Mega Enterprise v Sunway [2014] SBCA 21

Section 1: Case Header

Citation: Mega Enterprise v Sunway [2014] SBCA 21; SICOA-CRAC 04 of 2014

Court: Solomon Islands Court of Appeal

Date of Hearing: 15 October 2014

Date of Judgment: 17 October 2014

Judges: Goldsbrough JA (President), Williams JA, Margaret Wilson JA

Parties: Appellant: Mega Enterprise | Respondent: Sunway

Advocates: J Keniapisia for the Appellant | M Tagini for the Respondent

Nature of Jurisdiction / Procedural Posture: Appeal from a decision of the High Court of Solomon Islands (Faukona J) dated 6 December 2013, which assessed damages payable under a usual undertaking as to damages given in High Court Civil Case No. 36 of 2011.

Order / Disposition (Appeal Outcome): Appeal allowed; High Court order assessing damages quashed.

Section 2: Facts

2.1 Procedural Background

This appeal arose from a High Court decision dated 6 December 2013, where the High Court made an order assessing damages payable under an undertaking given in Civil Case No. 36 of 2011. The damages were assessed at $63,024.45.

The Notice of Appeal was filed on 10 January 2014. The Court of Appeal noted that this appeared to be out of time in the normal course, but given the timing (public holidays and possible registry closure), the Court condoned the late filing and heard the appeal.

The undertaking arose from interim restraining orders sought by the Appellant in 2011. To obtain those orders, the Appellant (through counsel) provided the High Court with “the usual undertaking as to damages.”

The Court noted that although the point was “moot,” it was doubtful the Appellant would have obtained the restraining orders without giving such an undertaking, and no submissions were made suggesting otherwise.

The interim relief was obtained on 17 February 2011, but was short-lived. After an inter partes hearing, the interim injunction was discharged on 2 March 2011, meaning the interim relief remained in force for nine days.

The substantive proceedings ended when the Appellant filed a notice of discontinuance on 13 April 2012. Following discontinuance, the Respondent had:

• the ability to seek costs under CPR Rule 9.60; and
• separately, the right to seek damages resulting from the interim order.

The Respondent filed the application for assessment of damages on 7 May 2013, which was finally determined on 6 December 2013.

The Court identified the relevant period of damages as 17 February 2011 to 2 March 2011 (the period the injunction operated).

2.2 Material Facts

(i) The undertaking and its legal basis

The undertaking given was the “usual undertaking as to damages”, provided for under the Solomon Islands Courts (Civil Procedure) Rules 2007 (CPR).

The Court reproduced the CPR definition, stating that the undertaking means the party giving it undertakes that if the party is ultimately unsuccessful (or the order ought not to have been made), then the giver is liable “(without further order)” to pay damages suffered as a result of the order, with damages to be assessed if not agreed.

(ii) The damages claim in the High Court

The High Court assessed damages at $63,024.45, based on evidence that the losses incurred were loss of production for the nine days the order was in force.

Evidence before the trial judge was that the restrained party’s losses were said to be loss of production for the nine days, calculated using:o an average production over time,o converted into a daily rate, theno multiplied by the number of days restrained.

That calculation was audited by Yam & Co, and their certification of the calculation as reasonable was exhibited through a sworn statement of Yu Yuebo, Managing Director of the Second Respondent.

The trial judge referred (at paragraph 8) to there being “no dispute” that the Second Defendant incurred loss of business earnings during the nine-day restraining order period.

(iii) Nature of the restrained activity

The Court of Appeal described the Respondent’s restrained activity as logging operations, stating that the Respondent was required to stop logging operations for the period of restraint.

The Court also observed that the Respondent “does not produce anything,” but rather fells trees, and that if a tree cannot be felled today, it may be felled another day.

(iv) Delay chronology relevant to the dispute

The Court emphasised the timeline:

• interim relief granted and discharged in 2011,
• proceedings discontinued in April 2012,
• assessment of damages sought in May 2013 (about 13 months after discontinuance).

The Court considered the 13-month delay between discontinuance and the damages assessment application to be unreasonable, and noted it was outside periods envisaged in some authorities such as Smith v Day (1882) 21 Ch D 421.

The Court stated there was no evidence before it to explain the delay, and at its request counsel for the Respondent was asked whether there was any material explaining it.

Section 3: Issues

The Court of Appeal identified four grounds of appeal, which together framed the issues for determination:

Issue 1 — Whether the Appellant in fact gave the usual undertaking as to damages at the time (or prior to) the grant of the interlocutory injunctive relief.

Issue 2 — Whether the damages sought were a direct consequence of the injunctive relief.

Issue 3 — The nature of the undertaking given (in the event that it is found an undertaking was given).

Issue 4 — Whether damages were payable under the undertaking where there had been no trial of the issues, because the proceedings were discontinued.

Section 4: Rule

4.1 Usual undertaking as to damages (CPR 2007)

The Court stated that a usual undertaking as to damages is provided for under the Solomon Islands Courts (Civil Procedure) Rules 2007 (CPR).

The Court set out the CPR definition of the “usual undertaking as to damages”, which requires that the party giving the undertaking undertakes that:

• if the party is ultimately unsuccessful, or
• it is otherwise shown that the order ought not to have been made,then the giver of the undertaking is liable (without further order) to pay damages suffered by another party or person as a result of the order being made, with damages to be assessed if not agreed.

4.2 Undertaking may be given orally by counsel

The Court recognised that even if the Registry file does not contain a written undertaking, counsel may give an undertaking orally during a hearing.

Therefore, the absence of a filed written undertaking is not conclusive and not necessarily indicative that no undertaking was given.

4.3 Undertaking is a condition of interim injunctive relief

The Court stated that where an interlocutory injunction or interim relief is sought, the Court will require the applicant, as a condition of the Court granting relief, to enter into an undertaking to abide by any order the Court may make as to damages.

The undertaking is given to the Court, but it provides for damages to:

• any party to the proceedings, or
• any other person, whether or not that party was itself the subject of the restraint.

4.4 Damages payable without further order; assessment only where quantum cannot be agreed

The Court stated that damages are payable under the undertaking without further order, and that assessment is required only where the quantum cannot be agreed.

4.5 Discharge of the interim order determines whether the order was made with good cause

The Court rejected a submission that, when assessing damages, the Court should assess whether the order was made with good cause.

It held that because the interim relief was discharged at the inter partes hearing, that issue had already been determined.

4.6 No trial is required before damages can be claimed under the undertaking

The Court stated that discontinuance and the absence of a trial does not prevent a party from seeking damages suffered as a result of the injunctive order.

It held that it is not a pre-condition of the undertaking that issues must have been determined at trial.

4.7 Recoverable damages must be losses suffered “as a result of the order”

The Court reaffirmed that damages under the undertaking are confined to damages suffered as a result of the order being made.

In assessing such damages, the Court indicated that where operations are restrained (here, logging), the costs properly recoverable are those fixed costs such as labour and machinery that could not be utilised during the restraint period.

The Court stated that profit from timber sales was not lost, but merely postponed, because trees not felled during the restraint could be felled later.

4.8 Delay is a relevant factor in whether an assessment should be permitted

The Court treated delay as a factor relevant to an assessment of damages being sought.

It referred to Smith v Day (1882) 21 Ch D 421, noting that the delay in this case was well outside periods envisaged in some authorities.

The Court also relied on the reasoning of Apaniai J in HCSI 96 of 2005 (14 May 2014), where his Honour held that delay is a factor to be taken into account when assessment of damages is requested, and refused to grant an assessment hearing due to unreasonable delay.

The Court stated that a modern approach is to consider:

• the delay,
• the reasons for it, and
• potential prejudice to the parties,before deciding whether discretion should be exercised.

Section 5: Application (Court’s Reasoning)

The Court considered the four grounds of appeal and determined the appeal accordingly.

5.1 Ground 1 — Whether the undertaking was given

The Court noted that the order granting interlocutory relief contained the usual recital recording that the usual undertaking as to damages had been given.

The Court held that, in the absence of evidence to the contrary, that recital demonstrated that the undertaking was in fact given.

The Appellant’s argument relied mainly on the fact that the Registry file did not contain a written undertaking.

The Court rejected this, stating that counsel may give an undertaking orally during a hearing, meaning the absence of a filed written undertaking was not conclusive (and not even indicative) that no undertaking had been given.

The Court further observed there was nothing filed to show:

• that counsel was not instructed to provide an undertaking, or
• that no undertaking was given.

Result: Ground 1 failed.

5.2 Ground 3 — Nature and scope of the undertaking

The Court explained that where interim relief is sought, the Court requires the applicant, as a condition of obtaining the relief, to enter into an undertaking to abide by any order the Court may make as to damages.

It emphasised that although the undertaking is given to the Court, it provides for damages to:

• any party to the proceedings, or
• any other person,whether or not that person was the direct subject of the restraint.

The Court stated that damages are payable under the undertaking without further order, and that only assessment is required where quantum cannot be agreed.

The Appellant submitted that the Court assessing damages should consider whether the interim order was made with “good cause” or otherwise.

The Court rejected that submission because the interim relief had already been discharged at the inter partes hearing, meaning the question of whether it should have been made was already resolved.

The Court noted that it was not in dispute on appeal that damages were confined to damages suffered “as a result of the order being made.”

Result: Ground 3 failed.

5.3 Ground 4 — Whether damages require a trial of issues

The Appellant argued damages were not payable because there had been no trial, since the proceedings were discontinued.

The Court rejected this argument, holding that discontinuance does not prevent a party who suffered damage from the injunctive order from seeking damages.

It stated that it is not a pre-condition of the undertaking that issues must be determined at trial.

Result: Ground 4 failed.

5.4 Ground 2 — Whether the damages sought were a direct consequence of the injunctive relief

The Court noted that evidence before the trial judge was that the losses were said to be loss of production during the nine-day restraint period.

The calculation was based on:

• average production over time,
• divided to give a daily rate, then
• multiplied by the number of restrained days.

That calculation was audited by Yam & Co, and their certification was exhibited through a sworn statement by Yu Yuebo, Managing Director of the Second Respondent.

The Court referred to the trial judge’s statement that there was “no dispute” that the restrained party incurred loss of business earnings during the nine days. Court’s reasoning on why the assessment basis was wrong

The Court observed that in this case, the Respondent was required to stop logging operations.

However, the Court stated that the Respondent “does not produce anything,” but rather fells trees, and if it cannot fell a tree today, that tree remains available to be felled another day.

The Court held that the costs properly recoverable were fixed costs, such as labour and machinery that could not be utilised for profit during the restrained days.

It reasoned that profit from the sale of felled timber was not lost, only postponed.

The Court concluded that the material presented in the damages assessment was not sufficient to identify recoverable losses on the correct basis, and therefore the basis of assessment was in error.

The Court stated that under different circumstances, this would suggest the matter should be sent back for a rehearing.

5.5 Delay (raised in submissions) and why the Court refused to remit for rehearing

The Court then turned to a matter raised in submissions which did not appear in the Notice of Appeal: the time taken by the Respondent to seek assessment of damages.

The Court set out the chronology:

• interim relief ordered and discharged in 2011,
• claim discontinued in April 2012,
• assessment requested in May 2013, with 13 months between discontinuance and the damages application.

The Court held this was an unreasonable delay, and well outside timeframes envisaged in some authorities, including Smith v Day (1882) 21 Ch D 421.

The Court stated there was no evidence explaining the delay. It noted that assessment could not be requested until the proceedings ended, but there was still a further delay before the application was made.

The Court referred to Apaniai J (HCSI 96 of 2005, 14 May 2014), who treated delay as a factor and refused an assessment hearing due to unreasonable delay. Court’s treatment of how delay affected the outcome

The Court noted the delay issue was not raised at first instance, and there was material suggesting the trial judge was led to believe the application had been filed only one month after discontinuance, which was an error repeated in submissions.

The Court acknowledged delay was not raised as a ground of appeal, but held it must still be taken into account when deciding whether to send the matter back for rehearing.

The Court concluded:

• the Respondent sought assessment on an incorrect basis,
• did so after substantial delay, and
• that delay came after a long delay before discontinuance.

The Court held these factors meant it would be wrong to send the matter back for a further hearing now.

While it did not entirely adopt the dicta in Smith v Day, it confirmed delay is a factor, and a modern approach considers delay together with reasons and potential prejudice before exercising discretion.

Section 6: Conclusion (Disposition / Orders)

The Court of Appeal held that the appeal should succeed.

1. The appeal is allowed.

2. The order of the Court below is quashed.

3. Costs of:

• the appeal,
• and the costs incurred in dealing with the application for assessment, were awarded to the Appellant, such costs to be agreed or taxed.

Section 7: Precedent / Legal Principles

7.1 A party who gives the usual undertaking as to damages undertakes that if they are ultimately unsuccessful or it is otherwise shown the order ought not to have been made, they are liable without further order to pay damages suffered as a result of the order, with damages to be assessed if not agreed.

7.2 The fact that the Registry file contains no written undertaking does not prove that no undertaking was given, because counsel may give the undertaking orally during a hearing, and the recital in the order is evidence the undertaking was given unless contradicted.

7.3 Where interim injunctive relief is sought, the Court requires the applicant, as a condition of granting relief, to enter into an undertaking to abide by any order the Court may make as to damages.

7.4 Although the undertaking is given to the Court, it provides for damages to any party or any other person, including persons not directly the subject of the restraint, if they suffered damage as a result of the order.

7.5 Once the undertaking applies, damages are payable without further order, and only an assessment is required where the amount cannot be agreed.

7.6 Where interim relief is discharged at an inter partes hearing, the question of whether the order was made with good cause is treated as already determined, and the Court assessing damages does not re-litigate that issue.

7.7 The discontinuance of proceedings and absence of a trial does not prevent a party suffering damage from the injunction from seeking damages under the undertaking, because trial determination is not a pre-condition of the undertaking.

7.8 Damages under the undertaking are confined to losses suffered as a result of the injunctive order, and the assessment must be based on losses properly attributable to the restraint.

7.9 Where logging operations are restrained, the Court held that profit from the sale of felled timber was not lost but merely postponed, and that the costs properly recoverable are fixed costs such as labour and machinery that cannot be utilised for making a profit for the days of the restraint.

7.10 Delay is a factor the Court will take into account when an assessment of damages is requested, and in this case the Court treated the delay as relevant when considering whether to send the matter back for a further hearing.

7.11 The Court indicated that while older authority treated delay itself as sufficient, the more modern approach is to consider delay together with:

• the reasons for delay, and
• potential prejudice to the parties,before deciding whether discretion should be exercised.

Section 8: Ratio Decidendi

Where damages are assessed under a usual undertaking as to damages, the assessment must be confined to losses suffered as a result of the interim order, and where the assessment is made on an incorrect basis because the material is insufficient to identify the losses properly recoverable (including that profit was not lost but merely postponed), the assessment order may be quashed; further, delay is a factor the Court may take into account when considering whether to remit the matter for a further hearing.

Published on OcLII: 20/02/2026