Mitiaro Trading Company Ltd v Estall [1981] CKHC 7; Plaint 47.1980 (24 February 1981)

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WILLIAM JOHN ESTALL
MANA STRICKLAND
BENIONI JOSEPH
GEOFFREY ARAMA HENRY
KURA STRICKLAND
Defendants

Dates of Hearing: 28, 29, 30 July; 11, 12, 13 August;
5 September; 3, 14 October 1980
Date of Judgment: 24.2.1981

This is a claim for $10,000 alleged to be owing to the plaintiff by the defendants under an agreement whereby in addition to the payment of this sum the defendants agreed to purchase certain chattels and equipment belonging to the plaintiff on the Islands of Manuae and Rarotonga. The defendants admit there is due the sum claimed but counterclaim for $18,239 basing their claim on allegations of a breach of an oral warranty as to condition collateral to the said agreement, fraudulent misrepresentation and failure to deliver certain of the chattels purchased thereunder. They also raise a defence under Section 645 of the Cook Islands Act 1915 to the effect that the said agreement is "oppressive, unreasonable and improvident" and that in the interest of the "natives" the claim should not be enforced.

The undisputed facts reveal that about the turn of the century Manuae Island an Island approximately 124 miles North East of Rarotonga was leased by its Aitutakian owners on a long term lease which subsequently the Cook Islands Co-operative Bank Limited acquired by assignment. By arrangement with the Bank the plaintiff in 1973 obtained tenure of the Island for a period of 5 years and carried on business there producing copra and other island produces as well as engaging in fishing. In August 1977 the Bank went into liquidation and the liquidator took steps to terminate the arrangements with the plaintiff. Following certain court proceedings, the plaintiff entered into agreement with the Bank on the 28^th August 1979 whereby it purchased for $60,000 the residue of the lease of the Island. About this time, certain people of Aitutaki who had considered the Island should be returned to them as owners elected a Committee known as the Manuae Landowners Committee (hereinafter referred to as "the Committee") comprising the defendants and two others, to achieve that end. Steps were taken to frustrate any further dealings with the Island resulting in certain Court proceedings being instituted by the Government who had been approached by the Committee for assistance, to test the validity of the Agreement entered into by the plaintiff with the Bank. In the result, the plaintiff's Managing Director Mr Christopher Vaile met with the Committee and what has been referred to as an "agreement in principle" was reached whereby the Manuae Landowners purchased the plaintiff's "complete interest in Manuae". On the 2^nd October 1979 Mr Vaile and the defendants with the two other Committee members met at the office of the plaintiff's solicitors and worked out terms of agreement. Minutes of that meeting were drawn up by Mr T C Clarke, Solicitor for the plaintiff recording the proceedings thereof. The Minutes read:

MANUAE LANDOWNERS COMMITTEE: G A Henry, S Sadaraka, M Strickland, W Estall, N Puna & B Joseph, K Strickland

1. That the application before the High Court to determine whether the Aitutaki Motus Prohibition of Leases Act applies to the agreement between Cook Islands Co-Operative Bank and Mitiaro Trading Co shall proceed on Friday 05 October 1979.

2. That the Agreement in principle reached between the Manuae landowners and Mitiaro Trading Co shall apply whatever the outcome of the Court hearing on 5^th October.

3. Mitiaro Trading shall sell to the Manuae landowners its complete interest in Manuae including its right to exclusive possession and all share of profits from operations on Manuae. The Manuae landowners shall pay the sum of $60,000 to the Co-operative Bank Ltd in full payment of the interest of the Co-operative Bank. The Manuae landowners shall purchase from Mitiaro Trading all the equipment of Mitiaro Trading and stock in connection with the Manuae operation.

Mitiaro Trading shall provide a list of the equipment both in Manuae and presently on Rarotonga with values, and such values shall be subject to agreement on a fair value basis and the equipment subject to inspection. As consideration for a complete surrender of all Mitiaro Trading Company's rights in respect of Manuae and future profits the Manuae landowners shall purchase all the equipment of Mitiaro Trading, but it is acknowledged that some individual items may be subject to negotiation between the parties. The Manuae landowners shall not make any further payment to Mitiaro Trading in respect of goodwill or other residual interest in the Manuae lease.

4. The earliest steps will be taken by both parties to endeavour to resolve the list of equipment.

5. The parties to the agreement shall advise the Government that clear agreement has been reached in principle on the basis of the Manuae landowners buying out Mitiaro Trading Co lock stock and barrel.

6. The Manuae landowners shall advise Government that for the purpose of carrying out the agreement that has been reached it will be necessary for the Manuae landowners to obtain a guarantee for finance from Government. Government is to be asked to confirm the granting of that guarantee in principle at the soonest time.

7. If positive steps are taken by Manuae landowners particularly with regard to obtaining Government's agreement in principle to a guarantee of finance before Wednesday 10^th October Mitiaro Trading will seek an adjournment of its application for approval of the agreement between the Co-op Bank Ltd and Mitiaro Trading presently before the Leases Approval Committee."

After that meeting the Manuae Committee proceeded to raise funds from their Aitutakian people for the purchase. They also met with Government representatives and other concerning finance. The transaction of the plaintiff with the Bank, which the Committee had contended to oppose was allowed to proceed through the Leases Approval Committee whose consent by law was required. The Committee also arranged for Mr Mana Strickland and a mechanic Mr Tangata Tuarae to inspect with Mr Vaile the chattels of the plaintiff being sold and situated in Rarotonga. These men commenced their task on the 22^nd October 1979 all items being seen with the exception of a pontoon.

On the 24^th October 1979 the plaintiff's solicitors indicated impatience with the progress of negotiations and wrote to Mr Benioni Joseph who was Secretary of the Committee as follows:

Three weeks have now passed since the meeting on 2 October when an agreement in principle was reached between Mitiaro Trading Co Ltd and your Committee in which the former is to sell its interests in Manuae to the Manuae landowners "lock, stock and barrel". Immediately after the meeting our client supplied you with a list of its equipment (together with values) which was to pass with the sale. We understand that a person appointed by your Committee has now inspected the equipment in Rarotonga. Our client is most anxious to hear from your Committee with regard to this. You will appreciate that the sale of the equipment is a fundamental item.

Our client is also most anxious to learn what progress has been made in the raising of finance by your Committee. We understand that a submission for a Government guarantee was put to the Cook Islands Cabinet some weeks ago but we have not learned of the outcome of this. It was our understanding that a Government guarantee would be crucial to your financial arrangements.

We have stressed on behalf of our client the great need for urgency in resolving these various matters so that a firm agreement can be drawn up, signed and then carried out. This must all be done well before 1 December 1979 the date by which our client must complete its agreement with the Liquidator of the Co-op Bank."

This was followed on the 31^st October 1979 by a further letter to Mr Joseph who was Secretary of the Committee; reading:

Further to our letter to you dated 24 October 1979 we note that we have not had any reply from you. Our client is most anxious about its position. From the lack of response from your Committee we feel we must conclude that your Committee either does not wish to honour the agreement reached on 2 October 1979 or is unable to do so. That being so our client must make alternative arrangements.

Please advise us in writing by no later than 4pm Friday 2 November 1979 as to any proposal your Committee may have to further the agreement reached on 2 October 1979. We emphasise that any such proposal to be acceptable to our client must contain firm binding contractual terms."

From then on, the pace of the negotiations quickened. Mr P McDonnell a solicitor then practising in Rarotonga was instructed by the Committee to act on its behalf and on the 9^th November 1979 he wrote to the plaintiff's solicitor:

Further to your discussion with me of the last several days I enclose herewith the list of plant belonging to Mitiaro Trading Co Limited, and situated on Rarotonga, that my clients wish to purchase together with their valuation of the items. I have explained to them that all the plant required is subject to an independent valuation and arbitration if necessary and they are aware of and have accepted this. They are also aware that the same provisions would apply to the plant and machinery on Manuae.

Plans are well advanced towards incorporating a new company with a fully paid-up capital of $25,000.00 and my instructions are that the full amount will be in hand shortly. I am trying to expedite this matter and will be in touch with you again next week to confirm that all is in order."

The valuation submitted totalled $11,080. To this letter the plaintiff's solicitors replied on the 12^th November 1979 (inter alia) as follows:

"You referred to an intention to subject the list of equipment to independent valuation and arbitration. That was not to be the case for the equipment on Rarotonga, but rather for the equipment on Manuae. As far as the equipment on Rarotonga was concerned, it was believed that this could be resolved between the parties without any delay. If there was need for negotiation on some items before agreement on values was reached there was adequate time in which to do this. This would not be the case for the equipment on Manuae so it was proposed that the agreement in respect of that equipment would be subject to arbitration based on an independent valuation.

In view of what appeared to be deliberate delaying tactics on your clients' part we took the precaution of advising our client to obtain its own independent valuation of the equipment on Rarotonga."

The independent valuation we have shows that the offer now made by your clients is ridiculously low.

We must advise our client therefore that in the absence of an immediate further offer from your clients at realistic values that your clients are not serious in endeavouring to finalise a fair agreement with our client. Our client must therefore look to an alternative arrangement by which it can satisfy the Cook Islands Co-operative Bank Limited (In Liquidation) on 1 December, 1979."

I have discussed this matter at length with my clients and they have now instructed me with a further proposal regarding the plant and the equipment they wish to buy from Mitiaro Trading Company.

My clients will purchase all this, with the exception of the five tons of copra, for the prices asked by the seller, i.e. for a total of $20,900.00.

EQUIPMENT ON RAROTONGA	(Your price)		(Our offer)

Radio Transceiver	$500.00		$450.00
Batteries	100.00		unseen negot.
Tools	$2,500.00		" "
Aluminium Pontoon	1,000.00		" "
Wooden Boat	200.00		180.00
Suzuki Outboard Motor	900.00		500.00
Diesel	453.00		453.00
Lincoln Generator	1,800.00		1,500.00
Lister Diesel Motor & Winch	1,500.00		800.00
Log jinker	100.00		100.00
Shed	800.00		600.00
Rope	200.00		200.00
Chain Saw	300.00		300.00
Other Tools	750.00		500.00
Further Tools		750.00	unseen negot.
		11,853.00		5,553.00

As you can see a number of items on Rarotonga are not required by my client and it is there (sic) understanding that your client has been aware of this during the whole course of these negotiations."

A reply to this letter from the plaintiff's solicitors was received on the 15^th November to the following effect:

"Basically, our client is prepared to accept the offer conveyed in your letter of 14^th November but with certain additions.

Our client accepts the price of $20,900 with the removal of the copra from the list.

The letter then deals with specific items relating to the equipment on Rarotonga. These items were subsequently settled and on the 19^th November Mr McDonnell advised that his clients were prepared to sign "the proposed agreement".

On the 22^nd November 1979 an agreement was signed by the plaintiff and the defendants (The Committee had lost two of its members who were overseas). The Agreement contained (inter alia) the following provisions:

"1. THE Vendor shall sell and the Purchasers shall purchase the equipment and items set out in the Schedule hereto at the price of $34,543.00.

2. THE Purchasers shall pay the said purchase price in cash on the execution of this agreement.

3. THE Vendor warrants that the said equipment and items referred to in clause 1 hereof are its own property free from all encumbrances whatsoever.

4. POSSESSION of the said equipment and items referred to in clause 1 hereof shall be given to the Purchasers on execution of this agreement provided however that the equipment and items presently on the Manuae shall remain on Manuae.

5. THE Vendor shall at the direction of the Purchasers enter into and execute such valid surrender or assignment as may be required by the Purchasers to the Purchasers or their nominees of the leasehold interest of the Vendor or any other rights of the Vendor in the islands of Manuae and Te Auotu arising under an Agreement for Assignment of Lease made between Cook Islands Co-Operative Bank Limited (In Liquidation) and the Vendor dated 28^th August 1979 or any other document of title...........

6. THE Purchasers shall forthwith make or cause to be made payment to the Vendor of the sum of $10,000.00 in cash such sum having been paid by the Vendor to Cook Islands Co-Operative Bank Limited (In Liquidation) by way of deposit and part payment pursuant to the aforementioned Agreement dated 28^th August 1979."

The Schedule in the agreement set out "equipment on Manuae", "additional equipment taken to Manuae" and "equipment on Rarotonga".

On the signing of the agreement the defendants paid the sum of $34,543 for the equipment as provided in Clause 1 of the agreement but did not pay the $10,000 as required by clause 6 thereof. No assignment as provided in clause 5 of the plaintiff's interest in Manuae which it was acquiring pursuant to its agreement with the Bank was effected, since due to the plaintiff's default in the payment of the balance of the purchase price on the 1^st December 1979, the Bank cancelled the Agreement and forfeited the $10,000 deposit paid by the plaintiff thereunder. The plaintiff's default was prompted by the circumstances then prevailing. The defendants had purchased its equipment. However they had not arranged finance to cover the plaintiff's obligation to the Bank nor had they paid the $10,000 as required under the agreement. The defendants did in fact ultimately form a company known as Manuae Holding Company Limited and purchased the lease from the Bank.

The equipment on Manuae had not been inspected by the defendants up to the time the agreement was signed on the 22^nd November 1979. This was due to an unforeseen difficulty in travelling to the Island. The Plaintiff's ship did visit it on one occasion in November. Two of the defendants, Mr Mana Strickland and Mr Estall had been delegated the task of inspecting the equipment there. The others were by reason of their occupations unable to undertake the task which required their being away from Rarotonga for some days. Prior to the ship's departure, however, Mr Estall became incapacitated by a leg injury leaving only Mr Strickland available for the trip. Mr Vaile for personal reasons would not agree to him travelling on the boat.

The first inspection of the Manuae equipment undertaken on behalf of the defendants was not until the 6^th February 1980 when Mr Mana Strickland and some workmen arrived on the island.

On the 25^th February 1980 the plaintiff by its solicitors made formal demand for payment of the outstanding amount of $10,000 due under the agreement within 14 days. Payment not being made within the time stated, proceedings were commenced on the 14^th April 1980.

There is no dispute by the defendants that the sum claimed by the plaintiff has not been paid. Apart from the defence based on section 645 of the Cook Islands Act 1915 the substance of the Defendant's complaint is contained in their counter-claim which, in the main, depends upon the finding by the Court as to whether certain representations were made to them by the plaintiff as to the condition of the plant and equipment sold to them. The plaintiff denies that any representations were made. But having carefully considered the evidence I am satisfied the condition of the equipment was in fact discussed with the defendants prior to the agreement of the 22^nd November 1980. I accept the evidence of Mr G A Henry who referring to the meeting of the 2^nd October 1979 at p. 8 lines 1 and 2 to 10 in examination in chief said:

"It was also agreed that a valuation of the equipment would be undertaken and that purchase price would be on fair value basis but at the time all this was taking place it was agreed generally that the landowners committee would purchase the Mitiaro Trading equipment. The phrase used was lock stock and barrel. Subject however to fair valuation and provided that equipment was relevant to copra making. I do recall Mr Clarke himself giving us the assurance that we would not have to buy anything that was not in good condition. The meeting there was tremendous amount of goodwill during that meeting and it was heartening so far as the landowners meeting was concerned."

"Given the spirit of the meeting and assurance we received from Mr Clarke I felt confident we had reached a sound arrangement and that we had a good agreement.

A. Yes, I had no reason on that day to feel that anybody was going to sell us equipment we did not need or equipment not in good condition. Firstly we had Mr Clarke's statement. Second place Christopher Vaile is related. His wife is niece of mine and their son is therefore a landowner on Manuae. In any case right up to that meeting, Mr Vaile and I had met quite often in connection with the transfer of lease from his company to the people of Aitutaki. Those meetings were always very cordial, very friendly. I certainly did not think that anybody was trying to sell a pig in a poke."

Mr Henry was not challenged in cross-examination on this section of his evidence in chief. Mr Mana Strickland who was at the meeting said at p. 27 line 30+4 to p. 28 lines 5+4:-

"Q. I understand on one occasion you asked Mr Vaile about condition of two items on Manuae. Yes on 2 October in our meeting in this courtroom. That one - about what item did you inquire. Chula Dryer and I was told that it was in very good condition and was being repaired and still have some parts available....The barge. I knew that the barge belonged to Mr Vaile and I wondered if it would be in good condition because this is also an important item to our production of copra and I was assured that the barge is in very good condition and all it was needed was chipping off and painted."

"What was your belief as to condition of equipment on Manuae at time of signing.

I believed that according to Chris that condition of equipment. As I pointed out before I asked about barge and chula and given promise they were in good condition.

Supposed to be in condition and he had promised us that it is going to be well looked after."

"However you have not answered the question as to whether Mr Vaile said to you that the chula drier and barge was integral part of operation on Manuae and without them operation would not be viable. This is reason why I asked question on 2 October in the meeting we had here where you brought out there would be fair evaluation......"

"I'm putting to you that the only time Mr Vaile spoke to you about chula dryer and barge was to say you people need these items to make success in running Manuae.

He was also answering my question in this meeting about the barge he said it was going to be chipped and painted and in good order.

In your original claim in this matter you did not claim that Mr Vaile had promised that equipment be sold in good isn't that right.

"Subsequent to 2 October I met Mr Vaile by chance in front of the La Bonne Restaurant and I discovered he had been over to Manuae on the "Torea" and in the course of our conversation he told me that everything in Manuae was in order."

The plaintiff, through Mr Vaile, denies there were any such representations made, but, it is clear from the minutes of the meeting (Exhibit "M") and the correspondence above recorded that the parties were very much concerned to ensure that the equipment to be purchased was to be sold at a fair value. On this evidence alone I would find it highly improbable that the condition of the equipment was not discussed. Consequently, I hold that on the 2^nd October 1979 and subsequently prior to the written agreement of the 22^nd November 1979 there were oral representations made to the defendants by and on behalf of the plaintiff which were clearly to the effect that the equipment which was being offered for sale by the plaintiff was in good condition.

The defendants contend that these representations amounted to a warranty and constituted an oral contract with the plaintiff the consideration for which was their subsequently agreeing to purchase the equipment by the said Agreement in writing to which the former oral contract was collateral. They allege the warranty was false and was relied on by them.

The question as to whether or not any particular statement does or does not amount to a warranty depends on many factors. Anson's Law of Contract (25^th Edn) at pp 125-6 reviews the position as follows:-

"In endeavouring to reach a conclusion on this point, the Courts can be said to take into account a number of factors. First they may have regard to the time which has elapsed between the time of making the statement and the final manipulation of agreement; if the interval is a long one, thus points to a representation: Routledge v McKay [1954] EWCA Civ 8; (1954) 1 WLR 615. Secondly, they may consider the importance of the statement in the minds of the parties; a statement which is important is likely to be classed as a term of the contract; Bannerman v White [1861] EngR 713; (1861) 10 CB NS 844. Thirdly, if the statement was followed by the execution of a formal contract in writing, it will probably be regarded as a representation should it not be incorporated in the written document. Heilbut, Symons & Co v Buckleton (1913) NC 30 at p 50. Finally, where the maker of the statement is, "vis à vis" the other party, in a better position to ascertain the accuracy of the statement, the Courts will tend to regard it as a contractual term Dick Buntly Productions Ltd v Harold Smith (Motors) Ltd [1965] EWCA Civ 2; (1965) 2 All ER 65 at p. 67. Heilbut Symons & Co v Buckleton (supra).

But all these factors are at best only secondary guides and they are subsidiary to the main test of contractual intention, that is, whether there is evidence of an intention by one or both parties that there should be contractual liability in respect of the accuracy of the statement Heilbut Symons & Co v Buckleton (supra) p. 51. The question, therefore, is: on the totality of the evidence, must the person making the statement be taken to have warranted its accuracy i.e. promised to make it good? This overriding principle laid down in Heilbut Symons & Co v Buckleton (supra).

One further factor which must be considered. Since the collateral contract must inevitably add to the written contract, it must not vary it in the sense of being inconsistent with or contradictory of the written contract to which it is collateral vide Lysnor v National Bank of New Zealand Ltd (1935) NZLR 124 at 140 which cited the classic statement of Lord Moulton in the case of Heilbut, Symons & Co v Buckleton (1913) AC 30 where it was recognised that parole evidence not inconsistent with or contradictory of a written contract may be given to prove an oral agreement collateral with the written document. His Lordship at p. 47 said:

"It is evident, both on principle and on authority, that there may be a contract the consideration for which is the making of some other contract. If you will make such and such a contract I will give you one hundred pounds, is in every sense of the word a complete legal contract. It is collateral to the main contract, but each has an independent existence and they do not differ in respect of their possessing to the full the character and status of a contract. But such collateral contracts must from their very nature be rare. The effect of a collateral contract such as that which I have instanced would be to increase the consideration of the main contract by £100, and the more natural and usual way of carrying this out would be by so modifying the main contract and not executing a concurrent and collateral contract. Such collateral contracts, the sole effect of which is to vary or add to the terms of the principal contract, are therefore viewed with suspicion by the law. They must be proved strictly. Not only the terms of such contracts but the existence of an animus contrahendi on the part of all the parties to them must be clearly shown. Any laxity on these points would enable parties to escape from the full performance of the obligations of contracts unquestionably entered into by them and more especially would have the effect of lessening the authority of written contracts by making it possible to vary them by suggesting the existence of verbal collateral agreements relating to the same subject matter."

It is not suggested that the warranty in this case is inconsistent with the written contract of the 22^nd November in which there is a warranty as to ownership only. A warranty as to condition is not inconsistent with this. There is nothing in the Agreement which would exclude it.

A consideration of the cases shows the Courts to have leaned noticeably in the direction of treating an innocent representation prior to a contract as a collateral warranty or promise for which damages could be awarded - Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (supra) Denning MR at p 67. The general rule was more recently put forward in Mendelssohn v Normand Ltd (1970) 1 QB 177 at pp 183-4 when Denning MR said:

"There are many cases in the books when a man has made by word of mouth, a promise or a representation of fact, on which the other party acts by entering into the contract. In all such cases the man is not allowed to repudiate his representation by reference to a pointed condition .... Nor is he allowed to go back on his promise by reference to a written clause see City of Westminster Properties (1936) Ltd v Mudd (1959) Ch 129 145 by Harmon J. The reason is because the oral promise or representation has a decisive influence on the transaction - it is the very thing which induces the other to contract - and it would be most unjust to allow the maker to go back on it."

On consideration of the present case, I have come to the conclusion the statements made by the plaintiff to the defendants amounted to a warranty. In so doing I have taken into account the factors referred to in Anson (supra). Firstly, it is clear that by the very nature of the agreement the condition of the equipment purchased was of paramount importance. The minutes of the meeting of the 2^nd October 1979 (Exhibit "M") records that the plaintiff and the defendants agreed that the purchase price should be fixed on the basis of a fair valuation. Representations as to condition, in the circumstances would be regarded as important in the mind of the representor. Secondly, the plaintiff at the time the representations were made, knew the defendants had not seen or had the opportunity to see the equipment. They had no knowledge of its condition and were in no position to exercise their own judgment on it. Mr Vaile was aware of this. He, on the other hand, was in a better position to know of its condition and to ascertain the accuracy of any representation he made concerning it. I am also satisfied he knew that the defendants would accept his representations. In Oscar Chess Ltd v Williams [1956] EWCA Civ 5; (1957) 1 All ER 325 Denning LJ at p. 329 said:

"When the seller states a fact which is or should be within his own knowledge and of which the buyer is ignorant intending that the buyer should act on it, and he does so, it is easy to infer a warranty. This test is not a decisive one but it is nevertheless an important one."

One factor which Anson suggests militates against the conclusion that a representation is a warranty is that it is not incorporated in the subsequent written contract. Heilbut's case is cited as the authority on this. The English Court of Appeal in Oscar Chess v William's (supra) considered this case and Routledge v McKay [1954] EWCA Civ 8; (1954) 1 All ER 855. Each of these cases concerned representations made prior to and omitted in the written contracts. Denning LJ at p. 329 said:

"The Judge seems to have thought that there was a difference between written contracts and oral contracts. He thought that the reason why the buyer failed in Heilbut, Symons and Co v Buckleton and Routledge v McKay was because the sales were afterwards recorded in writing, and the written contracts contained no reference to the representation. I agree that that was an important factor in those cases. If an oral representation is afterwards recorded in writing, it is good evidence that it was intended as a warranty. If it is not put into writing, it is evidence against a warranty being intended; but it is by no means decisive. There have been many cases, such as Birch v Paramount Estates Ltd where the Courts have found an oral warranty collateral to a written contract."

"The learned County Court Judge distinguished Routledge v McKay from the present case because there was in the former case a written memorandum of the contract, before which words were used by one party inducing the opposite party to enter into the written contract. He also distinguished Heilbut, Symons and Co v Buckleton on the same ground. So far as the latter case is concerned, on a reading of the facts it seems to me that the contract in that case was concluded at the time when the representation was made although, since the transfer of shares was involved, formal brokers' contracts were afterwards drawn up. So far as Routledge v McKay is concerned, I have read the judgments in the case with some care and I cannot find that the Court based its conclusion on the distinction between words used on an occasion before the final conclusion of the contract and words used on the same occasion or incorporated in the same document, although the point was argued that, having regard to the language of the written memorandum, any earlier warranty was excluded. In any event I find such a distinction a fine one and one which I should be reluctant to draw unless compelled to do so."

Those cases are cited in Coffey v Dickson (1960) NZLR 1135. In that case the respondent as a preliminary to purchasing the business of the appellant sought and obtained an assurance that the plant was in good working order and condition. This assurance was given on the 26^th February and the formal offer to purchase was made until the 10th March. Neither the offer nor the subsequent exchange of correspondence contained any reference to the conditions of the plant. Richmond J held that in the circumstances such an omission in the formal documents did not exclude the earlier warranty and found that by entering into the principal contract for the purchase of the business, the respondent provided adequate consideration to support and render enforceable against the appellant the undertaking which the latter had given (p. 1144).

On a consideration of the totality of the evidence in the present case, I am of the opinion the omission to include the warranty as to condition in the written agreement does not negate the intention which I have found the plaintiff possessed when the warranty was given. The drawing up of the agreement was in the hands of the solicitors for the parties and was the subject of correspondence between them in which there is no reference to the condition of the equipment. However, I am satisfied after considering the evidence of Messrs Henry, Estall and Mana Strickland that the question of the condition of the equipment was regarded of paramount importance and that Mr Vaile understood it to be so when he discussed it with them.

Finally, there is the question of whether the lapse of time in the present case is fatal to the existence of a warranty. There was an interval of approximately six weeks between the first representation and the signing of the agreement. The same question concerned Richmond J in Coffey's case (supra). In his judgment he reviews and distinguishes the cases cited to him and it is helpful here to record the relevant parts thereof. At p. 1140 (line 28) to p. 1142 he says:

"Although I am satisfied that the statement made by the appellant was in the nature of an undertaking rather than a mere statement of fact, it is necessary that I deal in some detail with Mr Matson's contention that the lapse of time between the making of the statement and the making of the offer is fatal to the existence of a warranty.

In support of this contention, he relied upon Hopkins v Tanqueray [1854] EngR 533; (1854) 15 CB 130; 139 ER 369. In that case, the defendant sent his horse to Tattersall's for sale by public auction where the horse was to be sold without a warranty. On the day before the intended sale, meeting the plaintiff at the stable, and seeing him in the act of examining the horse's legs, the defendant said, 'You have nothing to look for; I assure you he is perfectly sound in every respect.' At the auction sale held the next day the plaintiff became the purchaser. It was held that there was no evidence of warranty to go to a jury and that the representation made on the day preceding the auction formed no part of the contract of sale. I do not think that Hopkins v Tanqueray can be regarded as laying down any general rule that a statement made at some interval of time before the actual sale cannot be regarded as a warranty. Such a conclusion would be directly opposed to the decision of the House of Lords in Schawel v Reade (1913) 2 IR 64 which was also a decision relating to a warranty in relation to a horse. As was pointed out by FB Adams J in Turner v Anquetil (1953) NZLR 952,955, the sale in that case was not completed on the occasion when the assurance as to the soundness of the horse was given. It was at a later date that the price was agreed on, and at a still later date that the contract was actually entered into. Nevertheless, the House of Lords held the representation to have been as plain a warranty of the soundness of the horse as could be given. I therefore cannot accept the view that the lapse of time which occurred in the present case is necessarily fatal to the existence of a warranty. This view of the matter is consistent with the words used by AL Smith MR. In the following passage from his judgment in De Lasalle v Guildford [1901] UKLawRpKQB 56; (1901) 2 KB 215: 'It must be a collateral undertaking forming part of the contract by agreement of the parties express or implied, and must be given during the course of the dealing which leads to the bargain, and should then enter into the bargain as part of it ......

In the present case, the circumstance, are otherwise, because, in my view, the offer and subsequent correspondence were intended by the parties as an exclusive record of the contract of sale itself. The present case therefore involves an inquiry whether or not the undertaking given by the appellant was a collateral warranty in the true sense described by Lord Moulton in Heilbut, Symons and Co v Buckleton (supra) namely, 'a contract the consideration for which is the making of some other contract'. In such cases, can the collateral contract be founded on a representation made some time before the principal contract came into existence?

This question was discussed in Routledge v McKay (1954) 3 All ER 855. In that case, the owner of a motor-cycle combination told a prospective purchaser that it was a late 1941 or a 1942 model. This statement was made on October 23, 1949, and seven days later the buyer and seller entered into a contract of sale and signed a memorandum of agreement which did not refer to the date of the model. Sir Raymond Evershed MR referred to various passages in the speech of Lord Moulton in Heilbut, Symons and Co v Buckleton (supra) and then made the following observations: 'Bearing in mind the passages which I have read from Lord Moulton's speech in approaching this matter it is important to observe that if there was a warranty, there was a contract between the two parties to the effect that the seller, for good consideration, undertook to indemnify the buyer against any loss the buyer might suffer if in truth the origin of this motor-cycle was, not 1941, but some much earlier date. Such a contractual obligation could be either part of the contract of sale itself or collateral to it. In the present case, for reasons which will appear, if there was a warranty it seems to me that it must have been collateral to the actual contract of sale, though I do not think that matter is necessarily conclusive of the question before us. The judgment then points out that the statement alleged as a warranty was given not when the bargain was struck but seven days earlier on October 23, 1949, and then proceeds: 'If that representation is to be a warranty it has to be contractual in form. In other words, so far as I can see, once the existence of a warranty as part of the actual bargain is excluded, it must be separate contract, and the overwhelming difficulty which faces the fourth party is that when the representation was made there was then no bargain, and it is, therefore, in my view, impossible to say that it could have been collateral to some other contract. Even apart from that, it seems to me that on the evidence there is nothing to support the conclusion, as a matter of law and bearing in mind Lord Moulton's observations, that in answering the question posed about the date of the motor-cycle combination there was anything more intended than a mere representation'."

Richmond J then refers to Oscar Chess v Williams (supra), in particular the words of Denning LJ at p. 320 (supra) and Morris LJ and Hodson LJ at pp 320, 321 (supra) and states at p. 1143 (lines 21 to 36):

"In the foregoing circumstances, it seems to me that the views discussed by the learned Master of the Rolls in Routledge v McKay did not form part of the ratio decidendi of the majority of the Court either in that case or in Oscar Chess Ltd v Williams. In these circumstances, I do not myself think that a verbal warranty need be collateral in the sense of contemporaneous with a written contract. In my view there is nothing in the judgment in Heilbut, Symons and Co v Buckleton which suggests any such rule. In that case the word 'collateral' appears to be used more in the sense of indicating that the making of the principal contract is the consideration which supports the ancillary undertaking or warranty. On that view of the matter, I can see no reason in legal principle why the warranty should not be given in anticipation of the making of the principal contract and in circumstances which show that the consideration which makes the warranty binding on the vendor is the entry by the purchaser into the principal contract of sale."

The learned Judge then cites in support the decision of Swife J in Miller v Canon Hill Estates Ltd (1931) 2 KB 113; at pp 118 and 120 (1931) All ER Rep 93 at pp 95 and 96. With respect, I adopt the view of Richmond J and am satisfied in the present case the interval of time between the meeting at which the statement as to the condition of the equipment was first made and the execution of the written contract does not ipso facto establish the claim of warranty. Here the defendants were negotiating to purchase equipment they had not seen. They did not know its condition. They asked as a preliminary to entering into the contract to purchase about its condition. They were to obtain financial assistance from the Government or a Government Agency and they required that assurance. That the meeting of the 2^nd October 1979 resulted in an agreement on that date is borne out by the Minutes thereof (Exhibit "M"). The parties agreed on several steps to be taken preliminary to the agreement and in its letter of the 31^st October (Exhibit "1") the plaintiff requires the defendants to "further the agreement reached on the 2^nd October 1979".

But, as Anson states (supra) the "overriding principle" as to whether a statement constitutes a warranty is whether "there was a contractual intention, that is, whether there is evidence of an intention by one or both parties that there should be a contractual liability in respect of the accuracy of the statement." This is deduced from the totality of the evidence. In Turner v Anquietal (1953) NZLR 952 Adams J at p 954 summarised the point as follows:

"The essence of the decision in Heilbut, Symons and Co v Buckleton (1913) AC 30 is that there can be no warranty unless the parties intended that the representation should be contractual. There must be the animus contrahendi with regard to the matter represented. Expressly or impliedly, the warranty must be offered and accepted as a contractual term, the representor not merely representing but promising its truth. This principle applies whether the warranty is put forward as an independent collateral contract or merely as a term of the contract. Their Lordships made it clear that the law is still, as was stated by Holt CJ in 1689, that: "An affirmation at the time of sale is a warranty, provided 'it appears on evidence to have been so 'intended". This is the classical utterance on the subject; but it does not mean that there must be express and direct evidence of intention, as, for instance, by the seller saying, 'I warrant this or that', or by the purchaser saying, 'I rely on you as warranting this or that.' It is sufficient if the evidence in its entirety establishes the necessary intent."

I am satisfied in this present case that the plaintiff intended to be bound by the representations made. The bargain to be made with the defendants centred around their acquiring the plaintiff's whole undertaking relating to Manuae the substantial part of which was its equipment. An inquiry as to the condition of that equipment by the defendants could only be regarded as a serious one upon which the very foundation for contracting to purchase the equipment depended. The defendants, the plaintiff knew, were acting on behalf of their Aitutakian principals and could be expected to seek such an assurance. The evidence adduced by the defendants satisfies me that they understood the plaintiff's statements to constitute the necessary promise which distinguishes a warranty from a mere representation. The warranty was a prerequisite to the defendants' agreeing to purchase the equipment. Without it there would have been no subsequent contract. In the result, I hold that the oral representations made constituted a warranty by the plaintiff intended to be collateral to the written agreement to purchase of the 22^nd November 1979 which the defendants were to and did execute.

I now turn to the question of reliance by the defendants on the warranty. I am satisfied the warranty when given related to all the plaintiff's equipment i.e. that situated both at Rarotonga and at Manuae. The defendants claim that reliance on the warranty induced them to purchase this equipment. In my view the evidence does not support that claim in so far as it relates to the Rarotonga equipment. This was subject to an intensive inspection by Mr Mana Strickland and Mr Tuarae. They were given full opportunity to do this. Counsel on their behalf contends that notwithstanding this inspection, the defendants were given by the plaintiff Mr Vaile certain undertakings as to the condition of the equipment which were accepted and relied on by Messrs Strickland and Tuarae resulting in only a cursory inspection by them. He seeks support from the facts in Coffey v Dickson (supra). The purchaser in that case was interested in purchasing a milk bar and dairy business from the vendor. He made an inspection of the business, and while doing so was told by the vendor that the plant was in good condition. As a result he did not inspect it thoroughly relying on the vendor's statement. The Court held that although he could have made a complete inspection the vendor's warranty was accepted by him and that it was contractual in effect. The facts in this case are quite different. Here the defendants' representatives carried out a long and, I am satisfied, a thorough inspection which resulted in a valuation upon which the defendants made an offer at a figure very much below that of the plaintiff's valuation. (Exhibit "X") which, with slight variation, was accepted. Mr Estall fairly states the position when in evidence at p. 45 (lines 20-25) he said:

"You have told the court you were fairly active in negotiations up to signing. A lot of those negotiations concern value of the equipment on Raro. When you signed that agreement, what was your belief of condition of equipment on Raro?

A. I honestly believe we were making a pretty poor purchase of equipment in Raro because of condition of reports from Mr Tuarae and Mr Strickland."

I consequently am satisfied that the warranty I have found to be made by the plaintiff was not relied upon by the defendants in relation to the Rarotongan equipment and does not apply thereto.

However, in the case of the equipment at Manuae, I consider the position to be different. It is clear that the original intention of the parties was that the equipment on Manuae would be "subject to arbitration based on independent valuation" (see letter of plaintiff's solicitors Exhibit "W" (supra)). But it was necessary for the plaintiff that the proposed purchase be settled and paid for by the 1^st December, the date it was required to settle its agreement with the Bank. The defendants were advised of this on the 24^th October (Exhibit "V" (supra)). When by the 12^th November the agreement as to the price of the equipment both on Rarotonga and Manuae appeared to be no nearer settlement, the plaintiff through its solicitors notified the defendants by letter (Exhibit "W" (supra)) it required an "immediate further offer". In pointing out that the defendants had neither inspected the equipment at Manuae nor valued it the letter on this said:

"We are advised by our client also that your clients were informed several times of the intention of our client to go to Manuae to inspect the condition of the equipment there. Despite this your clients never made any arrangements to accompany our client to Manuae. Our client has been to Manuae and returned. We can only conclude that your clients' lack of interest in this regard is further evidence of an intention not to carry out the agreement in principle with our client."

However, the evidence does not support this contention. I am satisfied the failure of the defendants to visit the island on the one available trip there was for good reason. Notwithstanding, on the 14^th November the defendants agreed to purchase the Manuae equipment at the price asked by the plaintiff without inspecting the same. It is contended by the plaintiff that the reason for the defendants thus entering into the agreement was to ensure they obtained the lease of Manuae. Consequently, it contends it cannot be said the defendants, in agreeing to the purchase price of the equipment, relied on the warranty given by the plaintiff particularly so in the case of the Manuae equipment where they had the right to arbitrate the price but chose not to. However, the facts do not support this contention. There could be no doubt in the minds of the defendants after receiving the letter of the 12^th November (supra) that there could be no further delay in completing the agreement. It is true that the agreement was a necessary step in their acquisition of the Island, is also equally true that there was no way in which they could carry out an inspection of the Manuae equipment within the "immediate" future. The demand of the 12^th November certainly brought the matter to a head and resulted in the defendants on the 14^th November (Exhibit "X") apparently abandoning the proposal for an independent valuation and arbitration in respect of the Manuae equipment and agreeing to purchase thereof at the price asked by the plaintiff. That they did this without having any foreknowledge of the equipment and its condition other than that conveyed to them by the plaintiff raises the strongest inference that they relied on the assurance of the plaintiff as to its condition. That surely could be the only basis upon which they could make the purchase. Accordingly I am satisfied that the warranty given by the plaintiff in so far as it related to the equipment on Manuae was relied on by the plaintiffs and applies thereto. To this extent the allegation as to the breach by the plaintiff of the collateral warranty is sustained.

The defendants in their final submissions indicate the claim under this heading is now confined to items (a) chain-block, (b) paint, (c) socket set, (e) rope, (f) map books, (g) axes, (h) shovels and (i) wire rope as set out in paragraph 12 of their counterclaim. The plaintiff has conceded that the 7 drums of diesel valued at $455 mentioned as item (d) were not supplied. The claim is based on an alleged implied term in the agreement to deliver these items to the defendants at Rarotonga. The burden of establishing this term is on the defendants and I find on the evidence they have not discharged it. The only obligation as to the equipment sold is contained in clause 4 of the agreement which specifies that items then specified as being on Manuae should remain there (Ex "B"). Section 31(2) of the Sale of Goods Act 1908 applies. But the issue depends not on an examination of the law as to delivery of goods. It is simply - Were in fact the items supplied to the defendants as contracted? The burden of proving they were is on the defendants.

Chainblock - The identity of this piece of equipment has not been established with certainty. Chainblocks are mentioned in the Manuae equipment and equipment taken to Manuae which would suggest that two were there. Mr Dashwood received one in Rarotonga. In the absence of better evidence particularly as to value, this claim cannot be sustained.

Paint - Six gallons of paint were sold. Three gallons were delivered to Mr Dashwood. I am satisfied on the evidence there was no paint on Manuae for the defendants and allow $54 being the value of the 3 gallons.

Socket set - The evidence establishes there were parts of the set scattered around Manuae. It is silent as to what parts are missing and the value thereof. The claim is not ascertained.

Rope - 6 lengths. The inadequacy in the agreement of description of the rope sold does not assist the defendants. I am satisfied from the evidence of Mr Robati that there was rope on the Island in November. It was Japanese rope. It was used by the plaintiff's employees. What quantity remained after use is not established, but, in view of the absence of evidence of the type sold and what constitutes a length of rope this matter cannot be adjudicated upon and the claim is not sustained.

Axes. The evidence establishes there were axes and handles in good condition at Manuae. The Claim is not sustained.

Wire Rope. Mr Robati said there was wire rope on Manuae (p 68 of the evidence). The agreement is silent as to the type or quantity of rope. This claim is not proven.

A false representation amounts to fraud if it is made knowingly, or without belief in its truth or recklessly, careless whether it be true or false Derry v Peek (1889) 14 App Cas 337. Fraud is dishonesty, and it is not necessarily dishonest, though it may be negligent, to express a belief on the grounds that would not convince a reasonable man. The law does not require a representor to warrant the truth of his statement, but, insists that he shall warrant his belief in its truth.

The defendants confine this allegation to the representations of Mr Vaile made in respect of the equipment on Manuae. The items in question are the chula drier, the barge and the diesel dumper. The burden is on the defendants to establish fraudulent intent on Mr Vaile's part. They have established that Mr Vaile had seen these pieces of equipment on two occasions prior to entering into the agreement with them. I have no doubt that careful inspection by him would have revealed serious deficiencies in the condition of the equipment, but, when viewing his evidence with that of Mr Smith and Mr Heather, I consider it probable that his inspection was superficial not equipping him with adequate knowledge to enable him to give a reliable assessment of its condition. I cannot be satisfied that he did not honestly believe what he warranted to be true. In giving the warranty he did I am satisfied he was negligent, but, I cannot conclude he was fraudulent.

The defendant admit the agreement as alleged by the plaintiff and acknowledge they have not paid the $10,000 agreed to be paid by them there under. They plead a positive defence that the defendants are "natives" and that the agreement is oppressive, unreasonable and improvident. They rely on section 45 of the Cook Islands Act 1915 which reads:

"The jurisdiction of the High Court or of any other Court in the Cook Islands to enforce any contract made by a Native (other than a contract of alienation of Native land duly confirmed by (the Land Court) shall be discretionary; and if the Court is of opinion, having regard to the interests of the Native, that the contract is oppressive, unreasonable, or improvident, the Court may either refuse to enforce the contract or may enforce it only to such extent and on such terms as the Court thinks fit."

This section gives the Court a wide discretion in relation to contract by a "native" who is defined in section 2 of the Act as:

" 'Native' means a person belonging to any of the Polynesian races (including the Maori race), and includes a half-caste and a person intermediate in blood between a half-caste and a person of pure descent from any such race."

Counsel for the defendants addressed lengthy argument to me urging I exercise my discretion to vary the contract to the degree that I delete therefrom the obligation of the defendants' to pay the $10,000 claimed by the plaintiff. He, by analogy, considers the principles guiding the Courts in considering relief in the case of contracts under the Minors' Contracts Act 1969 (NZ) apply here. There appear to be recorded no instances certainly in the last 30 years of section 645 of the Cook Islands Act 1915 having been considered or applied. Prior to that the records are silent. There can be no question the considerations then pervading prompting the enactment of the section 1915 could fairly be said to be different from those today. But the same question must be considered now by the Court as was required then? Do the "natives" bound by a legal contract because of the circumstances of the case require the special protection provided for them under the section? The circumstances to be considered are whether the contract is oppressive, unreasonable or improvident in relation to the natives concerned. I think the correct approach is first to consider the "natives" whose interests are to be regarded. There is no question but that all the defendants are "natives" within the meaning of the section. I shall deal with each in the order they appear in the proceedings. Mr Estall is a businessman in Rarotonga, formerly a Minister of the Crown for some years and well educated. He impressed me as being very aware of the implications of the agreement. Likewise did Mr Mana Strickland, also a former Minister of the Crown and a schoolteacher. Mr Benioni Joseph is a senior Public Servant and a Member of the Service Appeal Board as well as being engaged in a retail food business. He was Secretary of the Committee. Mr Henry is Leader of Her Majesty's Opposition, a University Graduate and well qualified in the matters of finance he being a former Minister of the Crown with the portfolio (inter alia) of finance. Mr Kura Strickland is a Member of the Legislative Assembly and a local businessman. The intellectual calibre of those gentlemen is such that I consider they collectively or individually could contract at least on equal terms with any person. They are, I am satisfied, quite capable of protecting their interests. But, even if that were not so, before relief could be granted under the section, the Court would have to find that the contract was oppressive, unreasonable or improvident. The agreement here could not be regarded as either oppressive or unreasonable. It contains no complex provisions and is expressed in simple terms. There was no bar to the defendants having recourse to law for its breach. The defendants were well aware of the implications of the agreement and I am satisfied fully understood it. There is nothing unreasonable in asking for payment of goods purchased or of money paid by the plaintiff to protect the defendants' interest in the Island. Nor is there any question of improvidence which in the sense of the section I consider, means a contract not well considered. There is no merit in this defence.

There being no defence established to the plaintiff's claim, it is entitled to an award of $10,000 in respect thereof.

(a) The established breach by the plaintiff as to the condition of the equipment at Manuae purchased by them; and,

As to (a), I assess damages on the basis of the actual value of the equipment at the time of purchase, save as in the case of the Diesel Dumper where I have also made some allowance for damage done to it by employees of the plaintiff after sale. The defendants claim the following items were not in good working condition:

There were other items mentioned in the counterclaim under this heading, but, these have been the subjects of settlement by agreement between the parties.

Having considered the evidence closely, I am satisfied this machine was not in good working order at the time of sale. The engine which had required reboring I find was improperly serviced by Mr Potter and I am satisfied that the condition of the vehicle when seen by Mr Tuarae was substantially the same as it was in November save that it had been further badly damaged by the plaintiff's workmen in January 1980 when it was being used for the plaintiff's operations on the Island. I therefore accept Mr Tuarae's evidence as being the most reliable guide as to the dumper's condition. It was not in good working condition and I conclude that the defendants' claim as to its value at $600 is more reliable than the value of $1,500 of the plaintiff and hold that in the circumstances a fair value thereof is $600.

The plaintiff quite correctly contends that if these spares are in good condition then the value is fixed by the agreed price of $1,000. The value placed on them by the plaintiff in its accounts (Exhibits "LL" and "MM") are immaterial in such a case. The burden is on the defendants to establish that they were not in good condition and if so establish then to prove a fair value therefor. There is no doubt that some of the parts are new and some are second hand. The evidence of the defendants is in apparent conflict. Mr Rowley said that these spares when he saw them in August last "did not appear to be in very good condition". Mr Tuarae, who saw them in February described their condition as "reasonably good". Mr Vaile has given explicit evidence as to the purchase of the spares and on the balance I am satisfied that the defendants' claim that the spares are not in good working condition has not been proven.

This claim in substance turns on the question as to whether at the time of purchase the motors were capable of being used. It is conceded by the plaintiff that parts were needed to put them in working condition and that all the necessary parts were supplied to the defendants' representative Mr Dashwood. I am satisfied that was not so. There were no water cooling systems attached to the motors. Irrespective of whether either of the motors was seized at the time of possession, I am satisfied they were not in good working condition when sold to the defendants and consider the evidence of Mr Tuarae as to value to be a helpful guide. However, it is clear some parts were supplied to Mr Dashwood which would increase the "scrap value" of Mr Tuarae and accordingly fix a value of $100 in all for the motors.

I am satisfied the plaintiff, through Mr Vaile, warranted to the defendants, in particular to Mr Mana Strickland that the drier was in "very good condition". Mr Strickland had seen it in 1972 when it was inoperable and was concerned to be assured that it was now capable of being used. I am also satisfied that at the time of purchase the drier was inoperable and in bad condition. It was not used by the plaintiff prior to the sale. The evidence of Mr Tuarae, Mr Estall and Mr Rowley as to its condition on their respective inspections is convincing. The inspection of Mr Rowley was extensive and I accept his evidence as to the condition of this piece of equipment and am satisfied that what he saw in August represented substantially its condition at the time of sale. The equipment was adequately housed; it had not been used and there is no evidence of it having been tampered with since the defendants acquired it. I do not accept, however, his assessment of its value. Nor do I accept the plaintiff's contention that its value must be related to the prices of a new Drier and the manufacturer's parts therefor. I consider two factors must be considered in arriving at a value. The first is that the Drier had virtually been rebuilt by Mr Vaile not by obtaining parts from the manufacturer but by using his own and local labour for fabricating and assembling the sections to be renewed. This in fact is what he suggested should now be done. The second factor is that for the expenditure of $5,000 Mr Vaile had put the equipment in working order in 1974 and used it until approximately 1977. He acquired the original Drier for nothing. It is probable that the Drier then was in no better condition than it is now. However the conditions under which Mr Vaile acquired it were different from those of the defendants who agree to purchase it. It does not appear as an item of plant and machinery in the plaintiff's Depreciation Schedule up to September 1977 (Exhibit "LL"). I, however, am satisfied that it is capable of being reconditioned and repaired and is of some value. In the circumstances, I consider a fair value to be $1,000 and I rule accordingly.

There is no doubt that the barge was not in working condition at the time of sale. I accept Mr Robati's evidence as to its condition. He and Mr Heather both describe their inability to float the barge and move it to a different position because of the splits and holes in the structure which took in water. The photographs (Exhibits "S 11 to 14") which were taken in July 1980 establish, as the plaintiff concedes, the barge to be in a very poor condition. But, on considering the evidence, particularly that of Mr Tuarae, I consider the condition at the time of sale was nowhere as bad as that revealed in the photographs and am satisfied that some of the damage occurred after the defendants acquired it. I am not prepared to disbelieve those who worked on the barge as to the method of chipping and painting it. The defendants have not established that this was done in an unworkmanlike manner. The splits in the hull and the holes in the deck, however, were without doubt in the vessel, albeit not as extensive as shown in the photographs, at the time of sale. They were not repaired. On the evidence, I am satisfied the barge is capable of repair. Having considered the evidence of the tradesmen as to welding, I find repair by welding is practicable. As to the value of the barge, the defendants on whom the burden lies contend a fair value is $1,000. No evidence has been given to substantiate that figure. That it is of no value I do not accept. Rather do I obtain assistance from the plaintiff's Depreciation Schedule (Exhibit "11") which records as at September 1977 a depreciated value or this equipment at $4017. This figure has been arrived at by an accepted accounting method and I feel it records a fair value of the barge at that date. There is no evidence of any improvements to it since that date nor is there any occurrence other than normal depreciation (resulting in the deterioration of the hull) since to the date of sale. I accordingly further depreciate the value for two years to September 1979 and fix the value for the purpose of assessment of damages at $3,254.

This boat was described in the agreement as being in Manuae. It was, without the knowledge of the defendants, brought to Rarotonga when it was first seen by Mr Estall shortly after the sale. It was at Avatiu and holed with no oars and rowlocks. Mr Vaile said he saw it in November and it was floating in Avatiu Harbour. When it was holed has not been established. However in the circumstances, it was the responsibility of the plaintiff to have it on Manuae with oars and rowlocks in good condition - Clause 4 of the Agreement. It was not and I consider the defendants' claim here is justified and find a fair value to be $100 as claimed.

(a) for breach of warranty:
Agreement Price Diesel Dumper	$1,500
Value fixed	600	$900
Agreement Price Spares Dumper	1,000
Value fixed	1,000
Agreement Price 2 Diesel Motors	500
Value fixed	100	$400
Agreement Price Chula Drier	5,000
Value fixed	1,000	$4,000
Agreement Price Barge	5,000
Value fixed	3,254	$1,746
Agreement Price Punt	250
Value fixed	100	150
(b) Goods and equipment not supplied:
7 Drums of Diesel		455
3 tins paint		54
		$7,705

There will be judgment for the plaintiff on the claim for $10,000. There will be judgment for the defendants on the counterclaim for $7,705.

(a) The plaintiff shall be awarded costs according to scale as on an action for $2,295;

(b) The plaintiff and the defendants will each pay $50 to the Department of Justice being the costs of taking of evidence in Auckland.

Solicitors for the plaintiff: Clarke Ingram & Co., Solicitors, Rarotonga
Solicitors for Defendants: Short and Tylor, Solicitors, Rarotonga

High Court of the Cook Islands

Mitiaro Trading Company Ltd v Estall [1981] CKHC 7; Plaint 47.1980 (24 February 1981)