Pioneer Supplies Ltd v Kewal Investment Ltd [1998] FJHC 142; Hba0018j.98s (23 October 1998)

Fiji Islands - Pioneer Supplies Ltd v Kewal Investment Ltd - Pacific Law Materials

IN THE HIGH COURT OF FIJI

AT SUVA

APPELLATE JURISDICTION

CIVIL APPEAL NO. 0018 OF 1998

:

PIONEER SUPPLIES LIMITED
Appellant

AND:

KEWAL INVESTMENT LIMITED
Respondent

Mr. V. Mahaor the Aphe Appellant
Ms. P. Narayan and Mr. H. Nagin for the Respondent

JUDGMENT

This appeal concerns a claim by the appel(the plaintiff in the Court below) for a sum of money said said to be 'due and owing by the respondent for the supply of a roller shutter door' to a private residence constructed for the managing director of the respondent company Mrs. Raj Pati Kewal, at 67 Princes Road, Tamavua.

No comprehensive Statement of Claim was filed in the case nor were any 'Particulars' provided. Of significance, it should be noted that no specific claim was made by the appellant on the basis of a 'Payment Certificate' issued by the respondent's consulting architect yet it was to be relied upon not only as evidence of the existence of a contract but more so as being the equivalent of a 'bill of exchange' or 'cash'.

The claim was denied on the following two (2) substantive grounds:

(1) The respondent states that '... (it) did not enter into any contract with the appellant for the supply of roller shutter door'; and

(2) The respondent claims that it '... entered into a contract with M. Hanif Builders Company Limited and the latter had subcontracted to the appellant and the appellant should therefore claim against M. Hanif Builders Company Limited'.

The learned trial magistrate in a carefully reasoned seven (7) page judgment dismissed the appellant's claim as 'not been sufficiently proved'.

The appellant now appeals against the trial magistrate's judgment on the following three (3) grounds:

"(1) THE Learned Magistrate erred in law and in fact in failing to resolve conclusively as a matter of law the issue of payment Certificate on 5th day of October, 1994 duly issued by the Respondent's Project Architect and authorised agent authorising payment to the Plaintiff/Appellant for the supply of Roller Door thereby great miscarriage of justice has occurred to your Plaintiff/Appellant.

(2) THE Learned Magistrate erroneously dealt with the alleged dispute between the Defendant/Respondent and her authorised agent, Jaimi and Associates with regards to payment Certificate dated 5th Day of October, 1994 when there was no evidence that the Defendant/Respondent ever disputed or took any legal recourse or otherwise against her agent to dispute the said Certificate and thereby misconstrued the effect of the payment Certificate once issued.

(3) THE Learned Magistrate erred in law and in fact and came to erroneous conclusions on facts of the whole; and more specifically gave undue weight and credence to the Defendant's/Respondent's allegation of alleged defects in the Roller Door when such a claim was never made or pleaded by the Defendant/Respondent in the Statement of Defence and it was equally open to the learned Magistrate to conclude that the allegations of defect was an afterthought by the Defendant/Respondent designed to avoid payment to the Plaintiff/Appellant."

These grounds are said by counsel, to raise two (2) main issues on appeal, one legal and the other factual.

The 'legal issue' is said to arise from the 'Payment Certificate' issued by the respondent's architect, the legal status of which the trial magistrate did not see fit to determine at trial since the same would require '....an examination of contractual documents not before the court'.

I can deal fairly briefly with this 'legal issue' which counsel submits ought to have been determined by the trial magistrate since there was evidence accepted by her that Jaimi Associates 'was the project consulting architect' engaged by the respondent in the design work, tender process and supervision of the construction of the house. Furthermore it was accepted that 'Mrs. Kewal paid M. Hanif (the building contractor) by progress payment upon receipt of Jaimi's payment certificate'.

In this latter regard it is undisputed that a 'Payment Certificate No. 1' dated 5th October 1994 was issued by Jaimi Associates in favour of the appellant company in regard to the supply of a roller shutter door to Mrs. Kewal's residence (See: Exhibit 'F').

As to the legal status of such a Payment Certificate counsel reiterated his submissions on 'THE LAW' which he advanced in writing before the trial magistrate (See: pages 39 to 41 of the record), where it is submitted:

"It is trite law that once the owner's architect or engineer issues an interim certificate to the supplier or sub-contractor, the owner must pay on the Certificate. No amount of cross or counter claim either by the main contractor or the owner would be in a position to defeat the claim from, in this case, the supplier. The reason is that the interim certificate is equivalent to cash and must be honoured. See: Dawnays Ltd. v. F/G Minter Ltd and Another (1971) 2 ALL E.R. 1389 at page 1392 para. (b)."

The correctness of the above proposition of law and the authority from which it is derived is open to serious doubt however, when considered in the light of the judgments of the House of Lords in Modern Engineering Ltd. v. Gilbert-Ash Ltd. (1973) 3 W.L.R. 421 where it held:

'(1) that there was no such general principle as appeared to be laid down in Dawnay's case in relation to sums certified as payable to sub-contractors ...'

In particular, Viscount Dilhorne, Lord Diplock and Lord Salmon were unanimously of the view that Dawnay's case, and several later cases that followed it, were 'wrongly decided'.

Suffice to say that the so-called legal principle upon which the first ground of appeal is based is, in my view, unsound and must be rejected.

If I should be incorrect however in the above then I would have no hesitation in upholding the trial magistrate's view that '... the payment certificate should be read with the contract from which it flows, ... to properly assess the defendant's purported liability thereon'. In the absence of such contract ('not before the court') the trial magistrate would have been foolhardy to have attempted to determine the respondent's liability under the disputed 'Payment Certificate'.

Needless to say a good deal of the problems encountered in this appeal arises as a result of the rather confusing and cryptic manner in which the parties pleaded and later presented their respective cases before the trial magistrate.

For instance, there was a good deal said about a 'general contract' that existed between the parties but no one saw fit to produce it. The appellant for its part, relied heavily on the 'Payment Certificate' but never pleaded it as a separate 'cause of action' based on specific contractual clauses derived from the 'general contract'. The respondent on the other hand, never alleged breach of contract as an alternative defence nor was there a counter-claim for defective workmanship on the appellant's part in the performance of the contract to supply and install the roller door yet much of Mrs. Kewal's evidence was devoted to that very matter.

I accept that the respondent's Statement of Defence no where challenges the validity of the 'Payment Certificate' or counter-claims for alleged defective workmanship on the part of the appellant company in the installation of the roller door, but, given the rather fundamental nature of its defence viz.: "no contract", and given the shortcomings in the appellant's own pleadings, it is in my view perfectly understandable.

The trial magistrate did however admit Mrs. Kewal's evidence on both aspects presumably, by way of rebuttal of the appellant's unpleaded reliance on the 'Payment Certificate' as establishing conclusively the respondent's liability to pay for the roller door, and also, to rebut the evidence of Jaimi as to Mrs. Kewal's recorded approval for the issuance of the Payment Certificate in favour of the appellant. (See: the typewritten 'Note: *' at the bottom of Exhibit 'F').

That this is so, is clear from the trial magistrate's judgment where she not only correctly identifies 'the central issue' thrown up by the pleadings, but also, the 'essence' of the appellant's case '... that it contracted with the defendant's agent, Jaimi, and duly performed its part of the agreement. This fact is alleged to be evidenced by Jaimi's payment certificate of 5th October 1994'.

Needless to say if the trial magistrate was satisfied that there was no binding contract between the parties and further that the 'Payment Certificate' was not authorised by Mrs. Kewal (as is clear from her first and second 'findings' at p.75 and at the top of p.77 of the record) then that would render its evidential value negligible, and, in the absence of any clear contrary contractual obligation such as might be found in a written building contract, was incapable of imposing any liability, vicarious or otherwise, on her, to pay the certified amount.

There is no merit in the second ground of appeal which is accordingly dismissed.

The 'factual issue' arises counsel submits, as a result of the trial magistrate's incorrect finding as to credibility based upon an incorrect assessment of the facts of the case.

In this latter regard the learned trial magistrate made the following relevant 'findings' (at pp. 75 and 76 of the record):

"(1) ...that the plaintiff had entered into a contract with M. Hanif for the supply of the roller door.

(2) ...that the defendant did not authorize Pioneer's sub-contract with M. Hanif, further did not approve the payment certificate dated 5th October 1994.

(3) ...that the plaintiff properly demanded payment on the invoice number 6562 from M. Hanif.

(4) ...that upon M. Hanif going into liquidation, the plaintiff improperly altered the said invoice and demanded payment on the invoice from the defendant.

(5) ...that the plaintiff is demanding payment for works not completed, further that the plaintiff failed to install a remote controlled roller shutter door. The said door, I am satisfied was never properly installed."

and, as to credibility, the learned trial magistrate said (at p.76 of the record):

"Having heard and considered all the evidence, observed all the witnesses in the witness box, I prefer the defendant's version of events. I consider the evidence from Mrs. Kewal to be truthfully and objectively given.

The evidence however, from the plaintiff's witnesses was generally inconsistent and often evasive The admission under oath from PW1 (the proprietor of the appellant company) that he had altered invoice number 6562, cast an extremely unfavourable impression on his entire testimony and has tainted the plaintiff's entire case. It is principally the concession from PW1 of document tampering which has rendered as generally unreliable and unsafe the evidence produced by the plaintiff."

As to the credibility of the respondent's architect, Jaimi (P.W.2) who quite unusually was called by the appellant company, the trial magistrate said (at p.77 of the record):

"I have upheld defence counsel that the evidence of P.W.2 be viewed as generally unreliable also. He was inconsistent ... The witness was generally evasive ... Furthermore in answer to defence counsel and as an explanation for the quotation (NOT the appellant's invoice) being in the name of M. Hanif, he said 'Hanif was asked to accept the quotation. She won't deal with individual subcontractors.' This convinces me that, Jaimi, knowingly acted without due authority."

In this latter regard I have carefully examined the 'quotation' dated 8.12.93 (Exhibit 'A') and note that it was given by the appellant company to 'Jaimi Associates' and NOT as counsel's question appears to suggest to 'M. Hanif'.

Indeed in the entire body of the 'quotation' there is not a single mention of 'M. Hanif'. What's more given that the 'quotation' was actually sought in writing by Jaimi Associates (See: Exhibit 'E') on behalf of Mrs. Kewal there is no reason why the 'quotation' should have mentioned 'M. Hanif' and, in fact, it did not.

In the circumstances, defence counsel's question (recorded at p.54 of the record) concerning the appellant's 'quotation' (NOT I stress the 'invoice' of 18.8.94, Exhibit 'C') clearly misrepresents the truth. It is therefore difficult to understand how Jaimi's answer to such a plainly misleading question could 'convince (her) that Jaimi knowingly acted without due authority' in issuing the disputed 'Payment Certificate', unless, the trial magistrate herself, had been equally misled into believing that the appellant's 'quotation' was 'in the name of M. Hanif builders' as appears to have occurred.

Given the above, the trial magistrate's assessment of Jaimi's credibility on this important matter may have been misguided and unduly harsh.

Needless to say Mrs. Kewal's understandable reluctance to deal with individual sub-contractors in the face of her understanding of the nature of the 'general contract' granted to M. Hanif Builders does not mean or preclude her authorised agent, Jaimi, from concluding a valid and binding contract with a sub-contractor on her behalf.

Counsel for the appellant also complains that the learned trial magistrate was overly influenced by the so-called 'invoice tampering' incident and furthermore became distracted in trying to resolve an unpleaded dispute that existed between Mrs. Kewal and her architect Jaimi, and as a result misdirected herself as to the true nature of the contract that existed between the parties as to the supply of the roller door.

As for the trial magistrate being 'convinced' that the 'Payment Certificate' was unauthorised, not only as earlier demonstrated was her assessment based upon a plainly incorrect answer to an equally misleading question, but she quite improperly finds, contrary to the evidence, that the contract for the supply of the roller door was entered into between the appellant and M. Hanif Builders.

Having carefully considered the relevant sequence of events and the relevant documentary exhibits, and mindful that an appellate court is always reluctant to differ from the findings of fact of a trial court into which credibility enters, I am nevertheless driven to the firm conclusion that the learned trial magistrate's first finding '... that the plaintiff (appellant) had entered into a contract with M. Hanif for the supply of the roller door ...' was, on the evidence, plainly wrong.

Notwithstanding the oral secondary evidence as to what was or was not included in the 'general contract' entered into between the respondent company and M. Hanif Builders, the specific (sub)-contract for the supply of the roller door to Mrs. Kewal's residence is evidenced and concluded in my opinion, by the following documentary exhibits:

* plaintiff's Exhibit 'E' - being Jaimi Associates invitation to the appellant company 'to tender for the supply of 1 only color bond roller shutter door'; ('invitation to treat')

* plaintiff's Exhibit 'A' - being the appellant's 'quotation' a fortnight later; ('offer') and finally,

* defendant's Exhibit 'A' - being Jaimi Associates written 'acceptance of Quotation by Pioneer Supplies to supply and install 1 off 2530 x 5300 wide, motorized 2 hand remote control Beige colour powder coated door in the sum of $4,565.75 VAT inclusive'. ('acceptance')

which latter document was on the face of it, copied to the 'contractor' (M. Hanif Builders) and confirmed in the evidence of P.W.1 at top p.47; 'the employer' (Kewal Investments); and 'Pioneer Supplies' (the appellant company).

Given the contract between the appellant and the respondent's authorised agent, the so-called 'invoice tampering' incident was, at worst, based upon a misunderstanding, and at best, an innocuous mistake.

Unfortunately the learned trial magistrate appears to have ignored the clear and unequivocal contract arising from the above-mentioned 'Exhibits' and accordingly misdirected herself as to their true meaning and effect.

The learned editors of Halsbury's Laws of England Vol. 4 (4th edn.) in paragraph 1264 cited in counsel for the respondent's written submission correctly states:

"Although the employer or his architect often nominates the sub-contractor under the provisions of the main contract, there is no privity of contract between the employer and the sub-contractor ... However, if the sub-contractor is ordered direct by the employer (or his authorised agent) to do work, the employer must pay him for it ..."

(my underlining)

The authority cited in Halsbury's for this latter proposition is Wallis v. Robinson (1862) 130 R.R. 841 the facts of which bears a striking resemblance to the present case insofar as it was a claim by a sub-contracted plasterer against an employer for payment of work approved by the employer's architect after a similar unpaid claim had been made by the original contractor (See: defendant's Exhibit 'D') who had then become bankrupt. In the case the employer denied liability on the ground of his having entered into a contract with a third party (i.e. the original contractor) to do the whole plastering work.

Martin B in directing the jury said at p.843:

'The first question for you is, whether the architect was the agent of the defendant to order this work? And next, did the architect so conduct himself as to lead the plaintiff to believe that he had a contract with him to pay him for the work. The plaintiff could not act on what was passing in the architect's mind, but on what was said to him, and what he was led to believe.'

The jury found in favour of the plaintiff.

In the present appeal, having held that there was a valid and binding contract entered into between the appellant company and the respondents duly authorised agent Jaimi Associates, the appeal must be allowed.

However, with a view to finally determining this appeal and mindful that the learned trial magistrate has found that the appellant's performance of the contract was seriously 'incomplete' in several respects and indeed the roller door had to be completely removed and replaced for which the respondent incurred undisputed expenditure of $4,060.00 (See: defendant's Exhibit 'F' and the evidence of DW2 at pp. 69 to 71 of the record) I am satisfied that judgment should be entered for the appellant company in the sum of $(4,565.75-4,060.00) = $505.75 together with costs of the action and the appeal which I fix at $250.00.

The appeal is allowed and judgment is entered in the appellant's favour in the sum of $755.75 inclusive of costs.

D.V. Fatiaki
JUDGE

At Suva,
23rd October, 1998.

Hba0018j.98s