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Bugabu Resources Limited v PNG Forest Authority [2020]

Unsuccessful claim for unpaid Project Development Levies

Logging companies mentioned in this document:

Concessions mentioned in this document:


                                                            N10778
                           PAPUA NEW GUINEA
                  [IN THE NATIONAL COURT OF JUSTICE]

                               W.S NO. 873 OF 2020

                              BETWEEN:
                      BUGABU RESOURCES LIMITED
                                      Plaintiff

                              AND:
               PAPUA NEW GUINEA FOREST AUTHORITY
                                     Defendant

                                   Lae: Dowa J
                                  2022; 19th July
                                 2024: 26th April

CIVILPROCEDURE- claim for unpaid project development levies under
Forestry Management Agreement-competency of proceedings-lack of
representative capacity-need for naming of parties in the writ of summons-
need for consent and authority-proceedings incompetent-on the merits-the
plaintiff failed to prove there were PDL monies due and owing-entire
proceedings dismissed.

Cases Cited:

Simon Mali -v- The State (2002 SC690)
Tigam Malevo v Keith Faulkner (2009) SC960
Jackson Tuwi -v- Goodman Fielder International Limited (2016 SC1500

Counsel:

J Veisami, for the Plaintiff
L Vava, for the Defendant


                                  JUDGMENT

26th April 2024

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1.     DOWA J: This is a decision on both issues of liability and damages. The
Plaintiff claims the sum of K 1,033,407.09 against the Defendant being for
unpaid Project Development Levies (PDL) under a Forest Management
Agreement for logs harvested in the Mongi Busiga Timber Project area,
Finschaffen District, Morobe Province.

      Brief Facts


2.     The Plaintiff is a landowner company from Mongi Busiga Timber Project
area in Finschaffen District, Morobe Province. The Plaintiff filed proceedings
against the Defendant, PNG Forest Authority for outstanding Project
Development Levies (PDL). The Plaintiff alleges, it was authorised by all the 84
landowner groups in the Mongi Busiga Timber Project area as their trustee to
receive all the PDL payments on their behalf. The Plaintiff claims the Defendant
owes K1,033, 407.09 for the log shipment 125-132, which the Defendant failed
to pay.

3.     The Defendant filed a Defence, denying the claim, and pleads that the
PDL payments for the log shipment 125-132 have all been paid out to the
respective landowner beneficiaries including the Plaintiff. The Defendant pleads
that the Plaintiff does not represent all the 84-landowner groups, but only some
of them. The Defendant pleads further that the PDL payments were made only
to those landowner groups whose land or area the timbers have been harvested
and exported.

      Trial


4.    The trial was conducted by tendering of affidavits by consent.

      Issues


5.    The issues for consideration are:

         a) Whether or not the Plaintiff is the authorised and appointed trustee
            for all the landowner groups in the Mongi Busiga Timber Project
            area to receive all the PDL payments for the shipment 125-132.
         b) Whether or not the PDL payments for shipment 125-132 are still
            outstanding to be paid out by the Defendant.

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          Evidence-The Plaintiff
6.    The Plaintiff relies on the following Affidavits tendered by consent:

             a)     Affidavit in Support of Jenny Veisami sworn and filed 22nd
                  April 2021
             b)     Additional Affidavit of Jenny Veisami sworn and filed 1st
                  March 2022


7.    This is the summary of Jenny Veisami’s evidence. She is the Managing
Director of the Plaintiff. The Plaintiff and the Defendant executed a Forest
Management Agreement ('FMA') on 27th September 1996 which allowed Low
Impact Logging Limited ('LILL') to harvest and export timber from the project
areas, and LILL was obliged to make royalty and other payments including
premium and Project Development Levy ('PDL') to the Plaintiff for such
harvest. Then on 13th December 1996, a Memorandum of Understanding
('MOU') was executed between LILL and the Plaintiff for the PDL monies to be
paid to the Plaintiff as trustee of the landowners.

8.     LILL was granted a Timber Permit (No. 13-31) by the Defendant on 12th
September 1997 to harvest and export round logs for a term of 35 years, in the
project area. LILL then failed to pay monies representing premium and PDL
monies to the Plaintiff pursuant to the terms of its Timber Permit. As a result,
the Plaintiff filed National Court proceeding entitled OS No 308 of 1998 -
Bugabu Resources Pty Ltd -v- PNG Forest Authority & Anor seeking, inter alia,
an order for payment of the premium and PDL monies to the Plaintiff as trustee
of the landowners of the project area.

9.    On 4th December 1998, the National Court ruled in the Plaintiff’s favour
and ordered, inter alia, that LILL pay the PDL monies and processing levies to
the Defendant, and upon receipt, the Defendant was to pay to the Plaintiff the
PDL monies to the landowners. The Defendant refused to entertain the Plaintiffs
request claiming that the Court Order of 4th December 1998 was not clear, and
that the Plaintiff did not truly represent all the landowners.

10. As a result, the Plaintiff filed another proceeding entitled OS No 707 of
2005 - Bugabu Resources Ltd -v- PNG National Forest Authority seeking, inter
alia, a declaration that the Plaintiff was the duly recognized agent of the 84

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ILGs and was therefore authorized to receive all the PDL monies. On 24th
April 2007, an order was made in OS No 707 of 2005, by consent, which
recognized the Plaintiff as a resource entity upon which PDL monies were to be
paid on behalf of ILGs who have nominated the Plaintiff.

11.    In October 2009 the Plaintiff to issued recovery proceedings, WS No
1359 of 2009 - Bugabu Resources Limited -v- Kanawi Pouru & 2 Ors seeking
judgement for the sum of Kl, 224, 664. 34 being outstanding PDL monies due
and owing from a total of 80 shipments since 1998 to 2007 withheld by the
Defendant. On 14th June 2012, His Honour Kassman J, endorsed draft consent
orders of the parties to conclude the matter.

12. The Defendant did not make payments speedily resulting in contempt
proceedings being filed. As a result, all monies due and owing to the
landowners were eventually paid. The payments were for the period up to 2007.
The Defendant has yet to settle the PDL for period commencing 2008 up to the
present resulting in the current proceedings. Payments of PDL monies (100%
component) for period 2008 up to current date should have been paid to the
Plaintiff alone as the rightful recipient on behalf of the landowners as
recognized by the Orders in OS No 707 of 2005 and OS No 308 of 1998.
However, as at 2019, the Defendant has paid some of the PDL monies to the
Plaintiff and to other landowners to whom the Plaintiff is not aware of. The
Plaintiff claims for the outstanding balance it is entitled to receive on behalf of
the ILGs who nominated the Plaintiff. The Plaintiff instituted the current
proceedings for the recovery of monies for the Shipments 125A - 132 totalling
Kl, 033, 407.33.

      The Defendants Evidence


13. The Defendant relies on the following Affidavits also tendered by consent
of parties:
            a)    Affidavit of Vincent Batau sworn 29th and filed 30th April
               2021.
             b)     Affidavit of Vincent Batau sworn and filed 9th June2022.


14. Mr. Batau’s evidence is set out hereunder with minor adjustments. He is
the Area Manager - Momase Region for the Defendant based at the Regional
Office in Lae. The Defendant acquired the rights to harvest and sell timber/ trees
under two (2) Forest Management Agreements (FMA) signed between the
Defendant and the landowning clans namely, the Mongi-Busiga FMA and
Buhem-Mongi FMA. These FMAs were approved by the then Minister for

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Forest on 27th September 1996 and 25th April 1997.

15.    The Project Agreement was executed between the Defendant and the
preferred developer, Low Impact Logging Limited (LILL) on 9th September
1997. Thereafter a Timber Permit No. TP 12-38 dated 12th September 1997 was
issued to LILL to commence logging operations. According to the Project
Agreement and Timber Permit, the developer was required to pay Project
Development Levy (PDL), hence the collection of PDL funds by the Defendant
from all logs exported. The PDL is collected for payment to the Incorporated
Land Groups (ILG) on whose lands the logs were harvested and exported.

16. Since the commencement of the logging operations, no PDL payments
were made to landowners due to Court cases filed by the Plaintiff concerning
the PDL funds and various conflicting orders for the payment of the PDL funds.
The PDL funds were paid out only after the National Court Order of 14th June
2012 in proceeding W.S.No.1359 of 2009. The Court order was consented to by
all parties and formally endorsed by the presiding Judge, Kassman J. The
consent order was reached as a result of a meeting conducted at the project site
with all the landowners/ILGs representatives, the officers of the Defendant and
the Plaintiff on the method of PDL payments pursuant to a direction of the
Court. At the meeting, the landowners/I LGs were directed to discuss with their
members as to who to appoint as their representative or agent that would receive
the PDL monies on their behalf and to sign the Deed of Release and Authority
and Direction (DOR). The Deed of Release appointed or nominated the
representative or agent to receive or collect the PDL monies on their behalf
from the Defendant for payment to them.

17. According to the Defendant’s records on assessment and break-ups of the
PDL funds, the Defendants have paid out all the PDL funds claimed in the
Statement of Claim to all the appointed representatives of the ILGs including
the Plaintiff. There are no outstanding payments for the Plaintiff. In the case of
the Defendant, as appointed representative/agent, all PDL funds for ILGs under
its management have been paid in full (100% percent) to the respective ILGs
entitled to receive the PDL monies.

18. The assessment and break-ups are based on the harvest and export of
trees/logs from land owned by or belonging to a particular 1LG. Therefore, the
payment of PDL monies is calculated and paid to those ILGs whose logs/trees
have been harvested and exported per shipment. No PDL payment is made to
ILGs if their trees are not harvested and exported.


19.   In respect of the log shipments 125 -132, the Defendant has paid in full

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by cheques made out to the Plaintiff for all the beneficiary ILGs entitled to
receive the PDL payments that are managed by the Plaintiff and there is no
outstanding owed or due to it as alleged in the SOC. The Plaintiff was paid
about five cheques which were received directly from Port Moresby. There are
clans that have agreed for the Defendant to pay their PDL monies directly to
them which the Defendant did by paying them cash in Lae.

20. Mr Batau concludes his evidence deposing that for all payments received
directly by the Plaintiff from the developer, it has not provided any acquittals to
the Defendant for the PDL monies received. And the representative of the
Plaintiff, Mrs. Veisami, has not called into their office in Lae to discuss these
issues.


          a) Whether or not the Plaintiff is the authorised and appointed
             trustee for all the landowner groups in the Mongi Busiga
             Timber Project area to receive all the PDL payments for
             shipments 125-132.


21.     The Defendant acquired the rights to harvest and sell timber under two
Forest Management Agreements signed between the landowning clans and the
Defendant which were then approved by the Minister for Forest at the material
times. The project is known as the Buhem Mongi Busiga FMA and a Timber
Permit No TP12-38 was given to the developer, Low Impact Logging Limited.

22. As per the FMA and TP, the developer is required to pay Project
Development Levies to the Defendant for all logs harvested. The Defendant will
then pay the PDL to the landowners through their Incorporated Land Groups.

23. The Plaintiff claims it is a landowner company and represents all the 84
landowning clans in the project area and they have not been paid the PDL for
shipments 125-132 totalling K 1,033,407.09.

24. The Defendant contends that the Plaintiff does not represent all the
landowner groups, and for those it represents have received their PDL in full
and in any case, all PDL for the shipments 125 -132 have been paid in full by
the defendant and there is nothing outstanding.

25.    The Plaintiff has not filed any consent to act or authority by the any of
the landowning clans it represents as required by Order 5 Rule13 of the
National Court Rules.

19.   The relevant procedural law dealing with representative capacity is Order

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5 Rules 3, 13 and 15 of the National Court Rules. Rules 3, 13 and 15 read:
    ”3.      Joint right. (8/3)
         (1)      Where, in any proceedings, the plaintiff claims relief to
               which any other person is entitled jointly with him.
               (a) all persons so entitled shall be parties to the action; and
               (b) any of them who do not consent to being joined as a plaintiff
                    shall be made a defendant.
         (2)      Sub-rule (1) applies subject to any Act and applies unless the
               Court gives leave to the contrary.”
      “13. Representation; Current interests. (8/13)
            (1)    Where numerous persons have the same interest in any
                   proceedings the proceedings may be commenced, and, unless
                   the Court otherwise orders, continued, by or against any one
                   or more of them as representing all or as representing all
                   except one or more of them.
            (2)    At any stage of proceedings pursuant to this Rule the Court,
                   on the application of the plaintiff, may, on terms, appoint
                   any one or more of the defendants or other persons (as
                   representing whom the defendants are sued) to represent all,
                   or all except one or more, of those persons in the
                   proceedings.
            (3)    Where, under Sub-rule (2), the Court appoints a person who
                   is not a defendant, the Court shall make an order under Rule
                   8 adding him as a defendant.
            (4)    A judgement entered, or order made in proceedings pursuant
                   to this Rule shall be binding on all the persons as
                   representing whom the plaintiffs sue or the defendants are
                   sued, as the case may be, but shall not be enforced against
                   any person not a party to the proceedings except with the
                   leave of the Court.
            (5)    An application for leave under Sub-rule (4) shall be made by
                   motion, notice of which shall be served personally on the
                   person against whom it is sought to enforce the judgement or
                   order.
                         (6)    Notwithstanding that a judgement or order to
                                which an application under Sub-rule (5) relates
                                is binding on the person against whom the

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                                application is made, that person may dispute
                                liability to have the judgement or order
                                enforced against him on the ground that by
                                reason of facts and matters particular to his
                                case he is entitled to be exempted from the
                                liability........”
            15. Trustee, etc.
            (1) Where any proceedings, including proceedings to enforce a
            security by way of foreclosure or otherwise, are brought by or
            against a trustee, executor or administrator
            (a) it shall not be necessary to join as a party any of the persons
            having a beneficial interest under the trust or in the estate; and
            (b) a judgement or order in the proceedings shall, subject to Sub-
            rule (2), be as binding on those persons as it is on the trustee,
            executor or administrator.
            (2)Where a judgement is entered or an order is made in
            proceedings to which Sub-rule (1) applies and it appears to the
            Court that in those proceedings the trustee, executor or
            administrator could not or did not in fact represent the interests of
            the persons having a beneficial interest under the trust or in the
            estate, the Court may, in those or other proceedings, order, on
            terms, that the judgement so entered or the order so made shall not
            be binding on those persons.
           (3) Sub-rule (1) does not limit the power of the Court to order the
           addition of parties under Rule 8.”
20. The case law on representative capacity is settled in the cases, Simon
Mali -v- The State (2002) SC690, Tigam Malevo v Keith Faulkner (2009)
SC960 and Jackson Tuwi -v- Goodman Fielder International Limited (2016
SC1500. The basic elements of instituting class action are:

     a)      All intended Plaintiffs be named in the originating process.
     b)      Each and every intended Plaintiff must give specific instructions
          evidenced in writing to the lawyers to act for them.
     c)      The principal or lead Plaintiff must produce an authority to the
          Court to show that he is authorized by them.



21. The Plaintiff submits that its right to represent the landowners is
endorsed or given recognition by various Court Orders. It relies on the

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following Orders:

            a)      Court Order of 4th December 1998-in proceedings-OS 308
                 of 1998: Bugabu Resources v PNG Forest Authority &Another


            b)     Court Order of 24th April 2007-OS No 707 of 2005: Bugabu
                 Resources Ltd v PNG Forest Authority


            c)     Court Order of 14th June 2012-WS No 1359 of 2009:
                 Bugabu Resources Ltd v PNGFA & others


      Court Order of 4th December 1998-in proceedings-OS 308 of 1998:
      Bugabu Resources v PNG Forest Authority & Low Impact Logging Ltd


22.      In the proceedings-OS 308 of 1998, the Plaintiff sought orders that the
developer, Low Impact Logging to pay all PDL directly to the Plaintiff and not
to PNG Forest Authority and that PNG Forest Authority be restrained form
interfering with such payments. On 4th December 1998, the Court made the
following orders which read:
                    “ORDER
            THE COURT ORDERS THAT:
         1. The Second Defendant (Low Impact Logging Ltd) pay to the First
             Defendant (PNG Forest Authority) all monies representing
             Project Development Levy and Processing Levy payments for
             logs harvested and exported by the Second Defendant (“PDL
             Monies”) from the Mongi Busiga Timber Area, pursuant to the
             terms of a Project Agreement executed between the Defendants
             and dated 9 September 1997.


         2. The First Defendant pay to the customary landowners from the
             Mongi Busiga Timber Area covered by the Project Agreement the
             PDL Monies forthwith.


              ........”

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23.       The orders are clear. The Court did not grant the relief sought by the
Plaintiff. Instead, it ordered that the PDL monies be paid by the developer to
PNG Forest Authority to pay the landowners. The Court order did not direct
PNG Forest Authority to pay the PDL to the Plaintiff on behalf of the
landowners.




      Court Order 24th April 2007-OS No 707 of 2005: Bugabu Resources
      Ltd v PNG Forest Authority


24. In the proceedings-OS 707 of 2005, the Plaintiff sought amongst others, a
declaratory order that it is the authorised and lawful agent of the 84
Incorporated Land Groups (ILG) of the Mongi-Busiga FMA and thus be paid K
1,346,618.57 being the outstanding PDL monies payable to the landowners by
the developer and the PNG Forest Authority.


25.    On 24th April 2007, by Consent of parties, the Court made the following
orders which read:

                   “COURT ORDERS

                 BY CONSENT THE COURT ORDERS:

            1.     The Defendant accepts and recognize the Plaintiff Company
                 as the resources entity to whom payment of project
                 development levy (PDL) will be paid for those incorporated
                 land groups in the Mongi-Busiga Forest Management Area
                 (FMA), who have recognized and authorized the Plaintiff
                 Company to receive the said money on their behalf.

            2.    A deed of release will be executed by each of the
                 Incorporated Land Group who has directed that their PDL
                 money be paid to the Plaintiff Company so as to release the
                 Defendant of any liability and indemnifying the Defendant
                 against any claim in future by those respective ILG over the
                 PDL money.

            3.     Upon execution of the Deed of Releases the payment of the

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                  PDL money will be made to the Plaintiff Company.”


26.     The orders are clear. The Court did not appoint the Plaintiff as the agent
for all the 84 ILGs. There is a general recognition by the Defendant that the
Plaintiff is a company in the resource area to whom PDL monies can be paid for
those ILGs in the Mongi-Busiga PMA who have recognised and authorised the
Plaintiff company to receive the payments. That is, each of the ILGs were to
specifically appoint the Plaintiff to be their authorised agent and sign a deed of
release before payments were to be released to the Plaintiff. The evidence does
not show the number nor the identities of the ILGs who appointed the Plaintiff
to be their agent.




       Court Order of 14th June 2012-WS No 1359 of 2009: Bugabu
       Resources Ltd v PNGFA & others


27.      In WS No 1359 of 2009, the Plaintiff sought an order for payment of
K1,224,664.34 by PNG Forest Authority being for outstanding PDL monies for
the landowners. On 14th June 2012 the National Court made orders by consent
of parties as to the manner the PDL payments were to be paid.


28.   The orders of 14th June 2012 read:


              “ORDER
              THE COURT ORDERS that:
         1. The Landowners Project Development Levy (PDL) payments from
             the Mongi and Mongi Busiga Timber Area Project be paid to the
             various incorporated land groups in the following manner-

                (a) The 39 incorporated land groups listed in the attached
                    Schedule A shall have their benefits paid to Bugabu
                    Resources Limited;

                (b) The 18 incorporated land groups referred to in the attached
                    Schedule B shall pay their benefits to B.T.Gobu Lawyers
                    trust Account;

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                (c) The 9 incorporated land groups referred to in the attached
                    Schedule C shall pay their benefits to Mirupasi Lawyers
                    Trust Account.


                (d) The 18 incorporated land groups referred to in the attached
                    Schedule D authorized the Papua New Guinea Forest
                    Authority to collect and distribute their benefits on their
                    behalf.

         2.   The proceedings herein are to be discontinued by the Plaintiff
              filing a Notice of Discontinuance within 2 days from the date of
              these Orders.

         3. Each party shall pay their own costs of the proceedings.”


29.    The above orders show the Plaintiff was to receive PDL payments for 39
ILGs while the rest of the ILGs appointed other representatives to receive their
payments. The orders do not endorse or appoint the Plaintiff to represents all the
ILGs. The evidence shows, the Court directed parties to meet and agree on the
manner of the PDL payments. The order of 14th June 2012 was made as a result
of a meeting of all the landowners/ILG representatives, the Defendant and the
Plaintiff pursuant to a direction of the Court. At the meeting, the landowners/I
LGs were asked to appoint as their representative that would receive the PDL
monies on their behalf and to sign the Deed of Release and Authority. As a
result of that exercise, 39 ILGs appointed the Plaintiff to be their representative
to receive their PDL monies. The rest of the ILGs elected to appoint others
while some decided to collect their PDL money directly from the Defendant.


30. The orders do not give exclusive rights for the Plaintiff to represent all of
them except for the 39 ILGs who gave their authority to the Plaintiff to receive
future PDL payments. Even the 39 ILGs must give express authority to the
Plaintiff to institute the current Court proceedings on their behalf.


31.     I conclude from the evidence and findings above that the Plaintiff does
not have standing to commence the proceedings. Firstly, the Plaintiff does not
have a personal cause of action against the Defendant. It pleads in the statement
of claim that it represents the ILGs but did not indicate or name the ILGs it
represents in the light of some of the ILGs choosing to be represented by others
or directly dealing with the Defendant. Even for those ILGs the Plaintiff
represents, they are not named in the Writ of Summons to come within the

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ambit of Order 5 Rule 3 of the National Court Rules. The ILGs are not
identified and the details of their claims. Secondly, the ILGs have not expressly
signed any consent and authority authorising the Plaintiff to institute the
proceedings on their behalf pursuant to Order 5 Rule 13 of the National Court
Rules. Thirdly, although the Plaintiff pleaded it is the trustee for the ILGs, it has
not produced any evidence of trust like trust deeds executed by the ILGs with
the Plaintiff to invoke the jurisdiction of the Court under Order 5 Rule 15 of the
National Court Rules.


32.     The Plaintiff has no personal cause of action against the Defendant. It is
suing in a representative capacity. The Plaintiff must comply with the
procedural requirements to pass the competency test. The procedural law is
settled in Simon Mali v The State (supra) and others that any failure to comply
with the rules and the condition precedent settled by the Supreme Court renders
the proceedings incompetent.


33.       Based on the evidence presented, I find the Plaintiff does not have a
personal claim and has no basis to bring this action. The Plaintiff’s claim in
instituting the proceedings in representative capacity is flawed. For the
foregoing reasons, the proceedings are incompetent and shall be dismissed.


      Merits of the Case


34.        In case I am wrong about my ruling on the competency of the
proceedings, I will now turn to the merits of the case.


35.      The Plaintiff claims the sum of K 1,033,407.09 being outstanding PDL
money owing and due to the Plaintiff on behalf of the ILGs for the log
shipments 125 to 132. The Plaintiffs evidence is not clear. Jenny Veisame
deposes the Plaintiff received about 5 payments from the Defendant and is suing
for the balance. The Plaintiff did not give details of the ILGs it represents for the
outstanding claim.


36.      On the other hand, the evidence given by the Defendant shows that all
the PDL monies for the log shipments 125 to 132 have been paid in full at least
by 28th August 2020, about two months before the commencement of these
proceedings. The evidence shows the Plaintiff was paid 5 cheques for the ILGs
it represents. The rest, about 15 ILGs, were paid mostly in cash directly to the

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landowners or their ILG representatives. These payments were made in the
manner or method of payment as agreed to by the parties and endorsed by the
Court on 14th June 2012. That is, the Plaintiff was paid the PDL monies for the
ILGs it represents. As for the other ILGs, the Defendant released the money to
their own representatives or paid cash for those ILGs who retained the
Defendant as their agent. The evidence provided by the Defendant is
overwhelming and conclusive that all PDL funds received for the log shipments
125 to 132 have been paid in full and disbursed to all ILGs who were entitled to
the payment.

37.      Based on the evidence presented, it is clear the Plaintiff has failed to
prove the claim on the balance of probabilities and shall be dismissed on the
merits as well.

      Costs

38. Costs are discretionary. The cost shall be awarded to the successful party,
in this case, the Defendant.

      Orders

39.    The Court orders that:

      1.       The Plaintiff’s proceeding is dismissed.

      2.       The Plaintiff shall pay the Defendant’s cost, to be taxed, if not
           agreed.

      3.       Time be abridged.

Jenny Veisame:             the Plaintiff in person via J Veisame
Luke Vava Lawyers:         Lawyers for the Defendant

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