Delma Corporation South Pacific Ltd v Orica Coatings (Fiji) Ltd [2008] FJHC 36; HBC32.2007 (7 March 2008)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO.: HBC 32 OF 2007

BETWEEN:

DELMA CORPORATION SOUTH PACIFIC LIMITED T/A
CHAND CONCRETE INDUSTRIES
Plaintiff

AND:

ORICA COATINGS (FIJI) LIMITED
Defendant

Ms A. Neelta for Plaintiff
Mr. D. Prasad for Defendant

Date of Hearing: 3rd March 2008
Date of Submission: 4th March 2008
Date of Judgment: 7th March 2008

JUDGMENT

Background:

This is a claim for breach of contract dated 20th January 2005. The defendant manufactures paint. The plaintiff was in the business of making and selling concrete blocks. Under the agreement the defendant agreed to supply paint to the plaintiff. The agreement was for a period of two years commencing 20th January 2005. It could be terminated by either party giving the other six months advance notice in writing.

It is agreed that the supply of paint by the defendant was initially on the basis of 30-day credit which meant paint sold in one month had to be paid by the end of the following month. Later the supply was done on basis of 25-day credit.

Pleadings: Claim and Defence:

The plaintiff claims that the defendant breached the agreement by stopping supply of paint and other products to the plaintiffs without any valid reason and it failed to give the plaintiff the six-month notice of termination in writing. It claims damages for loss of business and general damages together with interest.

The defendant in its defence says that it had a valid reason not to supply paint to the plaintiff as the plaintiff failed to abide by the credit terms. It counterclaimed against the plaintiff for the sum of $14,739.61 being for paint supplied inclusive of interest at 1.5 percent per month.

Was there termination of contract?

Ronald Chand the Director of plaintiff company told the court that the usual practice between the parties was that the plaintiff company would place orders for supply of paint by fax. The goods would then be supplied by the defendant the next day. He told the court that the plaintiff placed two orders: one on 21st June 2006 and one on 22nd June 2006 but neither order was complied with by the defendant. That he says is termination of contract.

The defendant admits receiving these two orders by fax on those dates. However, the Sales Manager of the defendant company told the court that it is not always possible to supply paint instantly or by the next day. He stated at times it took some days to get the paint ready. Esther Sujit the accountant for the defendant company stated that at times it took two or three days to supply the goods.

There was a change at the defendant’s company with Pacific Coating Limited taking over its operations. About 4th May 2006 it had sent letter to all its customers stating that payment was henceforth due on or before the 25th of the month following the purchasers. It also drew attention that interest rate of 1.5 percent per month would be charged on overdue accounts. Then in bold letters it stated: "Please note that no product will be supplied to any account that is overdue. Goods will only be released if acceptable arrangement is made with the management." I accept the defendant’s explanation that the defendant began to enforce its policy strictly. I also accept that by the time the defendant had got the supply ready, it was past 25th June, so its policy of no payment no supply kicked in.

I believe the defendant that this document was sent to all its customers including the plaintiff. Ronald Chand also stated that he was aware of requirement for payment before 25th of the following month. However his argument in that as at 21st or 22nd June 2006 the plaintiff was not in arrears so goods should have been supplied to it. Opposed to it is the testimony of witnesses for the defendant that goods cannot always be supplied at the same time but at times it takes a few days. That sounds entirely logical as at times they may not have supply in stock or there was a question of getting the right tint for the paint. They also stated that June 25th was a Sunday and on Monday 26th June, their system had alerted them of plaintiff’s account being in arrears so the defendant did not supply the goods.

Ronald Chand stated as a second argument that in the past if his account was overdue the plaintiff still supplied the goods. This argument has little merit. It was an indulgence granted to the plaintiff in the past; it could also be withdrawn. It was for the defendant to decide what type of credit facilities it was prepared to give to its customers not for the buyer to force it upon the defendant.

The defendant’s submission is short and that is it did not terminate the distributorship agreement but only insisted on strict compliance with its credit terms of payment. I do not consider that I can treat the failure to supply the paint as per order of 21st and 22nd June, even if I reject the defendant’s explanation, as tantamount to termination of distributorship agreement by the defendant. There is nothing in that agreement itself to say that paint is to be supplied within so many days and failure to supply within fixed number of days shall be treated as termination. The plaintiff has not pleaded any implied terms in its pleadings.

Accordingly I hold that the defendant did not terminate the Distributorship Agreement.

There is one absurd aspect of this case. The plaintiff says it had a cheque dated 7th June 2006 for the outstanding sum ready together with payment voucher. It would not have taken great effort by the plaintiff to get on a vehicle and go to Lami and pay the outstanding sum and collect the paint. Alternatively it could have asked the defendant to bring the supply ordered on 21st and 22nd June and collect the cheque for arrears. The business relationship between the two would have continued and there would be no need for this action. What would have required less than an hours time now required more than a day in court.

Loss of Business:

Even if I had found there was improper termination, then the plaintiff on the basis of evidence adduced would not have proved the loss or damages suffered by it.

The plaintiff has claimed damages for loss of business. The plaintiff had some good clients like Naviti Resort, Western Builders and others. They are named in document 13 of the agreed bundle. It could be expected to make sales to some of them. However it is for the plaintiff to prove the loss to the satisfaction of the court on a balance of probability. The plaintiff must prove both fact of damage and its amount.

Rodney Chand estimated his loss at $120,000.00. PW2 RAJESH KUMAR is a tax agent. He assessed the plaintiff’s loss at $10,000.00 per month. The report is plaintiff’s exhibit 16 or document 3 in supplementary bundle. His figures are based on optimum sales.

The plaintiff company did not keep separate records for sale of blocks and for sale of paint. Even more telling is the disclaimer in the report which says that the information supplied by the company has not been independently verified by the witness. This witness was an expert witness. If I am to believe him, then I must be satisfied as to the accuracy of his source material. The weight which can be attached to the report depends on the credibility of the source material which formed its basis. He could easily have compiled a report in chronological order with invoice numbers and amounts and also produce those source documents in court. He should have backed his figures of monthly sales-purchases from the source material. These dockets would be with the plaintiff. These should have been disclosed to the defendant at the summons for directions stage.

Courts insist on certain degree of certainly and particularly, both in pleadings and in proof of damage having regard to the nature of the case. "To insist upon less is to relax the old and intelligible rules": Ratcliffe v. Evans (1982) 2 QB 524 at 532 or as Lord Goddard put it in Bonham Carter v. Hyde Park Hotel (1938) 6 7LR 177 "Plaintiffs must understand that if they bring actions for damages it is for them to prove their damage; it is not enough to write down particulars, and so to speak, throw them at the head of the court saying – ‘This is what I have lost; I ask you to give me these damages.’ They have to prove it".

The tax agent just gave figures. He did not produce the documents from which he compiled those figures. Additionally the tax agent did not calculate other expenses that would be incurred even if his figures are accepted. These would be like wages for employees engaged in sales and the incidence of tax on profit.

The plaintiff is seeking substantial damages and I remain unpersuaded as to the accuracy of the figures given. On the basis of evidence adduced, I cannot say how much loss the plaintiff suffered and I cannot drift into the realm of speculation to assess the loss.

Conclusions:

Accordingly, I hold that there was no termination of agreement and secondly even if the plaintiff had succeeded on showing termination, on basis of evidence, the losses were not proved.

As far as the counterclaim is concerned, the plaintiff admitted that it owed the defendant the sum claimed. Accordingly I enter judgment for the plaintiff in the sum of $14,739.61 plus interest at the rate of 1.5 percent per month from 7th March 2007 (the date of counterclaim) to 7th March 2008.

Final Orders:

Plaintiff claim is dismissed. There is to be judgment for the defendant on the counterclaim for $14,739.61 together with interest from 7th March 2007 to 7th March 2008. I award the defendant costs summarily fixed in the sum of $2,000.00.

[Jiten Singh]
JUDGE

At Suva
7th March 2008