Mana v Solomon Islands Electricity Authority [2014] SBHC 150; HCSI-CC 17 of 2013 (26 November 2014)

IN THE HIGH COURT OF SOLOMON ISLANDS
(Faukona PJ)
CIVIL CASE NO. 17 OF 2013

BETWEEN:

PETER MANA
Claimant

AND:

SOLOMON ISLANDS ELECTRICITY AUTHORITY
First Defendant

AND:

MICHAEL PITAKESA
Second Defendant

Date of Hearing: 29th August 2013, 2nd August 2014
Submissions: Claimant filed on 1st October 2014
Defendants filed on 10th October 2014
Date of Judgment: 26th November 2014

Mr P. Tegavota for the Claimant
Mr B. Upwe for the First and Second Defendants

JUDGMENT

Faukona PJ: A claim in category C was filed on 30th January 2013. The Claimant actually seeks three orders. One is for declaration that the first Defendant was in breach of the signed agreement. Secondly that the second Defendant to pay damages in the sum of $684,300.00 for breach of contract, and thirdly interest on the judgment sum.

2. The Claimant was a producer of natural coconut oil (NCO) in Auki at a relevant time in 2011. The first Defendant is an authority established under section 3(1) of Electricity Act. The second Defendant is an employee of the first Defendant based in Auki and authorized to deal with matters affecting the operation of the Auki Power House.

The agreement of 23rd September 2011

3. On 23rd September 2011, there was a written agreement signed between the Claimant and the first Defendant. Basically the agreement was for the Claimant to supply natural coconut oil to the first Defendant to be used by one of its generation AK 5 engine at Auki power house.

4. The major terms of the agreement were;

(a). The period of the agreement was twelve (12) months commencing from 26th September 2011.

(b). The Claimant would supply the Auki power house 1,000 litres of coconut natural oil per week at a price of $12-00 per litre.

(b). After each delivery of the CNO Claimant would submit an invoice for payment.

(d). The payment of CNO would be made within one week after receiving the product.

(e). After five months from the starting date, the parties would review the price of the CNO being supplied.

(f). The parties were entitled to terminate the agreement by giving ninety (90) days' notice by the party wishing to terminate the agreement.

5. From submissions, the agreement was a materialisation of an important project for the first Defendant and Solomon Islands. It was a trial project, which the first Defendant with assistance of ADB try to ascertain viability of coconut oil to be used instead of fossil fuel. If it was successful then the first Defendant will start to use coconut oil.

6. With the contract as a governing principal the Claimant therefore set down to work accordingly. On 5th October 2011 the Claimant delivered the first batch of 1,000 litres of CNO. The first delivery should have been made on 3rd of October 2011 in accordance with the term of the agreement. The Claimant however had failed to deliver on time. He was delayed for two days.

7. The excuse the Claimant advanced was that he wanted to ensure he produced the best and quality acceptable oil. Therefore extra days were required for further refinery and purification processes. The second supply was made on 21st October 2011 after two weeks and three days delay. In both occasions, the Claimant denies the delay. And explain the lateness of delivery was not because he had no copra available but premised on two reasons given above. On strict interpretation of the written contract the Claimant had it.

8. On both occasions, the first Defendant waived its rights to terminate the contract. The reason given was because it had accepted to make payments despite late deliveries. Mr Upwe refers to two case authorities to substantiate the first Defendant's waiver of rights. In the first case of Kong Fir Shipping Co Ltd,[1] I do not think it is applicable in this case. Strictly, we are not dealing with a breach of condition, which is not a term of the contract. Failure to deliver CNO in time is a major term of the contract. In the second case of Suisse Atlantique Societed d'Armement S.A V N. Rotterdamsche Kolen Central[2] can be summarised as, where the innocent party elected to treat the breach and repudiates by bringing the contract to an end. Then the whole contract has ceased to exist. Simply, the innocent party has the choice where there is breach of a term, whether to repudiate or not depend on it. In this case, the first Defendant chose not to repudiate but waive its rights. Hence, the contract continued to be binding on parties until notice of termination was issued by the first Defendant on 14th June 2012.

9. I noted there are other conditions, which may retardate efficient production of CNO, however, they are all irrelevant. The most important document is the agreement, which governs the dealings. It was existed until notice of termination of the agreement was issued.

Rejection of 3rd delivery of CNO.
10. The controversial issue emerged when the Claimant attempted to deliver the third batch of 1,000 litres on or about 28th October 2011. On that date the Claimant said that 5 drums of CNO oil were loaded onto a vehicle and drove to Auki power house for delivery. On arrival they were told by the second Defendant that no CNO be accepted, or they would not take delivery. In other words by the tone of the Claimant the third batch of 1,000 litres of CNO was rejected.

11. The first and the second Defendants denied there was any delivery of CNO on the third occasion (28/10/2011), therefore contrary to view expressed as rejection. The person who appeared at the power house on 28th October 2011 was the boss's son and Mr Bola. On arrival they enquired if CNO was needed. The Claimant was never seen on that occasion.

12. The issue of rejection whether it did occur or not is important and facts must be properly analysed so as to arrive at a fair determination. The first question to ask is why the Claimant failed to deliver any more CNO to the first Defendant after 28th October 2011, until the Claimant wrote to the first Defendant on 27th April 2012. Why there was a void period. Was it because the Claimant had no capacity to produce CNO? A view favoured by the second Defendant, or was it the Claimant was directed not to deliver further CNO.

13. The Claimants case is that on 28th October 2014 the third batch of 1,000 litres were delivered to SIEA Auki power house only to be told that no CNO would be accepted because of the broke down of the generator. Evidence from Mr Bola affirmed that the Claimant and his son did accompany him to the power house. He also affirmed the reason given for not accepting the CNO was the breakdown of the generator.

14. The two defence witnesses Mr Pitakesa and Mr Ganifiri denied the Claimant was present at the power house on 28th October 2011. Only Mr Bola and the boss's son were there. The first controversy in defence evidence is that when Mr Bola and the boss's son consulted Mr Ganifiri he told them to go to Mr Pitakesa. Mr Pitakasa denied both men and even the Claimant consulted him that day. He said he was in his office. As he looked out he saw Mr Bola and the boss's son asked the operator whether they need oil, and then they left. They never went up to his office to see him, a piece of evidence contrary to what Mr Ganifiri had said.

15. If there was no direct consultation with Mr Pitakesa that day, then the person who could have issued directions would be Mr Ganifiri. However, I doubted Mr Pitakesa is telling the truth. He attempted to distant himself away from the consultation in which Mr Ganifiri had directed Mr Bola and his friend who actually went to Mr Pitakesa's office. Of course, any direction as to whether or not the third batch of CNO is accepted, suspended or rejected must come from Mr Pitakesa. He was the Officer in Charge of SIEA power house at Auki. The issue whether the Claimant and his workmen failed to off load any drum at power house compound or deliver any invoice is immaterial. Where a supply was not accepted, logically a delivery note or invoice was not necessary. Hence most acceptable option was to return to the factory. This is a tactic the second Defendant resort to in an attempt to shift the responsibility and blame.

16. The issue that the Claimant had no capacity to produce CNO is a guess or a myth that is contrary to the evidence of Martin Sam. Mr Pitakesa had deposed in his sworn statement of 8th October 2013 that he had paid $24,000.00 on 13th October 2011 to the Claimant for CNO supplied on 16th September 2011 and 5th October 2011. But he failed to depose that the first Defendant had also paid the Claimant for supplies delivered on 21st October 2011 which was paid on the 11th November 2011. In fact, by 13th October 2011 the Clamant had received a total sum of $24,000.00 for total CNO delivered. With that money at hand the Claimant was able to secure and capable to produce 1,000 litres required even by 28th October 2011. With $24,000.00, at the rate he purchased copra, he could have purchased at least 80-90 bags of copra and that should able him produce more than three thousand litres according to his evidence.

17. The question ought to ponder is, why waited too long after 28th October 2011 not to deliver any more CNO despite the fact there was sufficient money to buy more copra. One conclusion I would draw is that the Claimant had been waited upon the Defendants as to when would resumption of supplies be uplifted. Having waited for five months the Claimant began to inquire by his letter of 27th April 2012. It reflected the truth of the matter that supplies had been suspended by Mr Pitakesa awaiting advice from Honiara. Nothing can be expected from Honiara because DW1 Marin Sam who was the signatory to the agreement had been in isolation and quite remote from the activities in Auki. In his evidence, he relied on the Officer on the ground Mr Pitakesa who was directly responsibilities to monitor the implementation of the project. The failure of the project was marred by failure of the second Defendant to monitor and did consultation with the Claimant. Non delivery on time should hint immediate investigations to ascertain any problem. Nothing can be expected of the Claimant. He is an individual trying to do business with a giant commercial entrepreneur, which provides energy services. The first Defendant and its employee were expected to ensure the project succeeded and moved forward. It is an authority established under an Act and had been engaged in providing services in commercial nature for many years.

Who actually breached the agreement:
18.
I am able to conclude; having being satisfied on the balance that CNO in five drums were in fact delivered on 28th October 2011 to first Defendant's Office at Auki but was not accepted by the second Defendant. A decision he himself would explain. He was the officer on ground responsible. In the circumstances, I noted section 12 of the Electricity Act, which renders the first Defendant and second Defendant liable. The question whether the second Defendant was negligence or not, is an issue both Defendants have to sort out themselves. In the light of evidence, the second Defendant is directly responsible

19. The issue of breakdown of equipment was later course in time and are irrelevant to this case. After 28th October 2011 was a period of five months before the Claimant wrote his first letter on 27th April 2012 where no immediate reply was received. By 30th May 2012 when the legal Counsel for fist Defendant made the first reply, the operation had already been stopped. Number of unknown intervening factors could have been contributed and circumstances could have changed as well. Though the agreement may have persisted there was nothing more the Claimant could do.

The amount claim:
20. This is a money claim. The Claimant claims the amount of $684,300.00 being for damage for breach of contract. That may perhaps comprise money spent on purchasing dried copra including loss of earnings. At this stage, it is not clear. The fact is that there was no particularisation of the amount claim. Besides that, I also noted the Claimants fax to first Defendant on 12th July 2012 detailing that he spent $71,289.00 for purchasing of dried copra.

21. It would appear that the Claimant had produced two tables particularising money spent on dried copra. One table is in a form of fax and the other is produced in the submissions.

22. In assisting the Court, I rely on the evidence by Martin Sam who said, on the date of signing of the agreement, he visited the factory and he sighted dried copra capable of producing at least 1,000 litres of CNO. That forms the basis for calculating when the Claimant commenced expended money buying dried copra. The agreement itself also provides a starting point to draw a line to evaluate and calculate when the Claimant started expended money to honour the agreement.

23. For fairness and upon relying on that evidence I will take account of bags of dried copra paid since 19/9/2011 before inspection by Mr. M. Sam who undoubtedly affirms availability of dried copra capable of producing 1,000 litres.

24. I also accepted the explanation by the Claimant that although Mr. Bola was an employee, he could organise his community to produce copra to be sold to him.

25. Therefore my calculation as to number of dried copra paid would start from 19th September 2011 and ends on 17th October 2011. From the tables the total numbers of dried copra paid would be 299 bags with a cost of $75,455.00. Cost is taken according to the Claimants buying rate of $3.00 per kilogram. Out from those figures the Claimant had produced 2,000 litres which was paid for $24,000.00. Deducted $24,000.00 from $75,455.00 equals to $51,455.00. The 1,000 litres not accepted by the second Defendant ought to be added to the claim which gives rise to $63,455.00.

26. In regards to loss of earnings, it is quite difficult to assess because there was inconsistency to CNO production by the Claimant and difficult to forecast. There is no evidence to proof so. Besides that there is no verification and particularisation of loss of earnings. Therefore, I refuse to grant or award any claim for loss of earnings.

27. May I conclude by pointing out that the project would not have been a failure, had the parties acknowledged that it was a pilot project which is important to Solomon Islands. It would have been better avoiding any written contract at the initial stage. And whilst the ADB is interested in the project it could have be in the best interest of all that ADB should continue to oversee the project move forward. Until the Claimant could able stand on his own feet then ADB should withdraw its assistance both in technical advice and administration.

28. Having said that, I am satisfied on the evidence adduced by the Claimant on the balance and therefore grant the orders in this manner.

Orders:
1. Grant declaration that first Defendant through its agent breached the agreement signed with the Claimant on 23rd September 2011.

2. The first and second Defendant are hereby ordered to pay damages for breach of contract in the sum of $63,455.00

3. Interest of 5% on judgment sum from the date the cause of action arose.

4. Cost of this proceeding is paid by the Defendants.

The Court.

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^[1] (1962) 2QB 26
^[2] (1967) 1 AC 361