Fielder Industries (SI) Ltd v Solwest Trading Company Ltd [1996] SBHC 8; HC-CC 153 of 1993 (21 February 1996)

HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 153 of 1993

FIELDER INDUSTRIES (SI) LTD

-v-

SOLWEST TRADING COMPANY LIMITED

Before: Muria, CJ

Hearing: 23 & 24 November 1995 - Judgment: 21 February 1996

Counsel: J. Corrin for the Plaintiff; A. Radclyffe for the Defendant

This is an action brought by the plaintiff against the defendant claiming the sum of $143,607lus interest for goods sold and delivered to the defendant.

At all relevant timt time the business of the plaintiff included manufacturing of flour, rice, biscuits and other products and selling them to its customers both in Honiara and in the Provinces on wholesale basis. The defendant's business at the time was that of a wholesaler and retailer at Noro, in the Western Province. From the pleadings, it would appear that the plaintiff and the defendant had been having business dealings with each other prior to October 1991 and up to March 1994.

It can also be seen that after March 1994, not only that business dealings between the plaintiff and defendant stopped but also negotiations between them to resolve the dispute now before the Court ceased. They have now submitted their dispute to the Court to resolve it for them. But before the Court does that, let me set out briefly the factual background to the claim.

Background facts to the Claim.

In or about October 1991 the plaintiff sent goods to the defendant. Those goods were shipped to the defendant at Noro in four (4) containers which arrived on or about 18 October 1991. The goods in those containers were mainly rice flour and navy biscuits. Then a further 10 containers of goods (flour, rice and biscuits) were sent in December 1991 to the defendant by the plaintiff. These 10 containers arrived at Noro on 2 December 1991. There was some dispute as to the total value of the goods in the two lots of consignments. There was also dispute that the goods in the containers were not ordered by the defendant. I shall return to these matters later.

The goods in the four containers were received and sold by the defendant. The same had also been done with the goods in the 10 containers although part of those goods were condemned by the Health Authority as unfit for sale to the public or unfit for sale for human consumption. There was no dispute that some of the goods in the 10 containers consignment were condemned. The dispute was who should be responsible for the damaged goods. I shall return to this aspect of the matter also later in this judgement.

To better understand the position of the parties in respect of the goods and the obligation flowing from them, I shall take each consignment and consider how it came about.

Consignment 1 (4 containers of goods).

It is the defendant's case that it never ordered the goods in the 4 containers. The evidence of David Soden, the former General Manager of the plaintiff, is that William Uluilakeba who is the Managing Director of the defendant would come down to Honiara every two or so months to settle the defendant's account and then placed orders for cargoes on account. Some times the defendant would place its orders by phone. The plaintiff would then prepare the goods and have them shipped to the defendant.

In October 1991, Mr. Uluilakeba spoke by phone to Mr. Soden regarding placing of orders for goods for the coming Christmas period. Mr. Soden took down the order on a piece of paper which was then passed on the Sales Clerk who prepared the Invoices based on the list of items shown on the piece of paper. After that the plaintiff shipped the goods in the 4 containers by a cargo vessel which arrived at Noro on 18 October 1991. This is confirmed by Mr. Uluilakeba in his evidence.

As to the value of the goods in the 4 containers, the defendant put that to be $130,344.00 (see Exh.21) and together with the Shipping charges (Exh.26) of $2,908.80 the total cost was $133,252.80. Mr. Soden did not say how much was the value of the goods in the 4 containers although he said that it was in excess of $100,000.00. Mrs Lora Bokolema who is the plaintiff's Accountant put the value of the goods in the 4 containers as $103,068.00 when cross-examined by Mr. Radclyffe. However when pressed further in cross-examination she agreed that the amount was $130,344.00. She also conceded that she had not yet worked for the plaintiff at that time but that she based her assessment on the information available to her. She further stated in her evidence that the defendant had the originals of Exh. 25, Exh. 26 and the invoices and that the items in Exh. 26 should tally with Exh. 25. I find the value of the goods in the 4 containers to be $130,344.00.

The goods in the 4 containers consisted on 1958 cartons of navy biscuits, 2100 bags of rice, 400 bags of flour and 100 buckets of self-raising flour. All these goods arrived at Noro, received and sold by the defendant. As far as the plaintiff is concerned, there was no problem about those goods nor was there any problem about repayment made to the plaintiff by the defendant on the sale of those goods. The defendant also confirmed this is his evidence. Mr. Uluilakeba also confirmed that the goods in the 4 containers were in good condition when he received them. Although both parties have conceded that as far as the goods in the 4 containers are concerned, there is no dispute between them over those goods, the legal position of the parties in respect of the goods in the 4 containers is something that needs to be clarified. That I shall now consider.

Was there a contract created between the parties in respect of the 4 containers of goods?

The elementary rule in contract law is that for a contract to come into being, there must be offer and acceptance, the offer being an expression of willingness by one party to contract on certain terms and with the intention that it will be binding as soon as the other party accepts it and acceptance being an expression of agreement to the terms offered. Let us see what happened in this case.

There can be no doubt that before October 1991 the plaintiff and defendant had been having businesses transactions between them and those business transactions included the supply of goods by the plaintiff to the defendant on credit account. The evidence of that comes from the former General Manager of the plaintiff and the Managing Director of the defendant. When one consults Exh. 21, one sees the balance still outstanding as at 30 September 1991 of $55,723.00. That amount was agreed to by the parties as still outstanding. As it has been shown, the goods in the four containers were dispatched by the plaintiff and received by the defendant. A question which one may ask is that would a reasonable and prudent businessman in the defendant's position accept the four containers of goods worth more than $130,000 without ordering them? I am prepared to answer that question in the negative.

In view of the business relationship between the parties in this case together with the evidence of Mr. Soden and the acceptance of the goods by the defendant, I conclude on balance that the goods were ordered by the defendant. That order was by phone and received by Mr. Soden who took down the order and instructed his Sales Clerk to prepare the goods and have them invoiced (see Exh. 27 Originals & Exh. 23 photocopies of the Invoices). The total value of which was $130,344.00.

Even if I accept (which I do not) that the defendant did not order the goods I would have found that in view of the business relationship between the parties and the fact that the defendant accepted the goods, sold them and repaid the plaintiff that there was an enforceable contractual relationship between them. There was acceptance by the defendant of an offer to supply the goods and that offer was accepted by the defendant when he received the goods and used them, that is, he sold them and repaid the plaintiff for the goods supplied. See Weatherby -v- Banham [1832] EngR 458; (1832) 5 C & P 228. What the defendant did in the present case was a clear act of intention to accept the supply of the goods from the plaintiff. It was open to the defendant to reject the whole of the goods delivered or accept some only and reject rest or accept the whole of the goods delivered and paid for them. See Hart -v- Mills (1846) 15 LJ Ex. 200. The defendant in the present case clearly chose the third option and that must surely create a binding contract between itself and the plaintiff.

Consignment 2 (10 containers of goods).

The 10 containers of goods shipped by the plaintiff to the defendant left Honiara on 5 December 1991 and arrived at Noro on 12 December 1991. According to Mr Soden the order for those goods was made by Mr. Uluilakeba sometimes after 16 October 1991. Mr. Uluilakeba agreed in evidence that he came to Honiara in November 1991 and saw Mr. Soden. At that meeting, Mr. Uluilakeba told Mr. Soden that the defendant did not want anymore rice and that only biscuits was needed. Mr. Uluilakeba then returned to Noro.

Mr. Uluilakeba was sent a fax on 5 December 1991 advising him of the 10 containers consignment and the goods in those containers. He agreed he received the fax. He also agreed that in fact on 2 December 1991 Mr. Soden phoned him about the contents of the fax.

Although Mr. Uluilakeba insisted that he did not order the goods in the 10 containers, he later qualified his position and said:

"I only ordered the biscuits in the 10 containers.

When the 10 containers arrived I went to the Noro, Wharf.

I checked the 10 containers against the invoices"

The containers remained at the Noro Wharf and after two weeks two of the 10 containers were found to have rain leaking through them. These two containers were marked JSSU 053038 and JSSU 050675. Discovering the leakage, Mr. Uluilakeba phone Mr. Soden about it and that goods had been damaged as a result of the leakage.

It is not disputed by the plaintiff that some of the goods damaged as a result of the leakage in the two containers. The plaintiff, and I am sure also the defendant, realised that part of the problems resulting in the goods being condemned by the Health Authority were that they were not being sold within good time. As a result some of the goods, particularly the rice and flour had weevils in them. Some of the goods had to be sold at low prices and others had to be destroyed as they were condemned as "unfit for sale for human consumption" or rejected for sale to the public because they were contaminated.

The goods in the 10 containers consist of 73 tonnes of 25 Kg Rice, 11 tonnes of Navy Biscuits, 44 tonnes of flour and 248 buckets of 15 kg self-raising flour. The total value of those goods was $235,923-00 which on the evidence I find, it to be the total value of the goods in the 10 containers. The defendant explained what it did with the goods:

"We sold some of the goods which were not damaged. We sent money back to the plaintiff"

With those factual evidence I shall now turn to consider the legal position of the parties in respect of the 10 containers of goods.

Was there a contract created between the parties in respect of the 10 containers of goods?

I have already set out the basic legal principles of contract when I discussed the relationship of the parties in respect of the 4 containers of goods. I need not repeat them here. The questions which I must consider now are: Were the goods supplied by the plaintiff upon the order of the defendant? Was there a binding agreement between the parties in respect of the supply of those goods?

As to the first question, the evidence on that is somewhat a little less strenuous to find. There is the evidence from the plaintiff contained in Exh. 31 (letter of 16/10/91) informing the defendant that:

"There is a ship leaving Honiara on 26 November 1991 Chenan V to go to Noro. This is the last ship before Christmas & 1 would strongly advise you to order your Christmas stocks in good time so we may containerise them and have them with you in early December."

After that advise from the plaintiff, the defendant's Managing Director Mr. Uluilakeba came to Honiara and met with Mr. Soden in November 1991. This is confirmed by Mr. Uluilakeba in his evidence. Mr. Soden's evidence is that it was at that time that the defendant placed its orders for goods for the Christmas period. Those goods were the ones loaded in the 10 containers and shipped to Noro. Mr. Uluilakeba conceded placing orders for goods but said that the orders which were only for biscuits which according to the evidence were 4,800 cartons of them.

I must raise the same question which I had earlier posed in this judgement and that is: why did the defendant have to accept goods which it said it never ordered? Why did it not take one of the appropriate options as mentioned in Hart -v- Mills (supra) namely the second option which is to accept only some of the goods which were ordered and to reject the rest? Like the first consignment, the defendant accepted the whole of the goods supplied and used them.

The evidence in this case viewed together with the existing business relationship between the parties would clearly support the plaintiff's contention that the goods in the 10 containers were ordered by the defendant and I so hold. To hold otherwise would, in my judgment, be contrary to business prudence.

It is also worth noting that the correspondence between the defendant and plaintiff from the time the goods arrived to the time the plaintiff issued the writs in May 1993 did not touch on any denial that the goods were ordered. All the correspondence revolved around the condemned goods and how best the repayment could be made to clear the arrears outstanding on the defendant's account. (See Ex. 1, 4 & 11).

In view of the cordial business ties between the plaintiff and defendant at the time, I come to the firm conclusion that the defendant placed orders for goods in the 10 containers from the plaintiff who then supplied the defendant who in turn received and sold the goods and repaid the plaintiff. Repayment of the account was based on the system of applying the receipt of payments against the old outstanding balance. There was therefore a clear legally binding contractual relationship between the plaintiff and defendant throughout their business dealings with each other at the material period.

The Agency argument

There was a suggestion by the defence that the relationship between the defendant and plaintiff was one of an agency arrangement. In view of the conclusion which I have reached, the agency argument can be put aside. I should simply mention that the business transactions between the plaintiff and defendant was on credit account by which the defendant bought goods on credit from the plaintiff and then sold them to its customers in the Western Province at a profit. For the defendant to speak of being an agent for the plaintiff in this case is legally incorrect. The fact that the defendant was an outlet of the plaintiff's products in Noro and who sold the plaintiff's products did not convert his position to an agent. See Ireland -v-Livingston (1871) LR 5 H L 395.

Again throughout his correspondence with the plaintiff regarding the damaged goods and the accumulating arrears, the defendant insisted that he suffered loss. That confirmed that the goods were his and not his principal's.

Storage space at Noro

There is the argument by the defendant that it did not have enough storage facility at Noro and as such the plaintiff had sent more than it could handle. This argument no doubt ties in with the agency argument. On this argument, the, answer must lie with the defendant as I have already accepted that it ordered the goods and that it was not an agent. It ordered goods in bulk with the intention of selling them for profits to its customers in the Western Province and only repaying the plaintiff for the price of the goods as invoiced.

In those circumstances it could hardly be the plaintiff's concern whether the defendant had enough storage facility or not. One would wish that such a concern was more for the defendant than for the plaintiff.

Goods ordered in excess of $300,000.00

The contention by the defendant is that its credit limit was $80,000 only and as such it could not have ordered goods in excess of $300,000.00 which was the rough sum total of the value of the goods in the two consignments (4 & 10 containers). In view of the conclusion which I have reached that the defendant ordered the goods in the two consignments, this contention must be rejected.

Amount due

The plaintiff claims that $143,607.27 is still owing to it from the defendant. That amount is calculated in the manner set out in the Amended Writ of Summons which shows the amount owing at the opening balance on 30 September 1991. That figure is $55,723.00. Invoices for goods ordered are added and payment received are deducted. In addition to the Invoices two payments of $5,000.00 each by cheques were dishonoured and they are added to the outstanding balance owing. The final amount owing, as I have said is $143,607.27.

Mr. Radclyffe frankly puts his client's position by saying that the key question is whether the defendant ordered the containerised goods. If it did then it is liable as the defendant can only be liable for the goods ordered and delivered. The conclusion I have reached is that the defendant ordered the containerised goods and those goods were delivered to it who accepted them. The defendant is therefore liable for the payment of those goods.

At the end of the December 1991 the arrear shown is $381,958.50. This no doubt covered the cost of the goods ordered in the two containerised consignments as well. It would appear from the record that regular payments had seen made by the defendant up to December 1992, clearing the arrears. These payments range from $30,000 to $80,000.00. From January 1993 to March 1994 payments had been made but in smaller amounts. However by March 1994 the arrear was reduced to $143,597.27. Between August 1994 to May 1995 there was no movement in the account and so with the $10.00 dishonoured cheque fee charged, the amount remains outstanding is $143,607.27.

I have compared the Statement of Claim contained in the Amended Writ of Summons with exit. 18, Exh. 21 and Exh. 16 and I am satisfied that the figures shown in the Statement of Claim represent the correct movement in the account of the defendant with the plaintiff. The amount of $143,607.27 on the evidence represents the arrears outstanding on the goods ordered and delivered in the containers as well as on the goods subsequently ordered and delivered between December 1991 and March 1994 and for which the defendant is liable.

Ms Corrin also asks the Court to rule on the question whether on the principle of similar fact evidence I should admit in evidence Exh 34 and 35. These two documents relate to a different case between Sullivans (SI) Ltd -v- Solwest Trading Co. Counsel suggested that I should admit Exh. 34 and 35. Relying on Mood's case [1976] Ch. 119. Mr. Radclyffe contended that the two Exhibits are not relevant to the present proceedings. In the light of the firm conclusion I have reached and in the light of the evidence put before the Court I feel it is unnecessary that I shall dwell into the relevance or the admissibility of the two exhibits proposed to the Court by Ms Corrin. That can await another occasion.

In the present case I am content to give judgement to the plaintiff in the sum of $143,607.27 plus interest and costs.

Order:

Judgement for the plaintiff in the sum of $143,607.27 plus interest and costs.

p align="center">Sir John Muria
CHIEF JUSTICE