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Sevona Development Co Ltd v New Venture Ltd [2022] SBCA 27; SICOA-CAC 6 of 2021 (28 November 2022)

IN THE SOLOMON ISLANDS COURT OF APPEAL

JUDGMENT OF THE COURT

1. This is an appeal against parts of the ruling and orders of the High Court, dated 1 April 2021 but not delivered and received until 23 April 2021, awarding the respondent compensation in the sum of SPD2 million.

Background

2. For a relatively straightforward matter, these proceedings have an unnecessarily torturous background. On 20 May 2020 the respondent, as claimant, issued a Category A claim against the respondents as first and second defendants.
3. The first appellant and the respondent are parties to a logging agreement which had the purpose of undertaking logging operations within the first appellant’s concession, comprising Tasolomo land. This agreement followed the normally expensive process required to start logging in the Solomon Islands. It is alleged that this expensive process was funded by the respondent. The matter was beset by disagreements between the appellants and the respondent, complicated by adverse land claims to the concession area that ultimately was the subject of a CLAC decision. In the proceedings the respondent sought a declaration that:
   1. the cessation of logging activities, temporary or otherwise, was not a breach of the logging agreement that would warrant termination by the appellants;
   2. the logging agreement was valid and binding upon the appellants and they be compelled to perform their obligations
   3. alternatively, the appellants pay the claimant damages for contract, including special damages of 2,739,464, to be assessed;
   4. consequential to that order, the appellants be restrained from negotiating with or entering into any agreement with any other party contractor without the written consent of the respondent;
   5. Order 4 equally apply to any other concession or entity, including Horizon Forest Limited in which the second appellant had a majority or controlling interest.
4. Essentially, this was denied by the appellants, who said that any termination was with cause.
5. On 16 July 2020 the appellants filed a “Defendant’s Application for Summary Judgment”, which was amended on 3 August 2020. In that application, relevant for present purposes, the appellants sought a declaratory order that the logging agreement dated 3 October 2019 was already terminated by the licensee, the first-named appellant, on 19 June 2020. That by virtue of that termination, the first appellant was at liberty to engage another contractor to harvest trees under the felling licence A101902, and an order directing the claimant to pay the first defendant commission of SPD20 per cubic out of the round logs exported from Tasolomo customary land in the total sum of SPD112,659.57.
1. This was opposed by the respondent.
2. It is relevant to set out the portion of the logging agreement that is at the centre of the dispute between the parties. Clause 19 reads:

19. This agreement may be terminated by either party giving a three (3) month written notice to the other party if and only if:

(i) The other party breaches any of the provisions of the agreement and fails to remedy the same within thirty (30) days after being required to do so by notice in writing.

(ii) The other party enters into liquidation either voluntarily or compulsorily with reconstruction excepted.

(iii) Contractor is prevented for a continuous period of two months from carrying out its obligations properly and efficiently by any means outside the control of the licensee and contractor other than imposed by forestry.

(iv) In entering into this agreement, the licensee hereby acknowledges that substantial investments have to be made by contractor for the timber rights expenditures including acquiring of licence, procuring of various heavy and light machinery, employment of working personnel, to construct the logging operation infrastructure, logging roads, bridges, and wharf facilities. As such due consideration and compensation to the contractor will be required in the event of premature termination of this agreement by the licensee without due cause. Such due consideration and compensation shall be not less than SPD2 million (2 million Solomon dollars).

(v) In the event contractor terminates this agreement without due cause, contractor shall compensate the licensee. The right of termination granted under this clause shall not prejudice the right and remedy of either particularly in respect of the breach to each other.

3. The matter came on before Higgins J QC (as he then was) on 3 August and the perfected order records as follows:
   1. That the termination letter dated 19 June 2020 regarding the logging agreement dated 3 October 2019 between New Venture Limited and Sevona Development Company Limited remains on foot.
   2. The claimant and defendant submissions on assessment of damages flowing from the termination referred to under paragraph 1 herein is adjourned to 1.30 p.m. on 17 August.
4. Unfortunately, the Judge then left the jurisdiction, due to ill health, and could not deal with the assessments of damage under the appellants’ claim for summary judgment. Nor was there any written ruling to indicate why he considered the logging agreement remained on foot, or even what he meant by “on foot”. Of particular moment, it is impossible to ascertain whether or not he considered the appellants had terminated the agreement with or without cause.
5. The next thing that occurred was that on 18 September 2020 the respondent filed an application for summary judgment, seeking payment of $2 million as compensatory damages pursuant to clause 19(iv) of the logging agreement of 3 March 2019, and special damages of $1,127,050 to be assessed.
6. Both the assessment of damages pursuant to the appellants’ application for summary judgment and the respondent’s application for summary judgment came on for hearing before Kouhota J on 2 March 2021.
7. The Judge considered that the logging agreement had been terminated without cause, and as such considered that the respondent was entitled to summary judgment in the sum of $2 million. It appears other claims were not dealt with by the judge.
8. In relation to the appellants’ claim for summary judgment and the assessment of damages, the Judge did consider they were entitled to be paid for the cubic metre agreed sum amounting to $112,659.57, and so ordered.

Discussion

9. This matter turns on a quite narrow point, and it is not necessary for us to rehearse the submissions from both the appellants and the respondent that we have read and considered. It is clear under clause 19(iv) that if the licensee terminates without due cause, compensation shall be payable in the sum of $2 million.
10. Summary judgment is dealt with by rules 9.57 and 9.58 of the Solomon Islands Courts (Civil Procedure) Rules 2007:

9.57 The claimant may apply to the court for a summary judgment where the defendant has filed a response or a defence but the claimant believes that the defendant does not have any real prospect of defending the claimant's claim.

9.58 A defendant may apply to the court for a summary judgment against the claimant where the defendant has filed a defence and believes that there is no real prospect of any part of the claim succeeding.

11. We do not need to rehearse authority. It is well-established that it is for an applicant for summary judgment to show that there is no prospect of any part of the claim succeeding.
12. The first, and insurmountable, barrier for the respondent in the Court below is there is no finding or ruling that the termination by the appellants was without cause. Given the Judge did not give reasons, it could only assist the respondent if it appeared on the face of the sealed order. It does not. All that is said is that the letter of termination “is still on foot”. It is unclear exactly what this means, but probably it means the termination was valid. That is quite a different question as to whether or not it was with or without cause.
13. There are also the two sworn statements of the second-named appellant. When they are perused, they reveal factual disputes, leading to allegations of breach of contract, between the parties as to why the relationship broke down in the way it did. The respondent makes valiant submissions that notwithstanding these matters none of the matters raised fall within paragraph 19 of the agreement between the parties.
14. Paragraph 19 is the clause that gives parties the right to terminate by giving a three-month written notice in certain circumstances. Some of those raised by the second appellant may well fall within clause 19 upon the ascertainment of the true facts. But clause 19 only goes to say that there is a right to terminate on 3 months’ notice in certain circumstances set out in the clause. If those circumstances are not present the clause’s effect is that termination would be without cause and compensation as set out would be payable. But the clause does not exclude termination on other grounds under the general law of contract. The contract would have to specifically exclude that right to have the effect that the respondent contends for. Clause 19 (v) is poorly worded. But it appears to us that the second sentence does envisage the rights for breaches outside Clause 19 are available to the parties.
15. There is an even more fundamental matter raised by the sworn statements of the appellants, and that is whether or not the person who executed the agreement was lawfully entitled to do so. The appellants say no, the respondent says yes. That is a matter that must be explored and determined.
16. There is no judicial ruling by Higgins J QC that termination was either with or without cause. There are also the matters raised in the sworn affidavits of the appellants, which if accepted by a court may well be found to be grounds to terminate under the general law of contract, which mean the matter is unsuitable for summary judgment, so it could not be said that there is no real prospect of defending the “claim”.
17. Quite what Higgins J QC had in mind when he ordered a hearing for assessment of damages relating to both the appellants and the respondent is a mystery we shall never solve. What is clear is that the only basis for which Kouhota J could have awarded the $2 million to the respondent was if there was termination without cause pursuant to clause 19(iv). While that was a matter before him in the summary judgment application of the respondent, he declined to determine it, by saying:

The Court shall proceed in respect of both applications for summary judgment as assessment of damages only.

18. We are satisfied the appeal must succeed. We are also satisfied that as Higgins J QC gave no reasons his order must also be set aside. On the material before us this is clearly not a matter that is suitable for summary judgment. Both the orders of Higgins J QC and Kouhota J are set aside. The matter is remitted to the High Court for directions and trial on the disputed matter relating to the agreement, the contractual effects of the factual findings and quantum of any damages payable.
19. In this appeal we are satisfied costs should follow the event. There are costs to the appellants, to be taxed if not agreed.
    

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Hansen JA, Vice President

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Palmer, CJ

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Lunabek, JA