Vave v Walenenea [1998] SBHC 142; HCSI-CC 337 of 1996 (15 July 1998)

HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 337 of 1996

ISIKELI VAVE

v

GEORGE WALENENEA

(Muria CJ)

Hearing: 16 April 1998
Judgment: 15 July 1998

A. for the Plaintiffntiff
C. Ashley for the Defendant

JUDGMENT

MURIA CJ:

In this action, the plaintiff claims the f $46,851.00 being for moni monies paid to the defendant for the purchase of a bus ordered through the defendant but had not been delivered. There is no dispute that the plaintiff paid the sum of $46,851.00 for the purchase of the bus.

The Plaintiff's Case

The plaintiff’s case is that in September 1996, he had discussions with the defendant about his interest in purchasing a Mitsubishi Rosa Bus from S. M. Aisha Trading Co. Ltd. in Japan. Following those discussions, the plaintiff decided to purchase one of the buses shown in the brochure, which the defendant showed to the plaintiff on the 24 September 1996. A price was said to be agreed upon in the amount of $46.851.00 of which $17,000.00 was paid on the 24 September 1996. The Receipt No. 20 (Exhibit 3) for that amount was issued on 25 September by Sombagi Transev which is the defendant’s business. The plaintiff said that he paid the money to the defendant in his office. The second payment of $29,851.00 00 was paid on 7 October 1996 to the defendant at the ANZ Bank. The Receipt No. 22 (Exhibit 4) for that amount was also issued by Sombagi Transev on the same day.

The two payments were both sent by Telegraphic Transfers ("TT") from the ANZ Bank in Honiara to S.M. Aisha Trading Co. Ltd’s bank account at the Tokai Bank, Katsushika Branch in Tokyo, Japan. See Exhibits 5 and 6. After the payments were made, the plaintiff followed the matter up with the defendant. However, up to present time the plaintiff has not yet received the bus he had paid for, neither has the said bus arrived in Solomon Islands at all. Consequently, the plaintiff now claims that there was a contract between the defendant and himself for the purchase of the said bus and that the defendant had breached that contract when he failed to deliver the bus to him. He now wants the return of his money.

The Defendant's Case

The defendant operates a transport service business under the name Sombagi Transerv. Apart from operating a taxi service, the defendant also imports vehicles for people who order through him. In the present dispute, the defendant's case is that the plaintiff and himself had discussed the matter of ordering a vehicle for the plaintiff. Following their discussions, the plaintiff agreed to order the bus from S. M. Aisha Trading Co. Ltd. in Japan through the defendant. It is the defendant’s case that the two payments for the bus were made by the plaintiff to the supplier of the bus and not to the defendant who only assisted him in transmitting the payment to the supplier’s bank in Japan. The defendant denies being the agent of the Japanese supplier. He was only helping the plaintiff to order the vehicle and that both the plaintiff and himself are victims of the conduct of the Japanese Supplier. In those circumstances, the defendant says that he cannot be liable to the plaintiff for breach of any contract of sale.

Was the defendant an agent?

I feel it would be prudent first to deal with the question as to whether the defendant was the agent of S.M. Aisha Trading Co. Ltd. The plaintiff’s contention is that the defendant was at the time the agent of the Japanese company. Reliance is placed on the fact that the plaintiff did not deal direct with the Japanese company whom he did not know but rather he dealt with the defendant whom he regarded as the agent for the Japanese supplier. Also relied upon is the fact that the plaintiff made payments to the defendant who issued receipts for the monies paid. Again, the plaintiff relies upon the fact that the defendant, after receiving the monies, applied to have the monies sent by TT to the Japanese supplier. These factors were submitted to support the plaintiff’s argument that the defendant was an agent of the supplier.

It is commonly understood and accepted that an agent is a person who has the authority or power to create or effect legal relations between a person in the position of principal and third parties and the relationship thus created is one of agency. See International Harvester Co. of Australia Pty Ltd. v. Carrigan's Hazeldene Pastoral Co. [1958] HCA 16; (1958) 100 C.L.R. 644. There is therefore the need to ascertain whether the defendant, in the present case, was the agent of the Japanese supplier.

There is no dispute that the defendant, apart from running a taxi service, also imports second - hand vehicles from overseas for those people who ordered through his business, Sombagi Transev. He would ask those who wanted to order vehicles, the types of vehicles they preferred and then he would contact the suppliers in Japan who would send him quotes and pro forma invoices. He would advise the interested buyers to make payments including duty on the vehicles should they ordered in their own names directly from the suppliers. Alternatively, if the interested buyers wished, they could have their vehicles ordered by the defendant’s under his business, in which case they would have the benefit of duty exemption which the defendant obtained from the Government.

The arrangement between the plaintiff and the defendant in this case was for the defendant to order the vehicle under the defendant’s business. The payment of $46,851.00 was made by the plaintiff in two instalments of $17,000.00, paid on 25th September 1995 and $29,851.00, paid on October 1995. On the evidence, I accept that these transactions were done at the ANZ Bank. The monies were sent by TT to the Japanese Supplier. The defendant’s evidence on this was confirmed by the Bank Officer who gave evidence at the hearing.

Thendant’s businessiness of ordering vehicles for interested buyers was also confirmed by Mr. Napoleon Padabela who also orde vehicle from Japan through the defendant’s assistance. He stated that he never receiveceived the vehicle he ordered but he managed to obtain one from a different order which arrived. Mr. Padabela, however, managed to personally contact the supplier in Japan and he personally sent the payment of $12,000,00 by TT to the supplier. However, as he said the vehicle which he ordered never arrived.

The evidence also showed that the defendant had only recently been in contact with S.M. Aisha Trading Co. Limited. Before that, the defendant had ordered vehicles for people from other suppliers of used vehicles. He said he had no difficulties with his previous suppliers from whom he ordered vehicles for his customers.

The court must consider each case according to its own circumstances. Whether or not the defendant in the present case was an agent of S.M. Aisha Trading Cmited depends on the evidence before the court and proper inferences to be drawn therefrom.from. The onus is on the plaintiff to show that defendant was in fact acting as the agent of the supplier at the time of ordering the vehicle.

There is as material before the court showing what the terms of the business to be carried on between them. We do know, however, on the evidence before the court that the company is a dealer of new and used vehicles. It imports and exports vehicles. The defendant runs a transport service and imports used vehicles from vehicle dealers overseas including from S.M. Trading Co. Limited.

It seems clear from the evidence that the defendant had ordered cheap vehicles from S.M. Aisha Trding Co. Limited and other dealers even prior to the 29th September 1996 when the plaintiff asked him to order the bus, the subject of these proceedings. The price of the vehicles was very much fixed. Like in the present case, the amount to be paid was as SI $46,851.00 which was received by the defendant in two payments (see Exhibit 3 and 4) and were transmitted to the company by Telegraphic Transfers (see Exhibit 5 and 6). For all intentions and purposes the transaction in the present case was basically this: Following the plaintiff’s interest in purchasing the Rosa Mitsubishi Bus shown in the brochure, the defendant placed an order for the supply of the said vehicle from the company. The amount was fixed by the company and to be paid to it by the defendant from “whom the company expected payment. The company had nothing to do with the plaintiff with whom the defendant dealt. It does not appear on the evidence that the defendant was expected by the company to inform it of any transactions he entered into with any other persons. The defendant was simply going about his own course in dealing with the goods he ordered and sent to him from the vehicle dealers overseas. The defendant was no doubt at liberty to deal with the goods (vehicles) sent to him under his own terms and there is clear evidence to support that suggestion. The price of the vehicle ordered was US$8,279.07 (see Exhibit 2). The amount of SI$29,851.00 paid to the defendant on 7th October 1996 when converted to U.S. Dollars, came to US$8,273.11 (see Exhibit 5) which was just about the same price of the vehicle ordered.

The defendant had earlier paid SI$17,000.00 which when converted came to ¥511,156.00 or US$4,717.50 or thereabout (if one used the same conversion rate as that used on $29,851.00). The price of the bus obviously agreed to by the parties (plaintiff and defendant) was clearly established by evidence to be SI$46,851.00 which when one converts at the same rate for that time into USD would fetch about US$13,001.15. That obviously was higher than the bus quoted in a proforma invoice (Exhibit 2). However, in a business transaction and in particular the type of transaction we are dealing with here, one can presume that part of that money would be for other incidental expenses, for example, freight charges and other commercial charges (except for import duty on which he acquired 100% exemption). On those facts one thing is clear and that is, that the defendant could sell the bus ordered, and other vehicles for that matter, at any price when it arrived from the exporter. It was up to the defendant to agree with the purchaser what price he was to pay for the vehicle ordered. But as between the defendant and the exporter in Japan, the price was fixed and that was the price which the exporter was interested in and that was the amount the defendant was bound to pay to the exporter in Japan. That was the reality of the relationship between the Japanese company, the defendant and plaintiff in the present case. On the analysis of the facts before the court, I do not think it can be said that the relationship between the company and defendant was one of a principal and agent. It was rather, one of vendor and purchaser and again as between the defendant and plaintiff, it was one of vendor and purchaser as well. Sir G. Mellish L.J. pointed this out in Ex parte WHITE In re NEVILL [1871] UKLawRpCh 33; (1870-71) 6 Ch. App. 397, a case involving the manufacturers who consigned their goods to the wholesale hosiers. The learned Law Lord said at page 403:

"But if the consignee is at liberty, according to the contract between him and his consignor, to sell at any price he likes, and receive payment at any time he likes, but is to be bound if he sells the goods, to the consignor for them at a fixed price and a fixed time in my opinion, whatever the parties may think, their relation is not that of principal and agent. The contract of sale which the alleged agent makes with his purchasers is not a contract made on account of his principal, for he is to pay a price which may be different, and at a time which may be different from those fixed by the contract. He is not guaranteeing the performance, by the persons to whom he sells, of their contract with him ... but he is to undertake to pay a certain fixed price for those goods, at a certain fixed time, to his principal, wholly independent of what the contract may be which he makes with the persons to whom he sells; and my opinion is that, in point of law, the alleged agent in such a case is making, on his own account, a contract of purchase with his alleged principal, and is again re - selling."

The contract of sale entered into in the present case was not one made by the defendant with the plaintiff on account of his principal but on account of himself as vendor selling to the plaintiff who was the purchaser.

I think it is also worth noting that there are in the business world today, firms and companies who may be termed as distributors but who purchase and re - sell products of manufacturers or of other dealers. Such distributors as pointed by the High Court of Australia in Intercontinental Harvester Co. of Pty Ltd - v- Carrigans Hazeldene Pastoral Co. may be loosely referred to as agents of the manufacturer but they are not agents in the legal sense.

Further in this case, I do not see how, on the evidence, the defendant can demonstrate his authority to create a legal relations between the person in the position of principal, that is, the Japanese company, and the defendant as a third party in this case. There is simply no evidence to that effect. The reality of matter here is that upon the plaintiff indicating his choice of the vehicle, the defendant ordered it from the Japanese supplier who was to send the vehicle to the defendant who in turn had to pay the supplier a certain fixed price as indicated in Exhibit 2. The defendant, being at liberty to sell the vehicle on what terms he pleased, negotiated with the plaintiff and agreed to sell the vehicle to the plaintiff at the price of SI$46.851.00. As between the defendant and the supplier, the contract sum was US$8,279.07. In those circumstances, in my judgment, the defendant was contracting on his own account and not as an agent.

Who is liable?

The plaintiff has not been able to establish that the defendant was an agent of the S.M. Aisha Trading Co. Ltd. Does this relieve the defendant of liability in this case? The general rule is that an agent who contracts on behalf of his principal is not liable on the contract as the contract is that of the principal and not of the agent. In that case, under common law only the principal who can sue and be sued: Montgomerie -v- United Kingdom Steamship Association [1891] UKLawRpKQB 7; [1891] 1 Q.B. 370. Where however, a person has been shown that, although he may be looked at as an agent but in reality he is himself the principal, the position has been made clear by Jenkins -v- Hutchinson [1849] EngR 703; (1849) 13 QB 744 which stated that in such a case there was no doubt that he was to be personally liable for breach of contract. Such a position was not only accorded with the law but also with common sense, as Scrutton LJ, pointed out in Gardiner v Heading [1928] 2 K.B. 284 at 290:

"But if a man who contracts with another thinking he is a principal, may on finding he is in truth an agent, sue the real principal, why should not the reverse hold good also? Why should not a man who contracts with another, thinking he is an agent, sue him when he finds out that he is the real principal? There seems to be no reason why he should not, provided the supposed agent has not expressly contracted as agent so as to exclude his liability as a principal party to that contract. .......... I am sure it is justice. It is probably the law for that reason."

Ithe defendant's case tase that he was not the agent of S.M. Aisha Trading Company Limited but that he was also a victim of S.M. Aisha Trading Company Limited's fraud, just like the plaintiff. Having admitted, of course, that he was not the agent of the company, the defendant has brought himself with the legal principles described above regarding his liability as a principal.

Concerning the submission that there was only an invitation to treat and that there was no offer and acceptance in this case, that cannot be accepted. Even if the brochure and pro forma invoice were invitation to treat, and they were as such, the plaintiff made the offer to purchase the bus through the defendant who accepted the offer. The consideration was the $46,851.00 offered to be paid by the plaintiff and accepted by the defendant as evidenced by Exhibits 3 and 4. This accords with the principles enunciated in Pharmaceutical Society of Great Britain -v- Boots Cash Chemists (Southern) Ltd [1952] 2 All ER 456.

The defendant then argued that there is no evidence of intention to enter into a contract in this case. I feel that by defendant accepting the offer from the plaintiff and consideration paid, there was an intention between the plaintiff and defendant to enter a contract of sale in this case. Reliance was placed on Balfour -v- Balfour [1919] 2 KB 571 by the defendant since, it was argued, the argument here was of a domestic or social nature being concluded between friends. Even if the relationship between the plaintiff and defendant here was one of close friendship. I cannot accept that the arrangement between them was also purely social. The defendant was conducting a business of buying and selling used vehicles imported from overseas. The plaintiff’s interest was to purchase a bus to run a transport business of providing transport service for people. Those were commercial interests and not social interests. They therefore intended by their arrangement to create a legal relationship between them: Roufos -v- Brewster [1971] 2 S.A.S.R. 218.

The defendant also raised the question of fraud and misrepresentation. I do understand the plaintiff's case to place any reliance on this issue nor was it raised. In any case it was not pleaded and neither party can now raise it. The plaintiff’s case is one simply of breach of contract for the supply of the Mitsubishi Rosa Bus for which he paid $46,851.00 to the defendant who failed to deliver the same.

On the view of the whole case, in my judgment, the plaintiff has established his claim that there was a contract entered into between himself and defendant and that the defendant had breached that contract. Consequently damages for that breach must be granted to the plaintiff. There will be judgment for the plaintiff in the sum of $46,851.00 plus costs.

(Sir John Muria)
CHIEF JUSTICE