BP South West Pacific Lts v Fesili Investments Corporation Ltd [2000] WSSC 28 (9 August 2000)

IN THE SUPREME COURT OF SAMOA
HELD AT APIA

BETWEEN:

B.P. SOUTH WEST PACIFIC LIMITED
Plaintiff

AND:

FESILI INVESTMENTS CORPORATION LIMITED
Defendant

Counsel: Mr. R.S. Toailoa for the Plaintiff
Mr. T.K. Enari for the Defendant

Dates of Hearing: 29 March, 9 April 1999 and 12 May 1999
Date of Decision: 9 August 2000

REASONS FOR JUDGMENT OF WILSON J.

By its claim the plaintiff, a supplier of petrol products, claims $82,819.83 for goods sold and delivered to the defendant between about 29 October 1997 and 23 January 1998. In the alternative, the plaintiff claims principal and interest in respect of two dishonoured cheques that were paid to the plaintiff but dishonoured.

By its defence the defendant admits each and every of the allegations of the plaintiff made in the statement of claim but says that the plaintiff "has not deducted from its claim rebates totalling $11,288l.20 and the hire charge of $440.00 for its use of the premises of the defendant as agreed", and says that these amounts should be deducted from the claim of the plaintiff. By its counterclaim the defendant claims damages for breach of the implied terms of a supply agreement and for breach of duty of care. The quantum of the damages claimed in the defendant’s counterclaim is "special damages" of $168,784.03 and "general damages" of $20,000.00. The term that is alleged to be implied is a term that the plaintiff would "provide and install dispensing equipment that was not defective and faulty and that was at all times in a proper working and operating order and condition" or "provide suitable non-defective equipment for the petrol station that was in proper working condition and of a type used in the trade elsewhere in Apia and to exercise care in installing the equipment and, in particular, to guard against leaks and monitor areas of possible leakages and losses that could occur underground and difficult to detect."

In its defence to counterclaim the plaintiff, apart from admitting the existence of a supply agreement between the parties, denies the allegations contained in paragraph 3 of the defence and counterclaim and "places reliance on clause 4.4 of the supply agreement", which provides for the defendant "to install, maintain and service" the equipment and for the plaintiff to be "entitled from time to time to replace or repair and defective parts in the said equipment or to substitute any other suitable equipment therefor ......."

The plaintiff admits that the equipment was obtained second-hand from Fiji, something that was known before the equipment was installed. The plaintiff denies that it was a breach of contract or breach of duty of care. The plaintiff denies the counterclaim of the defendant and says that, in any event, the defendant cannot prove any entitlement to the moneys it (the defendant) counterclaims and, even if a liability is proven, cannot prove the amount of the losses claimed. The defendant says that the defendant’s counterclaim should be dismissed.

At the commencement of the trial of this action, Mr Toailoa, for the plaintiff, conceded and accepted that the plaintiff "had not deducted from its claim rebates totalling $11,288.20 and the hire charge of $440.00" (see para. 2 of the statement of defence and counterclaim). He then went on to state (correctly) that the plaintiff’s claim is finalised and that all that remains is the counterclaim.

It was then agreed that the defendant should be dux litis.

In the light of the concession just referred to and the admissions made in the defence, the main issue left for determination in this case is whether the defendant can prove the alleged breach of contract or breach of duty of care and, if so, whether it can prove that the alleged or any damages resulted therefrom.

The documentary evidence that was adduced during the hearing comprised the supply agreement dated 23 September 1996 (exhibit P1), a sketch plan (exhibit P2) another sketch plan (exhibit P4), and a piece of flexible pipe (exhibit P5), some correspondence between the defendant and the plaintiff of various dates (exhibits D1, D2, D3, D6, D7, D8, D9, D10, D11, D12, D13, D15, D16, D17, D18, D19 and D20), some correspondence between the defendant and Mobil Oil Samoa of various dates (exhibits D4 and D5), a summary of account (exhibit D20), and a bowl (exhibit D21).

In his very brief Opening Address Mr Enari, counsel for the defendant, summarised the issues arising for determination in this case by indicating that the counterclaim arises from "faulty equipment and/or faulty installation .... (under) this agreement by the plaintiff (which) has resulted in loss of fuel (loss of product), which losses have fallen on the defendant." He said that "exhibit 20 (the summary of account) is an attempt by the defendant to quantify the (defendant’s) losses - the general manager will explain how he made the calculations."

The first witness for the defendant was Ted Stanley, an employee of the defendant working at Tanugamanono, who said that he was there when the equipment at the service station was installed by Mobil Oil (in 1998) and the equipment of the plaintiff was taken out. The Mobil workers had to wait a little while for the B.P. workers to remove their equipment. When the Mobil workers were "going about their job", his attention was drawn "to something that was happening on their job." He said that he was shown "part of the pipe that runs to the pump; that part was leaking ...... I had a look at it and confirmed that it had been leaking ...... I saw it wasn’t (dripping), it was a continuous flow ...... I went and grabbed a bowl and placed it underneath this leakage ...... between ½ hour and one hour this bowl was full of petrol ...... the sand was black." He testified as to the making of various complaints to the plaintiff about apparently defective pump equipment.

He explained that the complaints were handled by the plaintiff sending someone over (often Poasa) to fix the fault. Sometimes there were delays in fixing the problem. The complaints related to faulty operation of the pumps, the result of power surges, and other matters.

Ted Stanley agreed that the leak he saw was at the point marked "X" on exhibit P2, being a point underground and separated from the pump by a length of pipe, an elbow, and a connecting fitting. The B.P. staff shifted the pumps and left the pipes. He explained that he did not know who owns the connecting joint but he went on to say that, from underground up to the connecting joint, the owner is the defendant, but, after the connecting joint up to the pump, the owner is the plaintiff.

The second witness for the defendant was Iona Sulua, an employee of the defendant working at Tanugamanono, who could remember when the workers from Mobil came to install and connect their pumps, which replaced the old pumps of the plaintiff. He described the leakage at a connection and the bowl used to catch the leaking fuel. The earth was wet where the leak was.

The third witness was Anauli Pofitu Fesili, the managing director of the defendant corporation. He said that his corporation had experienced numerous problems with the pumps supplied by the plaintiff company. He described those complaints, which ranged from the numbers not running and there being no petrol, to a cover blowing off, to a handle (nozzle) leaking, to the pump stopping after the selected value of fuel had been discharged. He explained that Mr Wiki Curry had been "the professional" who had installed the tanks, connected the pipes, and installed the pumps for the plaintiff company. To be precise, he explained that the plaintiff had paid Mr Wiki Curry to connect the plaintiff’s pumps to the defendant’s pipes.

Anauli Pofitu Fesili confirmed seeing the so-called leaking pipe when the pumps of Mobil Oil were being installed.

He described the BP pumps that were in place before that incident.

Anauli Potifu Fesili purported to explain in a general way how the figures set out in exhibit D20 were calculated.

When under cross-examination Anauli Pofitu Fesili agreed, by reference to the evidence taken on commission, that the original tanks and pipes, when they were installed, were the property of his company. He (Anauli Pofitu Fesili) was to pay all the costs (underground tanks and pipes) and BP South West Pacific was to supply all equipment (the pumps). He said, in cross-examination:

"It is plain common-sense that the tanks and pipes belong to us, that they should remain our property if BP decides to terminate."

It became clear, during Mr Toailoa’s cross-examination of Anauli Pofitu Fesili, that the figures set out in exhibit D20 were largely based on certain assumptions, and he agreed that it would be impossible to prove "as a matter of fact" that the estimated daily loss was actually from the loss of petrol.

As he was forced to admit in cross-examination, the correspondence emanating from him shows neither consistency in his claim for compensation nor an authoritative basis for claiming for his "losses." The alleged losses increasing as the correspondence occurred, that is a pointer towards the conclusion that the alleged losses were not true losses at all, but they were simply being used as leverage to have a concession made.

The fourth witness for the defendant was Vanessa Sharon Fesili, the daughter-in-law of the previous witness and the person who prepared the accounts (exhibit D20). She purported to explain those accounts. She said that she is not a qualified accountant - she said she was "in (her) second year working towards (her) qualification of Bachelor of Commerce." Of greater significance in terms of the credibility and reliability of her evidence (and, therefore, the truth and accuracy of the accounts) is not her lack of full professional qualifications, but her family connection with the managing director of the defendant corporation.

Her evidence, both oral and written, lacked impartiality and objectivity. Furthermore, a number of "cracks" in her "armoury" were made to appear during cross-examination by Mr Toailoa.

The fact that she admitted that her instructions had been "to establish if there was a loss during the period as mentioned", and not a loss attributable to any one factor (such as, for example, leaking petrol), highlights the shortcomings in the defendant’s case in proof of "the losses".

She was asked:

"Q. Are you suggesting that it was no concern of yours as to whether the loss, if there was one, was from theft by staff members or theft of petrol by members of the public or inefficient marketing or any other cause?

1. Not what was the cause of the loss, (just) if there was a loss, what it was. Basically, I understood my job was to determine whether there was a loss and how much it was ......."
   

The fifth witness for the defendant was Fuimaono Lafaele Vito, a petrol station owner. He testified to having received some new pumps at his petrol station when he was with B.P. The inference to be drawn from this and other evidence was that his old pumps were installed at the defendant’s service station. He explained how those old pumps used to "over-supply" petrol on occasions. But he went on to say that Luasa would be notified, and "he would come and fix it."

He said that losses of petrol were replaced after his complaints were lodged.

The first witness for the plaintiff (and defendant to the counter-claim) was Mr Phillip Seti, the current General Manager of B.P. Oil in Samoa. He said that he was appointed general manager in March 1997, having replaced Mr Oscar Betham.

He frankly admitted receiving complaints from the defendant Corporation, some visible leaking problems (with the nozzles), some metre problems, and some in relation to loose guards and the like on the pumps, and he explained how the problems were solved. He had not heard of the particular complaint made by Fuimaono Lafaele Vito, and he said that there was no such complaint. I accept him on that topic.

Mr Seti was asked:

"Q. Under the supply agreement, what is the extent of B.P.’s responsibility regarding maintenance?"

He replied:

"A. B.P. would carry out the maintenance of all equipment that belongs to B.P. - a leak out of the pumps."

He said (and I accept this evidence when viewed in conjunction with the other evidence):

"The responsibility (for the storage tanks and pipeline) lies directly with the owner of the equipment, but B.P. would assist with repair and maintenance if there is an agreement between B.P. and the owner."

By reference to the sketch (exhibit P2) he confirmed that the pipe-work which connects to the pump and which is on the pump-side of the "X" belongs to B.P. and the rest belongs (or is the responsibility of) the defendant. He drew his own sketch (which became exhibit P4) to show that more clearly.

Mr Seti not only explained the procedure on commissioning of new pumps but also he emphasised that pressure testing occurs, and then follows monthly testings. The monthly testing during the period March 1997 till July 1998 revealed no problems, leading to the inference that there was no continuing leaking.

Mr Seti agreed that a fair summary of his evidence regarding inspections was to say that the reason why he did not carry out a more thorough inspection of the defendant’s service station (than was done monthly) was that, first, he considered that not all the complaints were real; secondly, he was getting in new parts all the time; and, thirdly, he was hoping to get in some new pumps. Regarding the incident when the pumps were changed over from B.P. to Mobil, he said that "it did not seem real (to explain a large alleged problem)" and there was "no hard evidence" pointing to an underground leakage.

With the benefit of hindsight, I state that it might have been better if the plaintiff had called in an expert to investigate and report at that time, but the defendant did not call one in either (and the defendant carries the burden of proof). Furthermore, Mr Seti pointed out that there was no correspondence dealing with this incident, which is suggestive of recent invention on the defendant’s part.

Mr Seti explained why, when the new pumps arrived, they were not installed. He said:

"When we got the new pumps, his (the defendant’s) accumulated debt with B.P. had reached a figure that convinced the company that (the plaintiff’s) investment with (the defendant corporation) will not be paid off."

In answering a question as to why the plaintiff did not install the new pumps, Mr Seti gave a very long and detailed answer, the effect of which was that the plaintiff was very concerned about the defendant’s accumulated debt and poor liquidity position, and it appeared to the plaintiff that the defendant was stalling for time, was not expressing concern about any underground leak, and was avoiding the plaintiff, as the creditor, and not fulfilling his promises.

With reference to the suggestion made by Anauli Pofitu Fesili that he had been incurring losses because of the poor condition of the pumps, Mr Seti gave a convincing reply. He said:

"...... but it is very hard for B.P. to accept that there have been losses incurred as a result of faulty pumps - this was because no figures (were) given of how much loss at that stage or how much fuel is leaking, and yet B.P. monitors the deliveries of fuel to Fesili’s service station on a daily basis, and not to receive payment when it is sold, so it is hard to accept that losses were due to faulty pumps."

The second witness for the plaintiff was Mr Wiki Curry, the managing director of Civil Pacific Engineering, which company was contracted to construct the tanks and the pipeline for the defendant’s service station. He said:

"I was hired by Fesili Investments Corporation Ltd. to fabricate two x 10,000 underground tanks and pipelines to connect the tanks to the pumps."

He said that it was a verbal agreement pursuant to which the defendant company would "supply the materials and I would supply the labour and machinery." He agreed that, in following the standard procedure, the tanks and pipeline were pressure-tested, and there were no leaks.

He explained by reference to the sketches, (exhibits P2 and P4) that the area marked "X" belongs to the defendant.

He was thoroughly tested as to possible circumstances said to have caused a leak to occur, but he was not shaken.

The third witness for the plaintiff was Misa Ioane Esoto, the qualified electrician who fixes electrical faults arising on pumps at the various B.P. service stations. He was able to remember attending at the subject service station "because the lights (fluorescents) inside the pump were not working." He testified to having attended 3 times to fix either lights that had blown or loose connections. He said that he heard about leaking at the pumps but he never observed any himself.

The fourth witness for the plaintiff was Poasa Faafua, who is a fitter employed by the plaintiff company. He explained that he serviced 6 B.P. service stations at first and later 8. He said that he had finished with B.P. in October in 1998.

He said that he installed the pumps at the service station in question. They were reconditioned computerised pumps; they were in good order and fault-free at the time of installation.

He explained how he did the installation and that they were tested. His understanding (which is consistent with what I hold to be the legal position) was that, if there was a fault in the pipeline, as distinct from the pump itself and the flexible pipe to the pump, that was the owner’s responsibility and not that of the oil company.

Poasa Faafua explained the various types of faults he attended to, including leaks inside or from the nozzle, adjustments to the computer system, and problems with the pump itself.

He testified to the number of occasions upon which he attended to fix leaks - "between 10 and 20 times". He also stated:

"Since I was there, I never experienced any major scale leaks."

When under cross-examination, he indicated that he knew where these pumps had been previously, viz. at Fuimaono Lafaele where "there were quite some minor faults - about the same as experienced by Fesili."

THE LAW

The Courts will, as a general rule, enforce not only the terms expressly agreed between the parties, but also those which are to be logically implied from those express terms [see Tappenden v Artus (1964) 2 QB 185, (1963) 3 All ER 213 and Gardiner v Moore (1969) 1 QB 55].

Whether a term will be implied is a question of law for the Court. A term will not be implied so as to contradict any express term [see Miller v Emcer Products Ltd. (1956) 1 Ch 304 and Lynch v Thorne (1956) 1 All ER 744]. Furthermore, a term ought not to be implied unless, on considering the whole matter in a reasonable manner, it is clear that the parties must have intended that that should be the suggested stipulation.

APPLYING THE LAW TO THE FACTS

In my judgment the term contended for by the defendant should not be implied in the circumstances of this case. To do so would contradict the express term in the agreement (clause 4.4).

On considering the whole matter in a reasonable manner, I cannot say that the parties must have intended that the term contended for by the defendant should be the stipulation.

I find that neither the workmanship that was performed when the petrol dispensing pumps were connected to the underground storage tanks and pipes nor the aged condition of the equipment caused leaks and the consequential losses of petroleum stocks of the defendant.

Noticeable by its absence was any expert opinion evidence by a suitably qualified expert to explain the cause or causes of any (and what) losses the defendant corporation incurred and to quantify those losses.

What the defendant did was call accounting evidence (albeit from a family member) to establish a loss to the defendant’s business. The casual link, even by means of circumstantial evidence, was not established.

I have steadfastly borne in mind that the onus of proof rests with the defendant to prove the cause of action pleaded in the counterclaim and, if so, the damages that flowed. The standard of proof is on the balance of probabilities. The proof must be something more than suspicion and something more than surmise, possibility, conjecture and speculation (see Toailoa Vaosa v Attorney General and Leataata Toailoa, unreported decision of mine dated 4 August 2000). It need not be as much as proof beyond reasonable doubt, where the party carrying the burden must exclude any reasonable possibility of the fact to be proven not being so.

A perusal of the correspondence that was tendered, together with an examination of the whole of the evidence, leaves me with the impression that the defendant made (and persisted with) the complaints against the plaintiff as a ploy to justify the non-payment of the debt that the defendant owed to the plaintiff. Indeed, I find that the counterclaim was pursued in an attempt to forestall the date when the outstanding debt had to be paid.

ORDERS

The defendant having admitted most of the plaintiff’s claim and the plaintiff having "admitted" or "accepted" (or having not argued with) the two deductions claimed by the defendant, there will be judgment for the plaintiff against the defendant on the claim in the sum of $77,152.06 plus interest at the rate of 8% per annum from 4 September 1998 till judgment, being $12,000.00, making a total of $97,152.06 plus costs.

The defendant, upon whom the onus rests, having failed to discharge the burden of proof in relation to the counterclaim [and, in particular, having failed to prove a causal connection between the losses it alleged it suffered and, furthermore, having failed to prove that the plaintiff was in breach of any term (express or implied) of the supply agreement or otherwise in breach of a duty of care] the defendant’s counterclaim is dismissed. There will be an order that the defendant pay to the plaintiff its costs.

I will hear counsel as to the quantum of the plaintiff’s costs.

JUSTICE WILSON