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SMC Trading Ltd v Katatake [2018] SBHC 39; HCSI-CC 272 of 2017 (29 March 2018)

SMC TRADING LIMITED -V- MICHAEL KATATAKE
(Claimant) & OTHER, WA TRADING
LIMITED

(1^st & 2^nd Defendant)

HIGH COURT OF SOLOMON ISLANDS
(BROWN J)

Civil Case No.272 of 2017

Date of Hearing: 22 March 2018
Date of Judgment: 29 March 2018

W. K. Ghemu of Whitlam Togamae Lawyers for the Claimants in cc 272/2017, Defendant in
cc 472/2017
L. Chite of the Public Solicitors Office for the 1^st Defendants in cc 272/2017
J. Iroga of Mauri Lawyers for the 2^nd Defendants in cc 272/2017, Claimants in 472/2017

Application to strike out counterclaim made by the 1^st Defendants against the Claimant and WA Trading Ltd (joined as a consequence of the counterclaim as the 2^nd Defendant) on the basis lack of standing and by reason of Rule 9.75 as frivolous and vexatious.

Brown J:

The claimants by category B claim filed on 27 June 2017 sought special damages for business loss at the rate of $20,570 per day and loss of machines in an amount of $564,413. The claimant also sought permanent restraining orders against the first defendants from dealing adversely with its machinery or that of its agents or subcontractors. The claimant is a contractor engaged by WA forestry products Ltd (WA) to undertake logging operations under felling licence number A101553. It is a Solomon Islands company and owner of various heavy machinery used in the felling and cartage of forest timbers. As a consequence of the actions of the first defendants, who are of Harapa village, Shortland Islands the claimants allege they have suffered loss and seek such damages as are set out in their claim.

The first defendants by counterclaim seek a judgment against the claimant for royalties in the sum of $600,000 owed to the first defendants and the Harapa community. The first defendants also claim damages for gravel and sand excavation, anchorage fee for shipments, rental storage fee and coral destruction, to be assessed. A judgment is also sought against the WA as a consequence of logs felled to waste at LR162 Harapa area.
The facts in this case are principally uncontested. The technology management and marketing agreement (TA) under which the contractor, SMC trading Ltd undertook to carry out logging operations in accordance with its terms and conditions over the concession land being Perpetual Estate parcel number 019 – 004 – 49 of LR162 Harapa, was with WA Forestry Product Ltd, referred to as the licensee of the first part of the agreement. The agreement bears stamp by the collector of stamp duty and is dated 24 March 2016. It recites the licensee is the holder of felling licence number A101553 issued by the Commissioner of Forests having its concession area in the Shortland Islands over this registered land parcel. The licensee represented and assured the contractor (the claimant) that it had lawfully satisfied statutory requirements under the Forest Resource and Timber Utilization Act and had lawfully obtained the timber rights from the resource owners. [The grant of profit]. The agreement further recites that the licensee and the resource owner are desirous of entering into an agreement with the contractor to undertake such logging operations within the said land areas upon the terms and conditions set out in the agreement; the agreement recites that the resource owner and WA shall invite and permit and authorise the contractor to enter the concession area for the purpose of undertaking full logging operations and to market the harvested logs. The contractor accepts such appointment subject to the terms and conditions set out. The agreement was to be for a term of five years. All the control of the logging operation remained with the contractor in order to ensure that all rules and regulations laid down by the law are duly observed and the contractor shall not do or suffer anything to be done to breach the terms and conditions of the licence. It is the contractor who is responsible for selling and marketing to any overseas market which in the opinion of the contractor will derive maximum benefit to the parties and it shall keep the licensee or the resource owner informed of the sales of the long. Proceeds of the sale of the export logs will be done by way of letter of credit and all export sales will be initially received into the bank account of the contractor who shall arrange for payment of export duty. The licensee shall make available suitable areas as shall reasonably be required by the contractor to carry out its obligations under this agreement, for log pond, campsite, workshops, staff quarters, wharf and other necessary facilities. Further the licensee shall ensure that there will be no problems for road access from the log pond to actual logging operation areas and in any disputes arise, they shall be settled by the licensee speedily and the contractor shall bear such costs for settling the disputes. Any landing fees, gravel fees, coral fees and anchorage fees as the case may be requested by the licensee or resource owner shall be paid by the contractor. The contractor in consideration of the aforesaid shall make the following payments after each shipment of logs.
A. 25 to 6% to be paid to the National government as export duty.
B. 5% to be paid to licensee as licence fees.
C 10% to be paid to resource owner as royalty.
D 60% to be retained by the contractor as contractor’s fee.

The contractor shall pay the entitlement due to the licensee and resource owner within seven days after clearance of letters of credit.

It is admitted and I accept this TA is that agreement between the claimant and the second defendant, WA. It is also uncontested that the particular land parcel, Perpetual Estate no. 019 – 004 – 49 is owned by Famosa trust board and has been, by way of grant of profit pursuant to section 167 of the Land and Titles Ordinance (Cap 93) given to WA. The grant of profit document form 12, bears the Collector of Duties stamp of 25 August 2015, hence admissible in this proceeding and affects both the Trust board and W.A. according to its terms. By clause 4 the profit is to be enjoyed in gross/as appurtenant to the land comprised in the interest of the grantee. The registered owner of the land then is the resource owner entitled to the royalties, in accordance with C, above. By cross claim the 1^st defendants have claimed moneys detailed in the TA.
The claimant says the relief claimed for damages for logs felled to waste at the concession was settled in a magistrate court case. That consent award dated 8 December 2017 appears to have reflected proceedings by the Commissioner of Forests against SMC trading Ltd and was settled on the following terms.

1. that the alleged forestry offences committed by SMC trading Ltd is hereby discharged by the office of the Commissioner of forests and research with effect from the date of this order.
2. the seizure notice and charged by the office of the Commissioner of forest and research is hereby discharged with effect from the date of this order.
3. that all the machineries seized shall be returned to SMC trading Ltd to commence their business operations.
4. notice of discontinuance shall be filed by the applicant and the respondent within seven days from the date of this order.
5. the parties shall meet their own costs.
This consent order was served perfected on 8 December 2017 as evidenced by the magistrate. I am satisfied that the cross-claim seeking damages in that sum of $289,300.07 for logs felled to waste relates to the claim by the Commissioner for Forests for breach of process under his Forestry Act and does not fall to be considered as a liquidated claim in this case.

This case may be described as a dispute between these first named defendants and their community. Whilst I have not been shown the Fomosa trust deed I accept that the Fomosa trust board is the registered owner of registered land the subject of the logging concession and that by way of grant of profit WA was entitled to enjoy the grant as provided for in the document, form 12. The first schedule to the document deals with the profit.
1. The right to conduct logging related activities in parcel subject to parties successfully negotiating terms and conditions.
2. The full terms and conditions of grant is to be stated in a written agreement between the parties
3. Entry by the grantee is subject to grantee obtaining a felling licence from Commissioner of forests and other related government agencies.
4. The full terms and conditions of the grant is to be stated in a written agreement between the parties”.
In time the grantee WA obtained a felling licence which is admitted. The written agreement is the Technology agreement [TA] which recites the desire of the Resource Owner to undertake logging on the land the subject of the grant of profit. Mr. Ghemu, counsel for the claimant, relies on the statements in support by Nge Ling Lau the director of the claimant company and argues the first defendants’ have shown no proof of representation in custom or law. The argument in law rests on the fact that the registered owner of the land in question is the Famoa trust board and that any proceedings claiming royalties should be for or against the owner, the ultimate beneficiary. The trust board had, by grant of profit, enabled WA to obtain a felling licence and subsequently it entered into the TA with the contractor, SMC trading Ltd. Whilst the “Resource Owner” is mentioned in that marketing agreement, [although not a party] Famoa trust board is the registered owner of the land and consequently owner of the resource.
Mr. Chite counsel for the first defendants argued that they were the resource owners for they were part of the community. I should say at once that it is no part of this court’s jurisdiction to enter upon an investigation into the customary entitlement to a share of the proceeds of the sale of the resources on the concession land granted WA by the registered owner, the Formosa trust board.
A grant of the perpetual estate by the Commissioner carries with it and vests in the owner of the estate all implied and expressed rights and privileges belonging or appurtenant there-to and subject to all implied and expressed obligations, liabilities and incidence of that estate. (Section 109 of the Land and Titles Act). Nowhere have the first defendants’ shown any standing to challenge the implied right of the perpetual estate owner to the benefit of the resources on the land or its right to deal with those resources by grant of profit in accordance with the Land and Titles Act. The fact of registration affords the perpetual estate owner an indefeasible title and any dealings with the land or appurtenant there-to shall be in accordance with the Act. It is accepted the dealing is the grant of profit in favour of WA.
Our Court of Appeal has accepted the ratio of the Privy Council, a ratio running through many of their judgments. Rather than reiterating those authorities by which I am bound, I set out again the principle of indefeasibility of title adopted in this jurisdiction. It may be advantageous, for counsel in this case would appear to have relegated it to the past while arguing precedence for asserted claims in custom.
“First in following and approving in this respect the two decisions in Assets Co., v Mere Roihi^[1] and Boyd v Wellington Corp.^[2]their lordships have accepted the general principle, that registration under the Land Transfer Act, 1952, confers on a registered proprietor a title to the interest in respect of which he is registered which is (under s. 62 and 63) immune from adverse claims, other than those specifically excepted. In doing so they wish to make clear that this principle in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or equity, for such relief as a court acting in personam may grant. That this is so has frequently and rightly been recognised in the courts of New Zealand and of Australia (see for example Boyd v Wellington Corp.per Adams J and Tataurangi Tairuakena v Mua Carr per Skerrett CJ)”^[3]

Mr. Chite has failed to address the law as it affects perpetual estate owners. Whilst he has continually asserted the first defendants’ rights as representative of community elders and their acts in interfering with the business of the claimant as a reflection of their standing as “resource owners” he has not suggested how these first defendants may successfully challenge and interfere with the rights of the perpetual estate owner under the Act and those claiming interest through the Famoa trust board.

This is a case where I have no hesitation in striking out the cross-claim. Both the claimant and the second defendant shall have their costs of these proceedings from the first defendants. It is regrettable that the first defendant would appear to have been badly advised as to their rights as part of the community presumably represented by the Famoa trust board. Any rights to benefit from the royalties due as a consequence of the felling of the timber resource should fall to be determined by the Famoa trust board it would seem. Were these first defendants aggrieved by the apparent failure of the Famoa trust board to recognise their claims, any right of action would appear to be against the Famoa trust board and can be seen to be that right to a claim in personam which the Judicial Committee was at pains to recognise, above.
The proceeding shall be set down for a pre-trial conference on 11 May at 9:30 AM together with proceeding cc 472 of 2017.

__________________
BROWN J

^[1] (1905) AC 176
^[2] (1924) NZLR 1174
^[3] Frazer v Walker anors [1967] 1 AC 569, [1967] 1 All ER 649, [1967] 2 WLR 411per Lord Wilberforce