit as an incentive in return for the Maka concession area under felling license no. A101114. He knows the Claimant’s owner well and they trust each other. He said they wanted his concession area and they must pay for it.
11. In cross-examination, Mr Kwong admitted that there is nothing in the MOU about the incentive payment of $500,000.00 for the Maka concession area. He nonetheless stated that they operate on trust and they trust each other. He maintained that the money is payment of consideration for the concession. The agreement was for the payment of incentive of USD$100,000.00 which is equivalent to SDB$500,000.00. He denied that the money claimed by the Claimant is an advance that needed to be reimbursed by him and the Second Defendant. It is an incentive package and neither he nor the Second Defendant should be compelled to reimburse it.

Discussion

12. This Claim was commenced as a simple debt recovery case filed by the Claimant for money owing by the First and Second Defendants. There is no dispute that the total sum of SBD$500,000.00 was given by the Claimant to the First Defendant through four instalment payments between 19 to 26 September 2019. The Claimant states that the money is an advance made to the First Defendant for his use and for the use of the Second Defendant. On the contrary, the First Defendant stated in evidence that the money was for consideration of giving and the subcontracting of the Second Defendant’s logging rights over their Maka concession area to the Claimant under felling license no. A101114.
13. Questions were raised in court in cross-examination of Mr Yew who gave evidence for the Claimant on the purpose of the cash advance from the Claimant by the First Defendant. That issue is also raised in Mr Nimepo’s closing submissions. No reasons was given for the cash advance and this court is urged to imply that the said money is not a cash advance but for the reason given by the First Defendant in his sworn statement and also in his oral evidence in court.
14. On that issue, I have noted and taken into account paragraph 7 of the sworn statement of Wen Yee Yew filed on 21 May 2021 in which he stated “I understand that when the First Defendant requested for a cash advance from the Claimant, he noted that he needed finance because the Second Defendant was facing financial difficulties. I was the one responsible for facilitating the payment of the cash advances. I therefore understood the request for financial assistance to have been made on behalf of himself and the Second Defendant”.
15. From the above extract of the sworn statement of Mr Yew, the reason for the advance is stated therein. The First Defendant needed advance from the Claimant because the First Defendant needed money and the Second Defendant was facing financial difficulties. It could therefore be said that the reason for the advance was to alleviate the First and Second Defendants from their financial difficulties and constraints.
16. It is further noted that Mr Nimepo of counsel for the First and Second Defendants had questioned Mr Yew about the reasons for the advance but failed to put to the witness the content of paragraph 7 of the said sworn statement. Paragraph 7 of the said sworn statement has not been rebutted by the First and Second Defendants during trial. In my view that piece of evidence is unchallenged by the First and Second Defendants.
17. Another issue which was raised by Mr Nimepo in his closing submission is the issue of a collateral agreement. It is Mr Nimepo’s submission that apart from the TMMA and MOU executed by the parties to this case and Southern Forest Industry on the Maka concession area, the payment of $500,000.00 to the First Defendant is a collateral agreement to those respective agreements. He had cited case authorities in support of his argument. The case of De Lassalle v Guilford [1901] UKLawRpKQB 56; [1901] 2 KB 215 CA was especially referred to by counsel. In that case the parties negotiated the lease of a house. The tenant refused to conclude the deal unless the landlord assures him that the drains were in good order. The landlord said they were in good order and it turned out not to be so. The tenant sued the landlord. The court held that the plaintiff was entitled to succeed on the basis that the promise had set out a collateral contract, the consideration for which was entry by the plaintiff into the main contract. The remedy then was the breach of the collateral contract.
18. In this case, there is no agreement between the parties to this case on any form of collateral contract between them. The alleged collateral contract of the First and Second Defendant is contested and denied by the Claimant’s witness, Mr Yew. There is also no evidence from Mr Yew and Mr Kwong that the contention of the First and Second Defendants was a precondition to the execution of the MOU between the Claimant and the Second Defendant on 21 September 2019. If it was a precondition to the signing of the MOU, then a collateral contract could have been created as per the De Lassalle case.
19. The next issue is that Mr Nimepo had never raised the issue of a collateral agreement in his clients defence filed on 26 April 2021. The only defence stated in their defence was that the payment of $500,000.00 by the Claimant to the First Defendant was for consideration of their Maka logging concession area to the Claimant. In light of that omission, they should not be entitled to raise the issue of collateral agreement. In any event and on the basis of my discussion on paragraphs 17 and 18 above, I am not satisfied that there is any collateral contract between the Claimant and the First and Second Defendants upon the contention of the First and Second Defendants.
20. I have had time to peruse the MOU signed between the Claimant and the Second Defendant on 21 September 2021 and have noted that the consideration for the Maka logging concession area is as stated therein. It is stated in that MOU that “the Claimant shall pay the Second Defendant an incentive of USD 5.00 per cubic meter for FOB price”. The MOU takes effect upon the date of signing of the agreement.
21. Mr Yew and Mr Kwong both told the court that the Claimant had never conducted logging on Maka concession area since the execution of the MOU to date. That basically means that the terms of the MOU could not be carried out as agreed.
22. The other issue affecting the MOU is the contravention of section 9 of the Stamp Duties Act (cap 126). That section provides:
    • s.9 No document executed in Solomon Islands or relating, wheresoever executed, to any property situate in Solomon islands or to any matter or thing done or to be done in Solomon Islands, shall, except in criminal proceedings and in civil proceedings by a Collector to recover any duty or penalty under this Act, be pleaded or given in evidence, or admitted to be good, useful or available in law or equity unless it is duly stamped in accordance with the law in force at the time when it was first executed.
23. So pursuant to s.9 of the Stamp Duties Act, the MOU between the Claimant and the Second Defendant is not enforceable and all parties to the said agreement cannot and should not rely upon the contents of that document as binding between them. Upon that basis as well, the MOU will not assist the First and Second Defendants in the pursuance of their defence on collateral agreement.
24. So where does the above discussion take this case to? I can say that the claim of the Claimant is a straight forward debt collection case. According to paragraph 7 of the sworn statement of Mr Yew filed on 21 May 2021, the First Defendant had requested an advance from the Claimant because the Second Defendant was facing financial difficulties and needed money to alleviate its financial situation. It is part of the agreed facts that the First Defendant is the owner of the Second Defendant and so the financial request was to assist them financially. There was a promise that the money advanced would be repaid by the Defendants but that was not done since September 2019 to date.
25. Upon the evidence adduced by Mr Yew in court as well as the content of his sworn statement filed on 21 May 2021 and the attachments therein, I am satisfied on the balance of probabilities that the $500,000.00 advanced from the Claimant to the First Defendant on 19, 23 and 26 September 2019, was a cash advance for the use and benefit of the First and Second Defendants. The First Defendant had agreed and promised to repay the money to the Claimant but to this date had failed to do so. I do not believe the version and evidence of the Mr Kwong in court because of the matters discussed above.
26. I hereby enter judgment in favour of the Claimant in the sum of $500,000.00 as against the First and Second Defendants jointly and or severally. I also order interest and cost to be assessed if not agreed.

THE COURT
Justice Maelyn Bird
Puisne Judge