Home | Databases | WorldLII | Search | Feedback High Court of Solomon Islands

Sosimo v Kwan [2013] SBHC 119; HCSI-CC 424 of 2011 (23 August 2013)

IN THE HIGH COURT OF SOLOMON ISLANDS.
(Faukona, J).

Civil Case No. 424 of 2011.

BETWEEN:

SAMUEL SOSIMO AND IVY SOSIMO
Claimant

AND:

DENIS KWAN, DEBBY KWAN AND DAVID First
KWAN
Defendants

AND:

KCM PROPERTIES LIMITED
Second Defendant

AND:

WINNER PROPERTIES LIMITED

Third Defendant.

Date of Hearing: 9th August, 2013.
Date of Ruling: 23rd August, 2013.

Mr. M. Tagini for the Claimants.
Mr. R. Kingmele for the Defendants.

RULING ON APPLICATION FOR DISCLOSURE.

Faukona J: This application was filed premised on Rules 2.9 and 7.5; and filed by the Defendants on 30th July, 2013. (For ease of reference, I'll be referring to the words Claimants and Defendants all throughout).

2. At the pleading stage, on 17th April 2012, the Claimants filed their sworn statement disclosing documents. Upon considering the disclosure statement, it became apparent to the Defendants that the claimants have failed to disclose certain documents as required by the Rules.

3. Hence, prompted this applicant in which the Defendants seek an order that the Claimants be required each to file a sworn statement;

1. Stating whether they have or had at any time in their respective possession custody or power any document specified in schedule thereto.

2. If the said documents or any of them have been but are now in their possession, custody or power respectively, stating, when they parted with the same and what has become of the same.

The Claimants case:

4. On an about 29th April 2001, the Claimants incorporated the second Defendant. On 19th June 2000 they incorporated the Third Defendant. Both were Directors and held 10,000.00 shares each in both Companies.

5. Both Companies were to operate business of realty development, retailing and wholesaling, importing, exporting, manufacturing and property investment.

6. As Directors, their role was to oversee the administration of the Defendant Companies.

7. Both Claimants deny and not aware they had transferred, neither sold, disposed nor issued any allotments of shares from Second and Third Defendants to the First Defendants. They denied having knowledge of how the First Defendants became holders of the shares. They also deny convening meeting to remove them from being Directors, and they resigned as Directors.

8. They also claim that the appointment of Denis Kwan and Debby Kwan as Directors of Second Defendant on 25th June 2001, and Directors of the Third Defendant on 31st August, 2000 or any date thereafter, was unprocedural. That the appointment of David Kwan as Director of the Defendant Companies was ineffective.

9. The Claimants became aware of the change in shareholding and Directorship on 27th June 2011, when they read the Solomon Star edition of that day.

The Defendants Case:

10. In early 2000, Denis Kwan decided to incorporate the two Defendant Companies to deal with real estate. He inquired with the Registrar of Companies Office as to the procedures. He was informed that he needed to proof of his citizenship. He felt embarrassed and being discriminated as he was a Solomon Islands Citizen at that material time.

11. Sometimes in early January 2000, Mr Kwan had a friendly meeting with Mr Hikimae, a lands officer, Mr Ologa who was working with the Registrar of Companies Office and Mr Sam Sosimo, one of Claimants.

12. Mr. Sosimo who was a qualified accountant proposed the two Companies could be incorporated with him and his wife holding shares. After incorporation the shares would be transferred to him (Kwan) and/or his nominees. It was agreed at that meeting that it would happen.

13. The Defendants say that all shares originally held by each of the Claimants in the Second and Third Defendants were held in trust for the First Defendants.

14. On 21 August, 2000, the shares held by the Claimants in the Third Defendant were transferred to the First Defendants and registered. As of that date, Claimants were no longer shareholders in that company. The Second Defendant was transferred to the First Defendant on 25th June 2001, and as to that date, the Claimants were no longer shareholders in that company, likewise the Claimants are no longer Directors of the respective Defendant companies.

The Law:

15. The law relating to disclosing of documents is well articulated by Mr Kingmele in his written submissions. The starting point is rule 11.2 which require party to disclose document if (a) the party is relying on the document or (b) the party is aware of the document, which to a material extent adversely affects that party's case or supports another party's case.

16. The general rule is expounded in the case of Jones V Monte Video Gas Co[1], it stated,

"... that an affidavit of documents cannot be contradicted and must be assured to be sufficient ... unless from the documents referred to or from admission in the pleadings from the party from whom disclosure was sought, or from the affidavit itself, it could be gathered some documents are withheld".

17. Notwithstanding, the case also allowed the Court to draw inference in the circumstance that a document or class of document has been omitted from the affidavit of documents.

18. In such Case as this, the applicable law is profoundly set out in the case of Compagrue Financiere et Commerciale Du Pacificque V The Peruvian Guano Company[2]. The principle requirement is that the party disclosing list of documents in his possession or under his control relating to the matter. Brett LJ clarified the definition as follows;

...every document relates to the matters is question in the action, which not only would be evidence - not which must either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of the adversary."

19. His Lordship further stated that the question Court must ask must be whether in the first affidavit or list of documents in the first affidavit or in pleadings, there are still documents in the possession of the party making the first affidavit which is not unreasonable to suppose, do contain information which may, either directly or indirectly, enable the party requiring further affidavit, either to advance his own case or to damage the case of his adversary.

20. The question is, are there still documents in the possession of the Claimants, which may enable Defendants to advance their case or damage the case of the Claimants? To answer the question the court must consider by looking at Claimants' claim and also the statement of defence and defendant's case.

21. The Claimants claim is outlined by Mr Kingmele in paragraph 14 of his submissions and the Defendants case is outline in paragraph 16 of the same submissions.

22. From the content of the sworn statements list of documents and pleading the Defendants belief there are still documents in possession of the Claimants, which are very important to this case and ought to be disclosed, that is the basis of this application. Those documents are contained in annexure marked ES-1 in a schedule page 21 and 22, attached to sworn statement of Eran Soma filed on 7th May, 2013.

23. Mr Tagini in his submissions emphasizes that he has no issue with the law. He acknowledges the requirements and the effects of disclosing documents is a well settled law. The problem he counters is that documents refer to in annexure "ES-1" above in the schedule pages 21 and 22 are not in their possession.

24. From my perspective view, observing the facts in the entire case, it reflects those two months after incorporation of Second Defendant, it was transferred to the First Defendants. The same number of months applied to the Third Defendant in relation to its transfer to the First Defendants.

25. If transfer of ownership of Shares and Directorship was made without the knowledge of the Claimants, then on the dates of transfer, the belief that they still own the two Companies is a myth. Despite being illusion, that could not exclusively carry away the obligations under the Companies Act in particular S.124 (a) (old Act). If for some reasons the requested documents were not in the claimant possession, then the question is, were the two Companies active and functioned as from day one. If they did, then there must be minutes of statutory and general meetings, signed notices of each general meeting, minute book, and profit and loss account for the companies, signed balance sheets, Director's report and auditor's report. In other words, the Claimants are obliged to comply with the memoranda and articles of association of the Defendant Companies and relevant provisions of the Companies Act.

26. Mr Tagini raises another point by submitting that few months after incorporation, the company's shares and directorship were transferred without their knowledge. That prompted Mr Kingmele to suggest that in that instance the Claimants were fully aware of the dates of transfer, yet sit on their rights to file a course of action within limitation of time..

27. This brings about an important matter, if indeed the Claimants were not aware of early transfer of shareholding and Directorship, then of course, documents requested in schedule page 21 and 22 attached to Mr Soma sworn statement could be correct. Or alternatively having aware of the transfer as early as few months after incorporation, and sits on their rights to file a course of action immediately of which is allowable by law, then they could be finding themselves barred under the Limitation Act. However, we are not dealing with the issue of limitation now but it is an option available.

28. The other issue is if the transfer were done by consent and lawful in all aspect and respect then there must be documents to that effect. Sworn statement of Doris Vakola filed on 13th June, 2012 which she deposed in paragraph 8 that there was no Form 32 (particulars of change in Directors/Secretary), Return of Allotment of shares or Annual Returns in respect of the Second and Third Defendants were executed and returned to her office. Further, she deposes on paragraph 10; accordingly any original documents relating to the Second and Third Defendants dated prior to April 2006 are no longer in existence. The only original documents, which are on our files, were from 2006 and later.

29. In paragraph 12 she also deposes that she has searched the records of Goh & Partners/Corporate Planners limited, but have not been able to locate any original of any letter of resignation as directors and/or of the Third Defendant nor did she locate the original share transfer of the Claimants shares in the Defendant Companies to the First Defendant or any of them.

30. However, she attached certain documents, which she deposes as drafts to her sworn statement. The document related to minutes of meeting by Directors, resignation as Directors by Claimants, and advice for preparation of document for transfer of shares from Claimants to First Defendant, actual transfer of shares, shares valuation of properties, consent to act as Directors and many more.

31. Drawn from the documents, it appears to reflect a formal transfer of shareholding; Directorship and management by the Claimants to the First Defendants were consented to which the Claimants deny.

32. I accept those documents are in draft form hence not actually signed but appear mischievous. Why they survive two blazes of fire? If Mrs Vakola could depose that nothing prior to April 2006 are in existence, then per se is self-contradictory, because all the draft documents attach to her sworn statement were dated prior to 2006. Some in 2000, 2001, and others in 2004. Are they genuine draft documents and not recently manufactured to reinforce defence in this case? Court requires direct and good evidence whether in materials, sworn statements or oral. From the face value of those documents they are far from being accepted or would convince me to draw any inference that was exactly what had been done or could have expected been done. I cannot make sense out of them.

33. I find there are discrepancies in both the Claimants and Defendants cases. Where then would the balance of probabilities lies.

34. I find assistance from Mr Goh's share valuation letter dated 15th August, 2001 in regards to KCM properties Ltd.

35. At paragraph 4 under the heading "other source of information" he did mention that no trading activities up to the date of preparation of this valuation. If that was the case for the Second Defendant, I would draw inference that it would occur with the Third Defendant as well. Both were not active companies. What would be expected of an inactive company? Of course, it cannot be expected that they would have in their possession minutes of meetings, signed notices, minute book, profit and loss account, Directors report and even Auditor's report. There was nothing done, they were dormant businesses.

36. I am conscious that in the light of evidence before this Court, should I make order for sworn statement disclosing documents, and if the Claimants would not comply with, I know for sure because there are no documents at all. Consequently, the problem that follows is enforcement of those orders, how effective will the orders be enforced if there is no document as required in their possession.

37. On the balance of probability and in weighing the scale, the pendulum swings to the claimants. I therefore dismiss the application with costs.

Orders:

1. Application dismissed.

2. Cost is paid to the Claimants.

The Court.

^[1] [1880] SO.B.D 556 per cotton LT at 559.
^[2] [1882) [1883] UKLawRpKQB 95; 11 QBD 55.