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Central Bank of Solomon Islands v Kalena Timber Co Ltd [1993] SBHC 22; HC-CC 092 of 1993 (9 July 1993)

HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 92 of 1993

CENTRAL BANK OF SOLOMON ISLANDS

-v-

KALENA TIMBER CO. LTD

High Court of Solomon Islands
(Muria CJ.)

Hearing: 28 June 1993
Judgment: 9 July 1993

A. Radclyffe for Plaintiff
T.T. Kama for the Respondent

MURIA CJ: The plaintiff applies for a declaration that it has power under the Exchange Control (Foreign Exchange) Regulations 1977 to prohibit the export of round logs by the Defendant until the Defendant fully complies with the conditions of the General Authority to export dated August 1986. The power of the plaintiff to issue such authority is said to have come from regulation 13 of the 1977 Regulations.

The circumstances giving rise to the present application are that the defendant logging company which was incorporated in Solomon Islands sought to export from Solomon Islands a consignment of 40,000 cubic metres of round logs on a ship called MV BIO Ace to Active Timber Agencies Pte Ltd (the buyer) in Singapore. This was to be done under a Purchase contract entered into between the Defendant and Active Timber Agencies Pte Ltd on 10 February 1993.

It is alleged by the plaintiff that one Tiang Miag Sing is one of the owners of Active Timber Agencies Pte Ltd and certainly the major shareholder of the defendant company. Mr. Tiang Ming Sing denied owning Active Timber Agencies Pte Ltd.

Although the documents filed in court do not confirm Mr. Tiang Ming Sing as owning Active Timber, there is no doubt that he holds a considerable interest in that company. Mr. Tiang Ming Sing has provided the financial backing as security for the operation of Active Timber. Mr. Tiang has been the sole signatory of Active Timber's cheque books. The security backed-up by Mr. Tiang consists of a Back to Back Documentary Credit of US$1,500.00 and a short Term Revolving Loan of US$1,000,000.00.

It is also revealed that Mr. Tiang's financial backing ties in with Mr. Tiang's operations in Solomon Islands.

In or about April this year, the defendant company attempted to export the 40,000 cubic metres of round logs. The prices of the round logs declared by the defendant ranged from US$120.00 per cubic metres down to US$65.00 per cubic metres. Comparing the export prices for same species in Papua New Guinea, the Commissioner of Forests informed the plaintiff on 5 April 1993 that the prices declared by the defendant were less than 50% of the minimum prices and as such the defendant had not declared the true market prices that could be achieved had the logs were to be sold to an "arms length" buyer.

According to the Commissioner, the prices declared were only the value of approximately 5,960 cubic metres out of the total volume of 40,000 cubic metres which was to be shipped. So that on that approximation, the defendant had under-stated the value of the round logs it wished to export to an amount of approximately US$303,410.00 or SBD 969,574.00.

Armed with such information, the plaintiff sought and was granted a injunction restraining the defendant from exporting from Solomon Islands the consignment of round logs. That order was later varied to allow the logs to be exported on the condition that SI$950,000.00 was to be deposited in the High Court. That was complied with.

Having canvassed the circumstances surrounding this application, I will now turn to the plaintiff's application to consider the extent of its powers in this regard under the Exchange Control (Foreign Exchange) Regulations 1977. These Regulations were made by the Minister of Finance pursuant to section 3 of the Exchange Control Act, 1976. For the present purpose, Part IV of the 1977 Regulations is relevant, in particular reg. 13 which provides as follows;

"13. (1) Subject to these Regulations, a person who exports any goods from the Solomon Islands except with the authority of the Monetary Authority shall be guilty of an offence.

(2) Subregulation (1) applies notwithstanding that authority for the exportation of the goods may be in force under some other law.

(3) The authority of the Monetary Authority under subregulation (1) may be in the form of a general authority or a specific authority.

(4) A general authority permits the export of goods on the basis specified in the authority, and shall be published in the Gazette

(5) A specific authority permits the person specified in the authority to export particular goods, in one or more consignments, in the quantities, by the methods of dispatch, and from the place, specified in the authority.

(6) A person who exports goods from the Solomon Islands with the authority of the Monetary Authority shall comply with all the terms and conditions of the relevant authority.

That regulation provides for the imposition of restrictions on export of goods from Solomon Islands. Such restrictions may be contained in the Authority, general or specific, issued by the Central Bank of Solomon Islands.

Mr. Kama for the defendant did not dispute that the plaintiff had the power to restrict the export of goods from Solomon Islands. Counsel however submitted that the General Authority in this case is silent on the powers of the plaintiff to specifically prohibit export of goods and as such it is not sufficient to prohibit the export of goods concerned.

When one looks at subregulation (1) of regulation 13, it must be obvious that no person is permitted to export goods from Solomon Islands except with the authority of the plaintiff. To export goods from this country without the authority of the plaintiff is an offence.

The authority referred to in sub-regulation (1) may be either general or specific. Both forms of authority are issued with terms and conditions relevant to the nature of the authority given.

A general authority permits a person to export goods on the terms and conditions specified in that authority. As such a person wishing to export must comply with those conditions specified in the general authority. Failure to do so amounts to non-compliance with the authority. Thus any exportation of goods in violation of the terms and conditions stipulated in the authority is an exportation without the authority of the plaintiff and may very well subject the exporter to prosecution by virtue of reg. 13(1) of the Regulations.

But that is not the end of the matter under consideration here. The question then is: does the plaintiff have the power to prohibit the exports of goods for non-compliance with the conditions of the General Authority until those conditions are met? The General Authority concerned here is that dated 12 August 1986 published in the Gazette; Gazettal Notice GN258 (not Legal Notice 258, as stated by the plaintiff). It gives the authority in the following terms:

GENERAL AUTHORITY

The Central Bank of Solomon Islands in pursuance of regulation 13 of the Exchange Control (Foreign Exchange) Regulations 1977 hereby gives a general authority for the export of goods from Solomon Islands to a destination in any country where

(a) payment has been received within three months before the date of export; or

(b) arrangement has been made for payment to be received within three months after the date of export,

in Solomon Islands currency or in any foreign currency through a bank in Solomon Islands.

This general authority is subject, in each case, to the following conditions:

(a) full payment being received in respect of the sale price of the goods; and

(b) the sale price of the goods not being less than the price which an exporter from Solomon Islands might reasonably be expected (regard being had to the terms of the transaction) to obtain for the goods for export to the destination involved at the date when those goods were sold or contracted to be sold under open market conditions; and

(c) foreign currency proceeds being promptly credited or sold, forthwith on receipt, to a bank in Solomon Islands; and

(d) details of the payment arrangements and the name of the bank in Solomon Islands to which export proceeds will be sold or credited being shown in the appropriate section of the relative Customs Shipping Bill:

This General Authority replaces that dated 10th February 1977.

Dated at Honiara this 12th day of August, 1986.

As it can be seen from the General Authority, issued pursuant to reg. 13 of the 1977 Regulations, it gives general authority to export goods from Solomon Islands under the terms and conditions stated therein. The plaintiff's power under the regulation is to give the authority, general or specific, and to subject such authority to terms and conditions to be complied with by exporters. That is what the General Authority of 1986 provides and it is in accordance with the powers provided for under regulation 13 of the 1977 Regulations.

The Exchange Control Act, 1976 gives the Minister of Finance power to make regulations over matters specified under section 3 of the Act. Under Section 3(2)(o) the Minister may make regulations making provisions for or in relation to -

"the control or prohibition of the importation or exportation of goods."

Under Part IV of the 1977 Regulations the Minister when making that Regulations chose to make provisions only for the control of exportation of goods. That control is given to the plaintiff, through its powers to issue General or Specific Authority together with the power to place restrictions or conditions on the Authority issued. No power has been given by the Minister to the plaintiff to actually prohibit the exportation of goods. To construe the provisions of the General Authority together with regulation 13 as conferring on the plaintiff the power to prohibit export of goods for non compliance with the conditions of the General Authority, would be to enable the plaintiff to extend its powers to the extent of having the power to make orders prohibiting exports based on the non compliance with its General Authority without the need for such power to be conferred on it by appropriate legislative provisions and there justify a plea for increased authority. That cannot be done. For, as Lord Lowry set out as one of the six propositions governing interpretation of ambiguous statutory provisions using delegated legislation (on some occasions):

"Regulations made under the Act provide a parliamentary or administrative contemporanea exposition of the Act but do not decide or control its meaning: to allow this would be done is to substitute the rule-making authority for the judges as interpreter and would disregard the possibility that the regulation relied on was misconceived or ultra vires."

It is thus incumbent on this court to construe the regulations so as to conform with the Act. Having done so, the declaration sought must be refused.

I make no observation as to the necessity for the plaintiff to be equipped with such prohibitory power as sought in this case. Proper consideration for legislative enactments would no doubt be necessary if such power were to be delegated to the plaintiff. But that is a matter for Parliament.

I think the plaintiff should pay the costs of this application.

ORDER: Application refused with costs.

(G.J.B. Muria)
CHIEF JUSTICE