Rarotonga Glass and Aluminium Ltd v Castaway Beach Villas Ltd [2006] CKHC 6; PLAINT 19 of 2004 (17 October 2006)

IN THE HIGH COURT OF THE COOK ISLANDS
HELD AT RAROTONGA
(CIVIL DIVISION)

PLAINT NO. 19/2004
MISC. NO. 66/2004

BETWEEN

RAROTONGA GLASS AND
ALUMINIUM LIMITED
A duly incorporated company having
its registered office at Rarotonga
Plaintiff

AND

CASTAWAY BEACH VILLAS LIMITED
A duly incorporated company having
its registered office at Rarotonga
Defendant

AND

TAMARIKI DESIGNS LIMITED
A duly incorporated company having
its registered office at Rarotonga
Third Party

Mr Little for Plaintiff
Mr Robertson in person for Defendant
No appearance for Third Party

Date of hearing: 16 October 2006
Date of decision: 17 October 2006

JUDGMENT OF WESTON J

[1] The Plaintiff seeks judgment for $25,325 (plus interest and costs) representing the balance of the price claimed to be due for supplying aluminium doors and windows. A total of $26,909 has been paid by the Defendant to the Plaintiff thus far. The Plaintiff says that the balance is due to it pursuant to a contract of supply.

[2] The Defendant admits that it instructed the manufacture and installation of the aluminium joinery but it denies legal liability for the balance claimed due. It says that it contracted with the head contractor Tamariki Designs Limited and that it was the obligation of that company to pay the Plaintiff as a sub-contractor.

[3] Mr Cameron Robertson appeared on behalf of the defendant company. He is one of the directors of the company. His wife Dorothy is the other. I gave leave to Mr Robertson to appear and represent the company.

[4] Tamariki Designs Limited was cited as Third Party. I am advised that it is in liquidation and indeed it has been dissolved. It was given notice of the hearing but took no part whatsoever. Mr Tamariki gave evidence for the Plaintiff.

[5] The individuals behind the Plaintiff and Defendant companies were previously friends. Mr Allen, director of the Plaintiff, initially rented a house to Mr and Mrs Robertson when they were first in the Cook Islands. As a result of this dispute there has been a falling out. Nevertheless, it appeared to me that there still a considerable measure of goodwill between the parties. I hope that following this judgment they will be able to resume their formerly cordial relationship. Unfortunately, today, I need to find a winner and a loser.

The Facts

[6] Mr Robertson and his wife are Scottish. In 2000 they had come to the Cook Islands and they purchased Ati’s Beach Bungalows in or about July 2001. They completed what we call Stage 1 of the renovations in late 2001.

[7] At some exact time unknown to me they had sold assets in Scotland and as a result of that were able to undertake what was described as Stage 2 of the renovations. Amongst other things, this involved a two storey building. Plans were prepared in late 2002. Mr Allen visited Mr Robertson and discussed those plans and I have seen a copy of those plans showing Mr Allen’s handwriting and various annotations made on them as a result of that discussion.

[8] Following that meeting, Mr Allen submitted a quote on 10 December 2002 addressed to the Directors of Castaway Beach Villas. As a matter of law I find this was an offer. Mr Robertson accepted that quotation. I am not sure as to the date of such acceptance, but that is not necessary for me to find. At this point, then, and subject to what I am about to say, it clearly arguable that there was a contract between the Plaintiff and the Defendant.

[9] Evidence was given about the payment of a deposit. Mr Allen said that he told Mr Robertson that he required a deposit of one third of the total price. Mr Robertson denied there was such an agreement. I find that Mr Allen did seek a deposit of one third. Mr Allen said it was his standard policy to seek such a deposit and he gave evidence about that including how in recent dealings with the Rarotongan Hotel he sought such a deposit. I found his explanation for that convincing.

[10] All costings and pricing were decisions made between Mr Robertson and Mr Allen. Mr Tamariki was not involved in them. The quotation was sent to Mr Tamariki on 17 January 2001. I am satisfied that the intention of that was to facilitate payment of a deposit. I am also satisfied that Mr Tamariki had not been involved to that point in finalizing the amount of the quotation.

[11] Mr and Mrs Robertson left the Cook Islands for Scotland on 16 January 2003 in the case of Mr Robertson and 23 January in the case of Mrs Robertson. I find that they appointed Mr Tamariki as their agent while they were overseas.

[12] It is quite clear on the evidence that various persons approached by the Robertsons in relation to the renovations were ordering materials by this point. Mr Tamariki said that his company had done so either in later December of the previous year or January 2003. I find that Mr Allen also ordered in or about January. Despite Mr Robertson’s assertions that nothing was agreed at this point (in part because there was no DIB approval), I find that it was his intention that these parties commence ordering materials by this time.

[13] The Plaintiff’s quotation was for $54,033. Included within that were some screen doors which were subsequently deleted by Mr Allen. I return to that below.

[14] On 22 January 2003, Mr Tamariki issued an invoice for $186,629.69. Mr Robertson was by then overseas. This invoice was never paid. Instead on 24 January 2003 the bank provided a letter of comfort to Mr Tamariki saying that the bank was funding the Defendant’s renovations.

[15] On 13 February 2003 a number of bank cheques were issued by Westpac drawn on the Defendant’s bank account. Included was a cheque payable to the Plaintiff for $16,909 which was the one third deposit referred to by Mr Allen.

[16] Mr Robertson’s evidence on this cheque was not entirely satisfactory. On the one hand he said he authorized the payment by way of email but on the other hand, he denied he agreed to the deposit being paid. I have already found there was such an agreement in relation to the deposit. Mr Robertson did not subsequently dispute with Mr Allen the claimed deposit. I cannot believe that the bank would have drawn the cheque if it did not believe it was properly authorized the Defendant. I note that no witnesses from the bank were called to give evidence in support of what Mr Robertson was asserting.

[17] Because the Robertsons were still overseas Mr Tamariki delivered the cheque to the Plaintiff on 13 February 2003. Mr Tamariki described himself as a courier and I find that that was his role. A receipt was issued by the Plaintiff, which was made out to Castaway Beach Villas. It seems unlikely that this was actually given to the Robertsons by Mr Tamariki. Mr Robertson said he did not get the receipt. As a matter of law, though, whether he did or not is in my view immaterial. By this time, Mr Tamariki was acting as agent for these purposes and the information as a matter of law would attributed to the Defendant. In any event, though, no further or subsequent complaint was made about the payment of this cheque.

[18] A contract was entered into between the Defendant and Tamariki Designs Limited on 12 March 2003. By this time significant payments had already been made on account of the development. Mr Robertson argues that pursuant to this contract the Plaintiff became a sub-contractor to Tamariki Designs Limited. He argued this by reference to the payment made in February that I have mentioned already. But in my opinion the timing is against him. The history of the matter clearly points to there already being a contract directly between the Plaintiff and the Defendant. A subsequent contract between the Defendant and Tamariki Designs Limited cannot alter this unless there was a formal agreement by the Plaintiff agreeing that it was to become a party to that March contract.

[19] The contract of 12 March 2003 is not entirely satisfactory and it is unclear as to whether any particular party was to be regarded as a sub-contractor. The contract referred to an initial deposit in the amount of $202,733.82. There was some dispute at the hearing as to whether payment in this amount was made.

[20] A few days later on 14 March 2003 the Defendant paid $107,142.82 to Tamariki Designs Limited. This was paid pursuant to an invoice dated 12 March 2003. I note:

(a) The invoice records that a payment of $16,909 had already been paid to the Plaintiff. No corresponding amount was shown in the right hand side of the invoice.

(b) The invoice shows other payments being made of $73,662.00 to Omaha, and $25,000 to PTS, a total of $222,713.82.

(c) The reference to the total contract price of $465,972.37 in the contract cannot in my opinion, constitute an admission that Tamariki Designs Limited became liable for paying the Plaintiff. It is clear to me that the contract was not intended to incorporate all payments as if they had been made by Tamariki Designs Limited.

[21] The building work continued from March through May and into June. A fax dated 4 June 2003 from Mrs Dorothy Robertson to the Plaintiff was produced in evidence. It asked the Plaintiff to get a move on. In my opinion that is evidence of the direct relationship between the Plaintiff and the Defendant.

[22] On 16 June 2003, the Plaintiff sent a letter to the directors of the Defendant setting out the amount to complete the contract. The amount of the insect and screen doors of approximately $7,000 was deleted. With variations, the balance due was $32,189.

[23] A few days later on 20 June 2003, the Plaintiff issued an invoice showing the same amount.

[24] Why did it do so? There was some dispute about that. As I understood his evidence Mr Robertson said it was done for the purposes of his dispute with Tamariki Designs Limited. However I note that the arbitration process between the Defendant and Tamariki Designs Limited did not appear to start until some time in July. Mr Allen was not entirely sure as to whether he knew about the dispute at that time. Certainly he could not recall whether his invoice was prepared for that purpose. I do not need to resolve this dispute. I do not believe it is significant one way or the other.

[25] There was then a process of dispute resolution between the Defendant and Tamariki Designs Limited. It seems there may have been two hearings in front of the arbitrator. I do not make any findings in relation to that process because the evidence on it was not complete and the Plaintiff was not a party to that arbitration. The process cannot be binding upon the Plaintiff. During this period the Plaintiff company continued to complete the installation of the aluminium doors and windows.

[26] This then takes us to 28 July 2003 when it appears there was a site meeting. There is a dispute as to who called the meeting but I do not believe I need to resolve that. It is clear that following that meeting, two letters were written by the Plaintiff in essentially the same terms. One was addressed to the Defendant and the other was addressed to Tamariki Designs Limited. In the letter to the Defendant, Mr Allen said "because of the large sums still owing to Raro Glass by the main contractor, he agreed to the Castaway directors paying this account directly to Raro Glass." The "he" in the above quote is Mr Tamariki.

[27] Mr Robertson said that this was an admission that the Plaintiff was a sub-contractor to Tamariki Designs Limited. Mr Allen, by contrast said he wrote the letter because Mr Robertson said that otherwise he would not get paid. I accept Mr Allen’s explanation. Mr Allen did not understand at this point that he had a contract with Tamariki and I do not find that this letter was an admission that he did.

[28] The copy of the letter that was sent to Tamariki Designs Limited referred to Mr Allen soft pedaling on the outstanding amount due to his company by Tamariki Designs Limited for some unrelated work. While something was made of this by Mr Robertson, I do not believe it assists me in resolving the nature of the legal relationship between the Plaintiff and the Defendant. I find that throughout this period in July Mr Allen was acting in an entirely practical way, without legal advice, to try and get his money back.

[29] Mr Robertson said in evidence that the letter of 28 July was effectively meaningless because he had an obligation to Westpac as a result of the direction given by the bank to him. I find that a surprising explanation because it suggests that the explanation given in the letter could not possibly work. In any event Mr Robertson said that his position was properly set out in a subsequent fax dated 6 August 2003 and it is to that I now turn. In this fax Mr Robertson said "will guarantee full payment of the remainder of the outstanding amount as soon as legal proceedings and arbitration is settled."

[30] At the same time a cheque was made out to the Plaintiff on the Defendant’s account in the sum of $10,000 and this was picked up by Mr Allen and banked into the Plaintiff’s account. As a result of this payment, Mr Allen then arranged for the Plaintiff to install the doors into the Castaway premises.

[31] Mr Robertson gave various explanations for this letter but ultimately accepted that he intended to underwrite the amount still owing. This morning he explained to me that that should be read as a personal commitment rather than a company commitment. I have reservations about that but for reasons I will come to below, I do not believe I need to resolve that. The reasons he had not honoured the guarantee he said was because Mr Allen subsequently supported Tamariki Designs Limited in the dispute between the parties.

[32] While that may have been Mr Robert’s perception, I find that Mr Allen did not help Tamariki Designs Limited so much as attempt to recover the money owed to his company. I reject Mr Robertson’s attempt to characterize this as blackmail.

Calculation of the outstanding amount

[33] I find that the sum of $25,325 is the amount in question. It is made up as follows:

	$32,189
less $10,000 paid in August..	10,00
	$22,189
plus variations of...............	3,136	(as to that I refer to an invoice dated 28.11.03)
making a total of...............	$25,325

[34] I accept that the Defendant paid a total of $25,909 to the Plaintiff. I also accept Tamariki Designs Limited did not pay anything to the Plaintiff on account of its services that are the subject of this proceeding.

With whom did the Plaintiff contract?

[35] I now turn to the key question. Did the Plaintiff have a contract with the Defendant under which the $23,325 can be recovered? I conclude that the Plaintiff did have such a contract. I rely in particular on the following factors:

(a). the quotation by the Plaintiff directed to the Defendant

(b). the deposit paid by the Defendant in February 2003

(c). the deposit paid prior to the March contract being entered into

(d). the $10,000 on the Castaway account paid in August 2003

(e). the so-called guarantee document.

[36] In effect the Defendant says that he appointed the Plaintiff a sub-contractor in relation to a contract that was not entered into until March 2003, some two months after the acceptance of the quotation. Rarotonga Glass, the Plaintiff, never agreed to be made a party to the March contract, nor did it accept it was a sub-contractor to Tamariki Designs Limited. Mr Robertson explained that because there were no formal terms and conditions attached to the quotation that meant that the contract was not formed at that point. He seemed to think that that was a fatal flaw. With respect I do not agree with him. It is common for contracts to comprise part documents and part oral communications supplemented as needed by custom and practice. I find that the current contract was of this form.

[37] I accept the evidence of Messrs Allen and Tamariki that there were very few dealings between them other than was necessary to co-ordinate the contracts. Mr Tamariki was not responsible for ordering or pricing the aluminium joinery. I accept the evidence of both Messrs Allen and Tamariki that as far as they understood it, Tamariki Designs Limited was not responsible for this account.

[38] The Defendant’s strongest point was the letter of 28 July 2003 but for the reasons I have already explained, I do not see that as a legally binding admission.

[39] So far as the letter dated 6 August 2003 is concerned, I do not assess it as it were a formal guarantee binding either on the Plaintiff or Mr Robertson directly. The case was not pleaded as a guarantee case. Rather I regard this as an admission of liability. I do not base my decision entirely upon it, but it is a relevant factor. I do not accept the reservations that Mr Robertson subsequently expressed to me about the status of this document.

[40] In his submissions Mr Robertson advocated that the Plaintiff’s position in this case was invented. I do not accept that. The chain of contemporaneous documents essentially supports the evidence that Mr Allen gave with the possible exception of the 28 July letter. However for the reasons I have already set out, I accept Mr Allen’s explanation about that letter.

[41] I have attempted to reconcile the amount of payments made by the Defendant, including to Tamariki Designs Limited, to see whether monies were paid to Tamariki Designs Limited that could be arguably owed to the Plaintiff. I have not been able to undertake that to any degree of success. Mr Tamariki said that he was not paid monies on behalf of the Plaintiff. On my calculations there is potentially some head room between the amount paid by the Defendant under the contract and the amount arguably payable in total. I do not believe I need to complete such a reconciliation. That is because I have found that there is a contract directly between the Plaintiff and the Defendant and the issue is whether the Defendant has paid to the Plaintiff the full amount owing under that contract. For the reasons I have set out above, I do not believe that it has paid such an amount.

[42] Mr Robertson argued that because the screen doors were not complete, that was in some way a relevant deficiency. Mr Allen said he did not complete the screen doors because he had not been paid to that point. He said he has not charged for these in the amounts claimed and on my inspection of the documents, that appears to be correct. I can understand Mr Allen taking the position that he did and I do not find against the Plaintiff because he did not complete the screen doors.

Conclusion

[43] There will be judgment for the Plaintiff in the sum of $25,325. I invite memoranda on the question of interests and costs. The Plaintiff is to provide its memorandum within 14 days and the Defendant will have 14 days after that to supply me with its memorandum.

Judge