Kinhill Kramer (SI) Ltd v Totorea [1999] SBHC 139; HC-CC 362 of 1995 (6 October 1999)

HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 362 of 1995

KINHILL KRAMER (SI) LIMITED

-v-

JOSEPH RODI TOTOREA

High Court of Solomon Islands
(KABUI, J)

Hearing: 28th September, 1999
Judgment: 6th October, 1999

A. Radclyffe for the Plaintiff
L. Kwaiga for the Defendant

JUDGMENT

(F.O. Kabui, J): The Plaintiff is Kinhill Kramer (SI) Limited a consulting engineering entity carrying on business in Solomon Islands. It filed a Writ on 1st December 1995 claiming the sum of $16,748.55 against Joseph Rodi Totorea, the Defendant for professional services rendered to the Defendant in 1994 or there about. The Writ was later amended in April 1998 with the endorsement of a claim for interest on the sum of $16,748.55 as stated in the original Writ at the rate of 18% per annum from 29th May, 1995 to 13th February 1998 amounting to $8,197.77 and continuing at the rate of $8.26 per day from 14th February, 1998 until payment with costs. As at the date of trial, the figure stands at $13,442.89. The Defendant has consistently denied liability for this sum of money.

The Facts

The Defendant was registered as Joseph Rodi Totorea carrying on business under the name of HONIARA GAMING CLUB in 1993. This registration was dated 14th October, 1993 under the provisions of the Registration of Business Names Act, 1971 (now Cap. 78). Following discussion with Messrs Fargas and Ayamiseba and the Defendant, the Plaintiff by a letter dated 22nd February, 1994 and addressed to the Defendant, informed the Defendant that the Plaintiff was prepared to carry out the work for the preparation of the premises for the Honiara Gaming Club. In that letter, the Plaintiff mentioned that Haydn had indicated a budget of about SBD340,000. The letter also mentioned 20% service fee. By fax dated 23rd February, 1994, addressed to Peter Read, the Plaintiff’s Manager, Fargas requested the Plaintiff to start work immediately. By letter dated the same day, the Defendant wrote to the Plaintiff’s Manager, Peter Read, suspending the arrangement for the work because he considered SBD340,000 plus 20% service fee as being too expensive. By letter dated 28th April, 1995, the Plaintiff forwarded its bill of costs for work done up to 23rd March, 1994 to the Honiara Gaming Club being $16,748.55. By letter dated 20th July, 1995, the Plaintiff reminded the Defendant of his obligation to pay $16,748.55 being professional fees for work done in early 1994. The sum of $16,748.55 was later settled by Messrs Fargas and Ayamiseba but the interest on that sum has remained outstanding since.

The Law of Contract

We all know about what a contract is. It is founded on agreement. It arises from offer and acceptance. When one person makes an offer, another person accepts it. When that happens, there is a contract. There are however numerous aspects of the law of contract. There are also numerous types of contracts. One type of contract is that between principal and agent. It is called an agency contract. Privity of contract is one aspect of this sort of contract. That is, the principal may say that he or she is not bound by the contract entered into by the agent because either the agent is not his or her agent or that the agent acted without authority of his or her principal. Deciding who is right or wrong in a case of dispute over liability in such a situation is a matter that depends largely on the facts of each case.

The Evidence

In his defence, the Defendant maintained that Messrs Fargas and Ayamiseba acted without his authority and outside the scope of their engagement with him. He gave evidence on oath and produced Exhibit 1 to prove this. Exhibit 1 was a letter he wrote to Mr. Read, the Plaintiff’s Manager, wherein he suspended or withdrew the then existing arrangement for the renovation of the Honiara Gaming Club premises. It was dated 23rd March 1994. Exhibit 1 was a response to the Plaintiff’s offer contained in Exhibit 6 being a letter, addressed to the Defendant by the Plaintiff and dated 22nd March 1994. This letter mentioned the figure SBD 340,000 plus 20% service fee being the quote for the work to be done by the Plaintiff. The response by Mr. Fargas by fax that same day to Mr. Read, the Plaintiff’s Manager, was the other way round. He accepted the quote and asked the Plaintiff to start work straight away. In that fax, Mr. Fargas stated that acceptance was made after consulting the Defendant. This is Exhibit 8 in the evidence. By letter dated 28th April, 1995, the Plaintiff submitted its bill of costs to the Defendant. This is Exhibit 7 in evidence. The amount was $16,748.55. By letter dated 20th July, 1995, the Plaintiff wrote to the Defendant reminding him of the outstanding amount of $16,748.55 and the fact that Messrs Fargas and Ayamiseba had authorised the work to be done and were willing to pay except that the signature of the Defendant was being awaited before the cheque was issued. This letter is Exhibit 4 in evidence. There is however no evidence to clarify the relationship between the Defendant and Messrs Fargas and Ayamiseba. However, the Defendant said they were the financiers of the Honiara Gaming Club. In Exhibit 1, the Defendant signed as Director/Principal owner. Apart from these, the relationship between them was vague.

Analysis of Evidence and Conclusion

Exhibit 3 dated 11 February 1994 appears to have been the result of an earlier contact by the Defendant with the Plaintiff about his proposal to set up a Gaming Club in the Francis Chow Building, Mendana Avenue, Honiara. Exhibit 3 was a letter written to the Defendant by the Plaintiff following a request from the Defendant that the Plaintiff make an offer to project and manage the Defendant’s work from start to finish. The quote was SBD688,340. There is no evidence that the Defendant responded to Exhibit 3. However, the first paragraph of Exhibit 6 are in these terms -

“Further to our discussions with yourself, Haydn Fargas and Andy Ayamiseba, it appears now that with the advice that as long as work on site commences before 17th June you comply with the requirements of the Gaming and Lotteries Board, time is not the over riding factor. Haydn has also indicated a budget of about AUD150,000 (about SBD340,000)”.

This paragraph does show that a number of discussions had taken place between the Plaintiff and Messrs Fargas, Ayamiseba and the Defendant between the date of Exhibit 3 and Exhibit 6. Exhibit 6 was therefore the result of those discussions. It had the figures SBD340,000 plus 20% service fee. The Defendant rejected this quote in Exhibit 1. Mr. Fargas accepted it in Exhibit 8. This acceptance by Mr. Fargas was pointed out to the Defendant in Exhibit 4. The relevant paragraphs in Exhibit 4 are in these terms -

“We write in regard to an account, still outstanding, for work carried out in good faith in assisting you and your partners in the establishment of the Honiara Gaming Club, in early 1994.

This work was carried out on authority of Andy Ayamiseba and Haydn Fargas up until the time you decided to suspend our Services on 23rd March, 1994.

We attach a copy of our invoice together with the relevant authority.

It is our understanding that both Andy and Haydn have authorised payment of our claim and one signature is on the cheque, awaiting now your signature. Please give urgent attention to this.

Should our payment not be received by the end of July, we will have no option but to take legal action to recover the outstanding payment to us. We hope that this will not be necessary.

There was clearly a disagreement between the Defendant and Messrs Fargas and Ayamiseba as regards the acceptable quote for the work to be done by the Plaintiff. Also, it was clear that the Plaintiff carried out the work on the authority of Messrs Fargas and Ayamiseba. The fact that the Defendant did not co-sign the cheque for the payment of that sum of $16,748.55 as pointed out by the Plaintiff in Exhibit 4 above could be attributed to his earlier rejection of the quote though not confirmed by the Defendant in evidence. However, this is a possible conclusion on the facts. There is another matter of significance. Exhibit 4 clearly stated that the Defendant was consulted by Mr. Fargas and perhaps Mr. Ayamiseba before the Plaintiff’s offer was accepted. Is consultation the same thing as acceptance? I do not think so. Acceptance means to say “yes” to an offer or invitation. Consultation means seeking advice or agreement of someone. The Defendant in giving his evidence on oath maintained throughout his testimony that he never accepted the quote from the Plaintiff. He never wavered under cross-examination by Mr. Radclyffe. The evidence of PW1 given on oath does not really add anything to the Plaintiff’s case. The effect of PW1’s evidence was that he saw the Defendant with two expatriate once in the Plaintiff’s Office and that the Plaintiff did charge fees for professional service. Messrs Read, Fargas and Ayamiseba were not called to give evidence on this matter. The Defendant’s evidence therefore stands uncontradicted. Furthermore, Exhibit 8 was never copied to the Defendant to acknowledge that he had been consulted and be aware of what was going on between them and the Plaintiff. Also, it would seem that Exhibit 8 had been faxed from Victoria, Australia. The Plaintiff straight away acted upon it. From the fact that Messrs Fargas and Ayamiseba were the financiers of the Honiara Gaming Club, it is possible to conclude that they were in the best position to decide the level of expense to be incurred in order to come out with the best product for an operating Casino business. It is also possible to conclude that in the best interest of their investment, they would have to override the Defendant where there was a conflict of views. That is to say, the paramount consideration would be their business interest and its future in Solomon Islands always underpinned by commercial sense and wisdom. This attitude was evident in the fact that Mr. Fargas signed Exhibit 8 on behalf of them generally without the Honiara Gaming Club letter head or on behalf of the Defendant. And as a matter fact, Messrs Fargas and Ayamiseba settled the bill for $16,748.55 but not the interest now claimed by the Plaintiff. As the Defendant said in evidence he was simply being used by Messrs Fargas and Ayamiseba as a “front” for their investment in gambling in Solomon Islands. This, in my view, was inevitable in this case. The Defendant was bound to be marginalised for obvious reasons. It would appear that he was simply a “paper” owner of the Honiara Gaming Club. I am not surprised if the Honiara Gaming Club was a conduit for money laundering at that time. I was then the Attorney General when the Honiara Gaming Club was being set up. I was also aware of the source of funding for the Honiara Gaming Club. However, this is beside the point. The point in this case is whether or not there is evidence to show that the Defendant did expressly or impliedly authorise Mr. Fargas to accept the Plaintiff’s offer to carry out the renovation work on the premises to be used by the Honiara Gaming Club. Is there evidence of ostensible authority in this case?

In my view, the evidence is to the contrary. The Defendant by Exhibit 1 rejected the offer by the Plaintiff in clear terms. He was simply overridden by Mr. Fargas in Exhibit 8. The fact that Mr. Fargas said in Exhibit 8 that the Defendant had been consulted is not in my view, conclusive evidence of the Defendant’s acceptance of the offer by the Plaintiff. Mr. Fargas was not called to give evidence of the terms of that consultation, if any. I do not accept that aspect of evidence as appears in Exhibit 8. As I have said, the evidence of the Defendant given on oath stands. That is to say, he is not liable to pay the sum of $16,768.55. It should be noted that Messrs Fargas and Ayamiseba have not so far attempted to recover from the Defendant the sum of $16,748.55 if they really believed that the Defendant was responsible for the acceptance of the Plaintiffs offer on 23rd March, 1994 and that they had settled that sum on his behalf. This is not surprising because all along Messrs Fargas and Ayamiseba were willing to pay for the Plaintiff’s bill of costs as shown by Exhibit 4. Obviously, they felt responsible for it. They must have felt that the Defendant’s rejection of the Plaintiff’s offer was unwise in the circumstances. As a matter of fact, the quote of SBD340,000 in Exhibit 6 was a suggestion by Mr. Fargas himself quoted by the Plaintiff to the Defendant. My research has only produced one case worthy of mention. In Gardiner v Heading [1928] 2 K.B. 284, the respondent was a builder who had done some work previously for a Company called Finance Guarantee Company which was introduced to the respondent by the appellant. Subsequently, the appellant offered the respondent some more work which the respondent carried out. The appellant took the respondent to the site, told the respondent to start work and gave directions about material to be used and details of interior decoration. When payment was due, the respondent was told that Finance Guarantee Company was not responsible. The respondent then sued the appellant for the sum due to him in the County Court and won. The respondent was also successful in the Divisional Court on appeal. Finally, the respondent succeeded in the Court of Appeal. Whilst these facts are not on all fours with the facts of this case, they are rather similar in broad terms. In both cases, there was no agent but there was someone authorising the contractor to start work for reward. Work was done and the bill was due to be paid by someone. In both cases, the bill was paid by the party who authorising the work to be done. There was no agent because the party authorising the work to be done was in fact, the principal. In the leading judgment, SCRUTTON L.J. described the legal position in this way,

“If a party makes a contract in his own name and the other party, the promisee, finds that the promisor has an undisclosed principal, although he never knew of him and therefore could never have given credit to him, yet he may sue him, because he has in fact made a contract with him. 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 so as to exclude his liability as a principal party to that contract.”

The Plaintiff here is clearly saying that its case falls within the second category of cases as described above by SCRUTTON L.J. That is, the Plaintiff contracted with Mr. Fargas thinking he was the principal but according to the Plaintiff was only an agent of the Defendant and therefore has sued the Defendant as the principal. As I have already said, there is no evidence to sustain that scenario in this case. The evidence before me points to the third category of cases in SCRUTTON L.J.’s category above as being this case. That is, the Plaintiff contracted with Mr. Fargas thinking that he was an agent but in fact he was the principal. The evidence in this case points to that conclusion. That is to say, Messrs Fargas and Ayamiseba were not agents of the Defendant. They were principals themselves. At least, Exhibit 8 clearly demonstrates that Mr. Fargas was the principal in the strict sense because Exhibit 8 was signed by him personally. The Defendant cannot therefore be held liable for the payment of $16,748.55 or for the interest thereon. Even if I am wrong in reaching this conclusion, there is also a further question to be asked whether or not the Defendant was really liable for the payment of the interest claimed. Clearly, the claim for interest was an after thought.

The Amended Writ was filed on an unknown date though dated 1st April, 1998. That was about 4 years after the Plaintiff rendered its bill for payment. The bill of cost for $16,748.55 said nothing about the rate of interest up to 13th February 1998 and the rate of interest thereafter from 14th February, 1998 onwards. Although Exhibit 2 was produced in evidence being the standard terms of contract of the Plaintiff, there is no evidence to confirm that the Defendant agreed to be bound by the terms of that document. It would appear from Exhibit 7 that the bill of costs being $16,748.55 was for preliminary work done by the Plaintiff on the Defendant’s project up until 23rd March, 1994 the day after the Defendant rejected the Plaintiffs offer for the main work. This is confirmed in paragraph 2 of Exhibit 4 referred to in this judgment. That is to say, it was payment for work done on the authority of Messrs Fargas and Ayamiseba up to 23rd March, 1994. Quite rightly so, Messrs Fargas and Ayamiseba had settled it. They would also have settled the interest sum had they been billed by the Plaintiff. There is no evidence that the Plaintiff had demanded them to pay the claimed interest. Their response to such a demand would have obviously been a guess. But the fact is that the claim for interest by the Plaintiff was not a subject matter of any contract between Messrs Fargas and Ayamiseba or the Defendant. There is no evidence of such a contract apart from Exhibit 2 which was signed by no one. It is a standard contract document .......... but is executed by no one. It is simply a blank standard contract for what it is worth. There is also no evidence to say that charging interest on late payments of bills of sots is on accepted business practice in this case to the point of being an automatic expectation by the customer. There is no basis for such a conclusion in this case. The Plaintiff’s claim for interest on the sum of $16,748.55 is therefore dismissed with costs.

F. O. Kabui
Judge