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Earth Movers Solomon Ltd v Attorney General [2024] SBHC 55; HCSI-CC 436 of 2019 (15 March 2024)

HIGH COURT OF SOLOMON ISLANDS

IN THE HIGH COURT OF SOLOMON ISLANDS
CIVIL JURISDICTION

Civil Case No. 436 of 2019

BETWEEN

EARTH MOVERS SOLOMON LIMITED
First Claimant

AND:

AROSI VISION LINK SERVICES LIMITED
Second Claimant

AND:

ATTORNEY GENERAL
(Representing the Commissioner of Forest Resources)
First Defendant

AND:

BANK SOUTH PACIFIC LIMITED
Second Defendant

Date of Hearing: 4 March 2024
Date Decision: 15 March 2024

Counsel
Ms A Willy for the First and Second Claimants
Mr Pitry B for the First Defendant

RULING

1. The Second Claimant was the holder of a felling licence A101537. It had entered into an agreement with the First Claimant and the Trustees and Land owners of customary land in ward 6 of Makira Ulawa Province
2. The First Claimant had produced to the Commissioner of Forest Resources the bank guarantee as a performance bond as required by the grant of the licence.
3. The licence contained conditions. Condition 8(b) of the licence is in the same terms as the conditions for felling licences provided for in the Forest Resources and Timber Utilization (Felling Licences) Regulations 2005 at regulation 10(h). The Licence at condition 8(b) provided:
   • “8. Before commencing carrying out any operations under the licence, the licensee shall enter into, and give to the Commissioner of Forests Resources a copy of, a performance bond of $250,000 that shall –
   • (a) be in the form of a bank guarantee or equivalent instrument acceptable to the Central Bank of Solomon Islands; and
   • (b) provide security for –
   1. (i) payment of taxes, duties, levies, fees, royalties, rent, compensation and other charges or amounts that may be payable by him to the Government or the relevant provincial government under this Act or a provincial ordinance; and
   2. (ii) payments arising from a contravention of the conditions of the licence, the Act and subsidiary legislation made under the Act; and
   • (c) be enforced by the Commissioner of Forest Resources against the issuing bank, insurance company or other authority if the licensee fails to pay a sum secured by it.”
4. On 30 July 2019 the Commissioner wrote to the General Manager of the bank which held the performance bond. In that letter the Commissioner recorded the following from paragraphs 12 – 15 inclusive:
   • “12. On the 6^th June 2019, Mr Tahani and Mr Woku made claim for the performance bond as part of compensation for the trespass and illegal harvesting and extracting of trees by AVLSL and EMSL within Rohu customary land.
   • 13. On the 2^nd July 2019, we have issued a notice to AVLSL and EMSL for the withdrawal of the performance bond established under licence A101537 as compensation for trespass and felling an extraction of trees within unlicensed Rohu customary land which is in breach of clause 3 of their licence terms and conditions.
   • 14. On the 4^th July 2019, EMSL and Law Corporation made representation to our notice indicating that the seizure order issued by the Commissioner of Forest has been quashed and the appeal filed by Mr Dobson Tahani and Mr. Wilson Moku has been dismissed.
   • 15. On the 30^th July 2019, we have sought advice from the office of the Attorney General and having satisfied that AVLSL and EMSL has breached clause 3 of their licence terms and conditions and have further breached Section 4(l) and 5(i) of the FRTU Act as evident in the field verification report.”
   • I therefore advise that the performance bond established under felling licence A101537 be withdrawn and payable to the below nominated account as a compensation to the landowners of Rohu customary land for the trespass and illegally extraction of trees within Rohu land.
   • Account Name: Rebert Firigeni
   • Bank: Bank South Pacific
   • Account No. 2498668001
   • Should there be further queries, please do not hesitate to contact the undersigned. By copy, all are hereby informed.”
5. On 5 August 2019 the First Claimant commenced these proceedings seeking a declaration that the letter of 30 July 2019 was a nullity and seeking orders that the performance bond held by the bank was not to be released to the Commissioner based on the letter of 30 July 2019. In the alternative the First Claimant sought a permanent order restraining the bank from releasing the performance bond to a Robert Firigeni, a third party.
6. In seeking those orders the First and Second Claimants relied on clauses 8(b) and (c) of the conditions of the licence. The Claimant brought an urgent application for an injunction on the same basis.
7. On 17 October 2019 the Commissioner wrote a second letter to the bank which resulted in an amended urgent application being filed on 18 October 2019. The application sought an order that the performance bond be paid to the Registrar of the High Court to be hold in trust until trial or an earlier order. The Court granted that application on 18 October 2017.
8. The Claim had been brought by the First Claimant. It was then amended to include the Second Claimant and to take into account the letter dated 16 October 2019. The heading and body of that letter are set out below:
   • “RE: WITHDRAWAL OF $250,000 PERFORMANCE BOND FROM AROSI VISION LINK UNDER FELLING LICENCE A101537
   • The above caption refers:
   • On 30^th July 2019, the Commissioner of Forest (‘the favouree’) advised you for the withdrawal of the performance bond of $250,000 established by Earth Movers Solomon Limited on behalf of Arosi Vision Link Service Limited under felling Licence A101537 to a nominated account as compensation to the landowners of Rohu customary land for the trespass, illegal harvesting and extraction of tress with Rohu land.
   • On 14^th August 2019, Robert Firigeni of Taifisi Lawyers acting for Dobson Tahani and Wilson Moku. Landowners of Rohu land wrote to the Commissioner of Forests, claim have made follow ups on various dates (7/8/2019, 9/8/2019, 12/8/2019 & 14/8/2019) for the release of the performance bond but was unsuccessful. He further claim BSP Bank not able to facilitate official directive been issued.
   • I advise it is a requirement under the Forest Resources and Timber Utilisation (Felling) Regulations 2005 that a performance bond of $250,000 must be established with the relevant banks under the licence. This bond provides the security for:-
   • (a) Payment of taxes, duties, levies, fees, royalties, rent, compensation and other charges or amount that may be payable under the felling licence.
   • (b) Payment arising from a contravention of the conditions of the licence, the Act and subsidiary legislation made under the Act.
   • The performance bond, be it in the form of bank guarantee or equivalent instrument acceptable by CBSI is enforced by the Commissioner of Forests against the issuing bank, insurance company or other authority should the company fail to settle its outstanding liabilities under the licence. Regardless of who establishes the bank guarantee, be it the licence or another company on behalf of the licensee, establishes that security bond at their own risks if there is an outstanding liabilities against the licence A101537. The claim who to settle the outstanding payment is a matter which the two companies can resolve amongst themselves and not to associate it with the purpose of the bank guarantee.
   • As such, I am concern that you have failed to observe the terms and conditions of the bank guarantee stated therein. This is clearly a breach to the terms and conditions of the bank guarantee. Hence, my letter to you dated 30^th July 2019 is hereby maintained.
   • Therefore, I am satisfied and demand an unconditional release of the SBD250, 000 performance bond to the Favouree, being the Commissioner of Forests Resources.
   • Should you fail we will not hesitate to instruct the Office of the Attorney General to pursue legal proceedings against the bank for the breach of the conditions of the bank guarantee.
   • I advise that this letter supersedes my previous letter to you dated 20^th August 2029.
   • I appreciate your cooperation in facilitating the terms of the bank guarantee and shall await your response soon. By copy of this letter, Earth Movers Solomon Limited and Arosi Vision Link Service Limited are hereby informed.”
9. On 14 November 2023 the First and Second Claimants filed an application seeking a ruling on a preliminary issues of law pursuant to rule 12.11 of the Solomon Islands Court (Civil Procedure) Rules 2007 in the following terms:
   • “The Claimant seeks:
   • (1) An order that the First Defendant does not have the power under the licence agreement to order the performance bond to be withdrawn and paid as compensation to the Rahu Customary Land Owners.
   • (2) An order that the First Defendant does not have to power under the licence agreement to order the performance bond to be withdrawn and paid to himself for matters relating to trespass of land.
   • (3) Alternative to orders 1 and 2, that the First Defendants letters dated 30 July 2019 and 16 October 2019 are an abuse of power and ultra vires and an abuse of his position, rendering the letters a nullity.
   • (4) The Registrar of the High Court to release the performance bond held in the National Judiciary Account – Solomon Islands Government Account to the First Claimant
   • (5) Costs against the First Defendant on an indemnity basis”
10. Counsel for the First Defendant has raised an issue whether rule 12.11 permits an application such as the one before the Court. Rule 12.11 provides:
    • “12.11 The court may hear legal argument on preliminary issues of fact or law between the parties if it appears likely that, if the issues are resolved, the proceeding or part of the proceeding will be resolved without a trial, or the costs of the proceedings or the issues in dispute are likely to be substantially reduced.”
11. Counsel referred the Court to the Court of Appeal decision in Attorney General V Chan [2017] SBCA 5 and submitted that there were questions of fact and law within the questions to be determined in the application. Counsel submits that there were questions of fact and law in the present case that made it inappropriate to rely on rule 12.11.
12. In Chan the reason the Court set aside the order made in the High Court was because the submissions and order went beyond the scope of the narrow question. The Court noted at paragraph 37 that there were various issues to be determined. That paragraph is as follows:
    • “37. Before the claim for judicial review could be finally determined, there were various issues to be determined, including questions of law and mixed questions of fact and law, such as whether there was ever a valid application in terms of s 39(2) or otherwise before the Board, whether the criteria for determining an application under s 39(2) differed from the criteria for determining an application under s 10, whether before the 2016 amendments a non-citizen was eligible for permanent registration or only temporary registration, and whether the 2016 amendments applied to the respondent’s application.”
13. In the present case the issues concern the demands set out in the two letters. There is no issue that the Commissioner wrote those letters. He accepts that he did. The question the Court is asked to determine is strictly one of law. The essential facts are not in dispute. There is a dispute about whether the logging operation of the Claimants extended into customary land beyond that permitted by the licence and the Agreement. That issue is not relevant to the question asked of the Court. The second factual issue raised by counsel for the Commissioner was that there should be evidence about what happened to the performance bond. The Court had ordered that to be paid into Court. Counsel for the Commissioner said he did not know whether the money had been paid or not while counsel for the Claimants insisted it had been paid into Court. How counsel for the First Defendant could appear on this application and make such a submission without first checking the facts is unexplained. It is also irrelevant to the question whether or not the Commissioner had exceeded his powers.
14. The Commissioner filed a further sworn statement on 8 February 2024 in which he confirmed he had caused the letters of 30 July 2029 and 16 October 2016 to be released (which the Court takes as meaning ‘sent’). He said the performance bond had not been released or withdrawn by which counsel said he means that he has not received it. He confirmed that felling license A101537 expired on 17 March 2021 and has not been renewed. In addition at paragraph 6 of the sworn statement the Commissioner said:
    • “6. My power to demand the release of the Performance Bond premised from my power to issue Felling License A101537 to the Second Claimant. Felling License A101537 is an agreement between the Second Claimant and the Solomon Island Government through me. I am not a third party to this license agreement which would not entitled me to demand the release of the Performance Bond.”
15. The Court finds that rule 12.11 is appropriate for the questions before it. They are questions of law to facts that are not in dispute.
16. The performance bond required by the Forest Resources and Timber Utilisation (Felling Licences) Regulations 2005 is to secure sums that may be due to be paid to the Government or a provincial Government following the failure of the licencee to pay the amount secured by the performance bond.
17. The Court of Appeal has recently confirmed this in Grace Logging Ltd v Attorney General [2022] SBCA 26. The Court said in paragraphs 23, 24 and 25:
    • “23. Again the emphasis and focus could not be clearer, any compensation arising from the licence agreement are payable to the Government etc. and not to any other party. The CoF being the Administrator of the FRTUA on behalf of the Government, where appropriate can direct that compensation be paid to the Government. That is the intent and purpose of that legislation to oversee the activities of the logging company that it complies with the requirements of the law.
    • 24. The two disputing tribes asserting rights of trespass against the 1^st Appellant on the other hand, are not privy to the licence agreement and therefore have no immediate rights or claim under that licence agreement. This means they cannot rely on Conditions 3 and 8 of the licence agreement to justify payments of damages for any trespass of the logger onto their lands and the CoF has no power to use the PB money for that purpose.
    • 25. The CoF simply does not have power under the Licence Agreement to have the PB withdrawn and paid as compensation to the two disputing tribes, Kobolutu and Manuku tribes. His actions in doing so were clearly ultra vires and an abuse of his position. He just doesn’t have the mandate to do so under the terms of the licence agreement.”
18. What then was the requirement in the letter of 30 July 2019? It was demanding exactly what the Court of Appeal emphasized the Commissioner could not do. He demanded that the performance bond be paid to Robert Firigeni as a third party for the alleged breach of the licence by trespassing into land beyond that permitted on the licence. As the Court of Appeal said: “His actions in doing so were clearly ultra vires and abuse of his position.”
19. Regarding the second letter where he demanded that the money be paid to himself for exactly the same purpose offends against exactly the same principle. The body of the letter has been set out in full in paragraph [8] above. The performance bond could not be used to compensate landowners for an alleged breach. As the Court of Appeal said the Commissioner as the administrator of the Forest Resources and Timber Utilisation Act on behalf of the Government can direct compensation to be paid to the Government. It follows that cannot include compensation for an alleged trespass on to customary land. That has not caused loss to the Government. The only breach of a licence condition identified in the letter of 16 October 2019 is what is said to be the trespass, illegal harvesting and extraction of trees within Rohu land. The Commissioner make it clear that the Robert Firigeni who as to be the initial recipient of the bond is a law practitioner acting for the aggrieved persons from Rohu land. The Court is surprised that the request to pay Robert Firigeni had come from Taifisi Lawyers in a letter dated 6 June 2019, as a legal practitioner practicing in the area of logging issues would have known such payment and demand for payment would not have been lawful.
20. Counsel for the First Defendant submitted that the decision of Grace Logging Ltd is distinguishable from the present case as in Grace Logging Ltd the performance money had been paid out but here it had not been. He submitted that the Claimants ought to have waited till the performance bond had been forfeited and paid before commencing proceedings. That argument cannot possibly succeed. The question would still remain, does the Commissioner have power to require the performance bond to be released for the purpose of compensating aggrieved land owners. The demands in the letters of 30 July 2029 and 16 October 2019 were clearly an abuse of his position. He did not have the power to make such a demand.
21. Dealing then with the questions asked. The Commissioner did not have the power under the felling licence to order the performance bond to be withdrawn and paid as compensation to the Rahu customary land owners. Question 2 is slightly different and will be answered in the way it was argued. The Commissioner did not have the power under the felling licence to order the performance bond to be paid to himself as compensation for the alleged trespass onto Rohu customary land.
22. Similarly the alternative order sought needs to be slightly rephrased. The demands contained in the letters dated 30 July 2019 and 16 October 2019 are an abuse of power and ultra vires and an abuse of his position.
23. Having answered the questions in those terms and noting that the licence came to an end in 2021 and noting that no other breach of the licence has been alleged, the sole issue remaining is what will happen to the performance bond.
24. The case will be called for mention on Thursday 15 March at 9:20am. If the parties cannot resolve this issue then the Court will hear further argument.
25. In the circumstances of this case the legislation and the Court of Appeal directive are so clear that the court has considered rule 24.12 of the rules which provide:
    • “24.12 The court may also order some or all of a party's costs be paid on an increased or indemnity basis if:
    • (a) the other party deliberately or without good cause prolonged the proceeding; or
    • (b) the other party brought the proceeding in circumstances or at a time that amounted to a misuse of the litigation process; or
    • (c) the other party otherwise deliberately or without good cause engaged in conduct that resulted in increased costs; or
    • (d) in other circumstances (including an offer to settle made and not accepted) if the court thinks it appropriate.
26. This hearing should not have been necessary. The conduct of the Commissioner and the Court of Appeal ruling in Grace Logging Ltd make that plain. The opposition to the application are clearly caught by rule 24.12(c).
27. Indemnity costs are to be paid by the Defendant. Had the Commissioner taken legal advice as he alleged he would have known that he had no power to do what he did.

By the Court
Hon. Justice Howard Lawry
Puisne Judge