Meke v Solomon Sheet Steel Ltd [1998] SBHC 115; HCSI-CC 53 of 1997 (3 September 1998)

IN THE HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 53 of 1997

JOSEPH MEKE

-v-

SOLOMON SHEET STEEL LIMITED & OTRS

High Court of Solomon Islands
(PALMER J.)
Civil Case No. 53 of 1997

Hearing: 22nd May, 1998
Judgment: 3rd September, 1998

Charles Ashley for the Plaintiff
Andrew Radclyffe for the Defendants

PALMER J.: This is an application by Writ for damages for breach of contract. The Plaintiff entered into the contract with the First Defendant on 16th May, 1995 (see Exhibit “2”). The terms of the contract included inter alia, a first refusal to the Plaintiff for “ ... all mechanical servicing and general repairs necessary to maintain the Companies vehicles; and that the contract may be terminated by either parties default, or mutual consent, giving 30 days notice in writing.

The Plaintiff alleges that the First Defendant had breached both terms and caused loss to him. In paragraph (10) of the Statement of Claim, it is pleaded that from 1995 onwards, the First Defendant failed to give notice that the contract had come to an end and instead gave all mechanical servicing and general repairs to the Second Defendant to be performed by PW2.

As against the second and third defendants, he says they were party to those breaches by permitting George Kili (PW2) to do the work which would have been done by him. (Addendum: on the condition that it would have been accepted by the First Defendant).

The Second and Third Defendants deny that there had been any conspiracy by them to sabotage the contractual arrangements between the Plaintiff and the first Defendant. The First Defendant denies that any breach had been caused by it but that rather it was the default of the Plaintiff that had caused the contract to fail.

THE PLAINTIFF’S EVIDENCE:

The evidence adduced by the Plaintiff is that he had simply not been given the right of first refusal after he had done some work for the first Defendant in May 1995. It is not in dispute that shortly after the contract was signed, the Plaintiff had been given work to do by the First Defendant and duly paid (see Exhibit 4). The Plaintiff says that since that time no offers of first refusal had been given to him. On a number of occasions he had checked at the work place of the first Defendant and found PW2 working on jobs which he claims he had not been given offers of first refusal.

PW2 was called to support his evidence that he did work for the first Defendant from about May/June 1995 to May of 1996. PW2 confirms having worked for the Second Defendant on contract basis and also for the First Defendant.

THE DEFENDANTS EVIDENCE:

The evidence on the other hand adduced on behalf of the First Defendant by Mr. John Lee, Director of the First Defendant and also Second Defendant was that he had actually sent for the Plaintiff on several occasions to offer him the right of first refusal but that he was not available to attend to the Company’s immediate needs, and so had to make alternative arrangements for the service and repair of urgently needed vehicles. It was not denied that PW2 was engaged to do the work in that regard.

Evidence was led to the effect that on the occasions the Plaintiff was required he was either busy with other jobs or doing milling at Malaita. DW2 and DW3 were called in support of this.

FINDINGS OF THE COURT:

This court finds that for the two weeks or so after the contract was signed, it was duly performed by the parties (see Exhibit “4”). Thereafter things did not work out as originally agreed and the contract came to a premature end.

I find that the First Defendant through its Director made several attempts to contact the Plaintiff to give him first option of refusal through the identified and agreed contact person (DW3). In the evidence in chief of the Plaintiff he states:

“When John was in the Office with me, I said, I have no telephone number, you can contact Nixon (DW3) so that if any job is available tell him and he will tell me then I will come and do it. Nixon at that time lived with his Aunty at White River. He lived very close to me.”

DW1 and DW3 confirms in evidence that at least on four separate occasions messages were left for the Plaintiff to attend at the premises of the First Defendant. DW3 went on two separate occasions on the instruction of DW1 but the Plaintiff was not available. DW3 states:

“He (DW1) told me to look for Meke. I went but could not find him. I reached his house but his wantoks said he had gone. I went at day time.

Question: How many times did you go?

Answer: Two times.”

DWl states he went on at least two occasions. He states:

“I had twice gone to his house at White River. His wife was there. I asked her and she said, he’s in town. I left a message to contact me. But he didn’t contact me.

......................

Second time I went to see him at White River about three or four days after. His wife was there. She told me that he had gone to Malaita. I asked her how long and she said one week. I came back.”

This court also finds that thereafter, the First Defendant engaged PW2 to do the repairs and servicing of their vehicles on a regular basis.

The Plaintiff did go to the premises of the First Defendant but did not raise any objections or make any enquiries whether there was any work for him to do. The relevant transcript of evidence in chief reads:

“Question: Did you try and see anyone at Solomon Sheet Steel about this? Answer: No. Every time I go to check when I saw George Kili doing those work, I just turned back.”

THE LAW:

In contract law, if one of the parties breaks one of the terms of the contract, a right of action arises. However in order for that right of action to arise it must be such as to constitute a repudiation by the party in default of his obligations under the contract. (See Anson’s Law of Contract 25th Edition page 523).

The Plaintiff alleges it seems that the breach was a repudiation of the agreement between the parties. The First Defendant was obliged in contract to offer a first refusal to him. It did not and engaged in lieu thereof a third party (PW2).

Technically, by conduct there was a repudiation of the agreement by the First Defendant, and this has not been disputed in the evidence by defence witnesses. It is pertinent to bear in mind that part of the defence put was that the first Defendant was entitled to regard himself as having been discharged from performance of his obligations, rather by default of the Plaintiff, as stipulated in the agreement.

Also it is important to appreciate that a breach does not of itself effect a discharge, that is, a termination of his obligations. He still has the option of either treating the contract as still in existence and insisting on its performance, or to regard himself as having been discharged by reason of that breach.

THE ISSUE BEFORE THIS COURT:

The issue before this court can shortly be summarised as whether there had been a breach and if so, whether the Plaintiff is entitled to the damages claimed?

ANALYSIS OF EVIDENCE:

The Plaintiff alleges that he had not been given first option of refusal for all mechanical servicing and general repairs of the Companies vehicles. On first appearances that would seem to be correct. Unfortunately, that is not the full and complete picture as found by this court.

It is clear and not disputed that after the signing of the agreement, the First Defendant performed his side of the bargain. There is no evidence to, suggest that the First Defendant was not willing and prepared to perform his obligations. To the contrary, there is clear evidence which suggests otherwise. In the evidence of DWl, DW2 and DW3, a practical problem cropped up which may have not been foreseen at the making of the agreement. It transpired that at the times he was needed to be given an offer of first refusal, the Plaintiff was not available. There is clear evidence that on at least four occasions, DW1 sent messages through DW3 and also personally went to the house of the Plaintiff to leave messages but he never turned up at the First Defendant’s premises. On at least those four occasions, the First Defendant had performed his side of the bargain, but not the Plaintiff.

According to the Plaintiff on the other hand, he alleges that no communication whatsoever was made. Unfortunately, he must be deemed to have had notice of those offers, as the only means of communication related to the First Defendant was through DW3 and for him (DW3) to leave messages at his house at White River (refer to heading, “Findings of the Court” and quotation made regarding this issue). I find therefore that on at least those four occasions, notice had been communicated to the Plaintiff.

On at least those four occasions, I also find that the Plaintiff failed to fulfil his obligation. Two reasons were adduced in evidence. Either he was doing work for Markwarth Shipping Company Limited, or involved in timber milling at Malaita; both activities not disputed by the Plaintiff. The two reasons given, legitimate though they be, do not alter the fact that the Plaintiff was not available on at least those four occasions and that thereby the First Defendant was entitled to give the work to someone else. Also there would seem to be little loss to the Plaintiff in respect of at least those four occasions, in that it is clear he was occupied with something else in any event. Accordingly I find no breach in at least those four occasions.

I note there may have been more than those four occasions when the First Defendant sent messages to the Plaintiff to offer him a first refusal, unfortunately, little evidence had been adduced to support these further.

It should also be highlighted that it would seem that the difficulties in communicating with the Plaintiff was a major contributing factor to the eventual failure of the agreement. This simply relates to the practical outworking of the agreement where the terms are silent. DW3, who was supposed to be the vehicle of communication, moved away from White River shortly after the signing of the agreement. He moved away only after a week. The Plaintiff had relied on him as the vehicle of communication as his house was just next to him. The Plaintiff however did not seek to let the First Defendant know how he may be contacted thereafter. It seems the Plaintiff took for granted that the First Defendant would go looking for him every time he is required, whereas the First Defendant may have assumed on the other hand, that because the Plaintiff was difficult to find, and having left messages on at least four occasions, if he was really serious about the contract, he would at least call in and let the First Defendant know if he was available. At least one would have expected the Plaintiff to take the initiative and let the First Defendant know of a more effective way of getting in touch with him or at least explain why he was not available on those other occasions and when he would be available. DW1 did state in evidence that sometime after, he spoke with the Plaintiff and told him that the contract was still open, but that the Plaintiff never turned up for work when required or to explain. The only evidence adduced before this court was that the Plaintiff did call in to the work place of the First Defendant, but did not lodge any complaints, raise any objections, or even make a simple enquiry and letting them know that he was available or when he would be available.

This brings me to address briefly one of the defences sought to be raised by the Defendants, that the contract thereby had been terminated by the Plaintiffs default in not availing himself to perform his obligations. The simple answer to this submission however is that, the contract expressly provides that even in cases of default, 30 days notice in writing was required. So yes, there has been default on at least those four occasions, may be more, but that even in those circumstances, the First Defendant was still required to give notice. On the evidence, there is nothing to suggest that such a notice was in fact given. The defence submission rather was that no notice was required to be given. Unfortunately, that is not the correct interpretation of the appropriate term. I quote:

“This contract may be terminated by either parties default, or by mutual consent, giving 30 days notice in writing.”

What distinguishes the First Defendant’s interpretation is the comma after the word “consent”, giving it a disjunctive function, separating the two ideas earlier expressed from the requirement of written notice. The First Defendant’s interpretation would have been correct if no comma was made after the word “consent”. The agreement therefore was not terminated by default as suggested by the First Defendant.

Further, I find that this is entirely consistent with the rest of the terms; in particular paragraph 4 of the contract. It reads:

“All work will be offered on a one off basis and will be negotiated individually. Solomon Sheet Steel Limited will reserve the right to accept or reject any or· all offers. The prices will be by way of a lump sum quotation, and will be for Labor only. All parts and materials will be supplied by the Proprietor.”

This simply means that each time work becomes available, a separate and new offer of first refusal is required to be given to the Plaintiff. If there has been default in the first offer, then that would justify the First Defendant engaging someone else to do the job and entitling it to terminate the contract on thirty days notice. But when a new offer arises, he is still required to give first refusal to the Plaintiff. So the default by the Plaintiff entitles the First Defendant to terminate the contract but with 30 days notice in writing. He did not do that on those four occasions. He was therefore still required to perform his obligations and breached that when he did not do so.

For the four occasions messages were left at the house of the Plaintiff, I find no breach of any term of the contract. I find however, that for jobs required to be done thereafter, there is no evidence to show that any first offers of refusal were given. Whilst I accept on one hand that DW1 had stated in his evidence that the contract was open and gave the impression that it was the Plaintiff who was responsible or partly responsible for its demise, the terms of the contract make clear that the First Defendant was required to make an offer of first refusal on each separate work to be done. I quote: “All work will be offered on a one off basis and will be negotiated individually”. To that extent, the First Defendant had committed a breach of that specific provision of the agreement.

But as pointed out earlier, a breach does not automatically operate as a discharge; rather it gives right to an action to either insist on the performance of the agreement or a discharge.

EFFECT OF BREACH:

In the facts of this case, what was the option pleaded, taken by the Plaintiff (if any)? It is not very clear from the pleadings, but one thing is clear. There is no evidence to suggest that the Plaintiff insisted on the contract being performed by the First Defendant. There is evidence to suggest that he appeared at the Companies premises on a number of times, but did not raise any issue. The impression I think sought to be portrayed was that the Plaintiff was available to perform his side of the bargain at those times but that he had not been given opportunity to exercise his right. Unfortunately, when it became obvious, he did not insist on its performance. The Plaintiff knew that the person in charge of operations was DW1. In his absence, of-course there would be the person supervising or someone in charge. But all that the Plaintiff did was to speak to PW2, a mere worker. He did not even speak to DW2, lodge any complaints or objections, or at the least, make enquiries with the appropriate persons.

With respect, I find his actions more consistent with that of a person who had acquiesced with what was being done rather than regarding himself as being discharged. That doctrine however was not raised in defence and therefore not proper to address without full hearing on the matter.

The way the claim has been pleaded would only suggest that the action is foundered on the premise that the breach brought the contract to an end and that thereby he was entitled to claim damages for loss suffered. And that is exactly what he has sought to do in this action.

ASSESSMENT OF DAMAGES:

That there has been a breach I must find in favour of the Plaintiff. Damages naturally should flow from that. The crucial question however turns on the assessment of damages for loss suffered, and this is where respectfully I find on the evidence before me little to justify any orders other than for nominal damages. My reasons for that are as follows. Since June of 1995, the Plaintiff was aware of the fact that a breach had been committed. He neither re-affirmed the contract to insist on its performance, nor raise any objections, complaints or even as much as a query. His complacency and passivity throughout must have a direct bearing on any purported losses claimed. It is incumbent on the Plaintiff to take such reasonable steps as are necessary to mitigate the extent of the damage if any caused by the breach.

Further, it must be pointed out that damages are assessed by reference to the terms of the contract sued upon. In the specific facts of this case, the term breached was the right of first refusal. The first Defendant still retained the right to accept or reject any offers of the Plaintiff. There was no certainty or guarantee therefore, that once the offer of first refusal was made that the Plaintiff would accept it. It had been clearly shown in evidence that on at least four occasions, the Plaintiff was not even able to fulfil his obligations due to his unavailability. No losses whatsoever occurred on those occasions. But even if he accepts the first refusal there is another hurdle to be overcome; that is, there is no guarantee that his offer would be accepted by the first Defendant. The first Defendant may or may not accept his offer. No loss would have been entailed in such situation. If anything, what was affected was the right of first refusal; not a legal right to the work and services to be rendered. The Plaintiff therefore cannot insist on being given the work to be done or in lieu sue for damages for the loss of· gains or profit which he had been deprived of. It wasn’t the case where the Plaintiff was contracted to do all the mechanical servicing and repairs of the Companies vehicles for one year. He was merely given a right of first refusal. The contract expressly reserves the right of acceptance on the First Defendant whether to accept or reject any or all offers. The contract leaves open the possibility that the Plaintiff may not receive any benefit from the agreement if all his offers were rejected.

Further, it is dear on evidence that the Plaintiff was engaged for a certain period of time to work for Markwarth and at other times involved in timber milling. So even if an offer was made to him for a first refusal, he would not have been in a position to take it up. This has been amply demonstrated on evidence on the four separate occasions when he was required by the First Defendant to give a quotation on work to be done.

When all these factors are put together, in my respectful view the losses incurred are minimal.

CLAIM FOR BALANCE OF INVOICES AS AT 31/5/95:

Respectfully I fail to see the logic and justification of this claim when it is not denied that for certain work done, the First Defendant was entitled to recover half of the money due to cover the debt owed by the Plaintiff.

CLAIM AGAINST THE SECOND AND THIRD DEFENDANTS:

This can shortly be disposed of. I find no evidence whatsoever to suggest even a hint of any conspiracy or whatever, to sabotage the agreement between the Plaintiff and the first Defendant by the second and third Defendants. The claims for damages against the second and third Defendants must be dismissed.

COUNTER-CLAIM:

The counter-claim of the first Defendant on the other hand has virtually not been disputed. The Plaintiff acknowledged owing money for 24 sheets of roofing iron in the sum of $1,866.24. In the evidence of DW1 there was further evidence of a loan of $1,000.00 made to the Plaintiff on some problems he had with NPF. This has not been disputed.

I note the amount claimed was for only $2,276.08 and not the full amount of $2,866.24; implying that the First Defendant had taken into account various deductions from work already performed by the Plaintiff. I enter judgment therefore for that sum.

ORDERS OF THE COURT:

1. JUDGEMENT AGAINST THE FIRST DEFENDANT ONLY FOR BREACH’.OF CONTRACT.

2. DISMISS CLAIM AGAINST THE SECOND AND THIRD DEFENDANTS.

3. NOMINAL DAMAGES IN THE SUM OF $250.00 ONLY GRANTED IN FAVOUR OF THE PLAINTIFF AGAINST THE FIRST DEFENDANT, WITH COSTS.

5. JUDGMENT IN FAVOUR OF THE FIRST DEFENDANT ON THE COUNTER-CLAIM FOR THE SUM OF $2,276.08 WITH INTEREST AT 5% FROM DATE OF JUDGMENT UNTIL PAYMENT.

ALBERT R. PALMER/
THECQURT.