Lolagi v Asco Motors Ltd [2008] WSSC 30 (21 May 2008)

IN THE SUPEME COURT OF SAMOA
HELD AT APIA

BETWEEN:

TELESIA LOLAGI
of Vaimoso, Accountant and Businesswoman.
Plaintiff

AND:

ASCO MOTORS LIMITED
a duly incorporated company of Apia.
Defendant

Counsel: L Tuala-Warren for plaintiff
S K Ainu’u for defendant

Hearing: 1 February and 11 March 2008
Submissions: 27 March 2008
Judgment: 21 May 2008

JUDGMENT OF SAPOLU CJ

Proceedings

[1] The plaintiff is a female who is an accountant. The defendant is a company which deals in the importation, sale and maintenance of Toyota motor vehicles.

[2] In these proceedings, the plaintiff has brought an action against the defendant claiming damages for breach of a contract of sale of goods. The alleged breach is non delivery to the plaintiff as buyer of a Toyota Echo motor vehicle which she had contracted to buy from the defendant as seller.

[3] The defendant in its statement of defence denies both liability and damages. However, in consequence of the evidence given at trial by the defendant’s sales manager, counsel for the defendant has conceded in his written submissions that there had been a breach of the contract of sale. The only issue that remains before the Court for determination is the assessment of damages.

Factual background

[4] On 5 January 2006, the plaintiff, who wanted to buy a Toyota vehicle, phoned the sales manager of the defendant company and enquired whether they had any Toyota Echo vehicles and what were their costs. The defendant’s sales manager replied that they had only two such vehicles left in stock and that they would not be ordering anymore of such vehicles. He also told the plaintiff that one of the vehicles cost $46,000 and the other cost $47,000.

[5] The next day, 6 January 2006, the plaintiff went to the defendant’s premises in Apia and had a look at the two Toyota Echos. She liked the vehicle for $47,000 and she told the defendant’s sales manager that she wanted to buy that vehicle but she would have to arrange bank finance to pay for it. The sales manager agreed to sell that vehicle to the plaintiff and to hold it for one week while the plaintiff arranged bank finance.

[6] On 9 January 2006, the plaintiff lodged an application with the Westpac Bank for a loan of $47,000 for the purchase of the vehicle. When the bank wanted some information about the vehicle, the plaintiff contacted an employee of the defendant and obtained the required information which she gave to the bank.

[7] On 13 January 2006, which was the last day of the one week allowed to the plaintiff by the defendant’s sales manager to arrange bank finance, the plaintiff phoned the sales manager and told him that her bank loan was being processed and could he still hold the Toyota Echo. The defendant’s sales manager replied that was fine and that he would hold the vehicle on the basis that she had lodged a loan application with the bank.

[8] On 17 January 2006, the plaintiff received a phone call from the office of the bank’s lawyers to come and take a bill of sale to the defendant’s sales manager to sign. After the plaintiff had taken the bill of sale to the sales manager and signed by him, she returned it to the office of the bank’s lawyers.

[9] On 20 January 2006, a senior employee of the bank informed the plaintiff on the phone that her loan application had been approved. The same bank employee also informed the defendant company on the same day that the plaintiff’s loan application for the purchase of the vehicle had been approved.

[10] On 25 January 2006, the plaintiff took her elderly parents to the office of the bank’s lawyers to execute a deed of mortgage over their land as a security for the plaintiff’s loan.

[11] On 26 January 2006, the plaintiff went with her parents to the bank for the plaintiff to sign the loan agreement and her parents to sign a loan guarantee. The plaintiff was then given a letter by the bank to be taken to the defendant for the release of the vehicle.

[12] When the plaintiff arrived with the bank’s letter at the defendant’s premises the sales manager was not there. However, she was told by another employee of the defendant company that the Toyota Echo had been sold earlier that day by the sales manager to a third party. The plaintiff was extremely disappointed and upset. She returned to the bank and informed the bank of what had happened. She then returned to the defendant’s premises and expressed her disappointment and disbelief to the general manager who said he would speak to the sales manager.

[13] Being desperate for a car, the plaintiff on the same day, 26 January 2006, went to Hyundai Motors which also deals in the importation and sale of motor vehicles and found a Tucson vehicle which cost $57,850. The plaintiff said she needed a car to take her son to school as the school year had started that day, 26 January 2006, and it was her son’s first year in school. She also said that she had no time to shop around as she was in urgent need for a car.

[14] The evidence given by the plaintiff as to what took place at Hyundai Motors when she went there is at variance with the evidence given by the sales manager of that car dealer. According to the plaintiff, when she went to Hyundai Motors the only car they had in stock was the Tucson. They had no other car. On the other hand, the sales manager of Hyundai Motors who was called by the defendant as a witness, testified that when the plaintiff came to their company they had other cars in stock and not just the Tucson. Even though there was a slight inconsistency between the evidence given in chief by this witness and the evidence she gave under cross-examination, her evidence was essentially as follows.

[15] This witness said that when the plaintiff came to Hyundai Motors, she told them that she had been to the defendant company for a Toyota Echo but the defendant company had sold her vehicle. This witness also said that at that time, Hyundai Motors had an Elantra car which cost $48,000 and she believed the Elantra car was shown to the plaintiff as it is comparable in price to the Toyota Echo. However, the plaintiff who was in a rush to get a car wanted the Tucson which cost $57,850 and which she eventually bought.

[16] After careful consideration, I have decided to prefer the evidence of the sales manager of Hyundai Motors to that of the plaintiff. At first, it is somewhat surprising that such a company as Hyundai Motors would have only one car in stock. Furthermore, the plaintiff had just been to the defendant company where she became extremely disappointed and upset when she found out, after all her efforts to get a bank loan, that the defendant had sold the car which it had agreed to sell to her. The plaintiff was also in desperation for a car to take her young son to school which had started the same day. This is consistent with the evidence of the sales manager of Hyundai Motors who said when the plaintiff came in she was in a rush to get a car and she explained what had happened at the defendant company.

[17] So the plaintiff who was extremely disappointed and upset was under great stress and in a rush whereas the sales manager of Hyundai Motors was not. This might have affected the plaintiff’s recollection of events that occurred at Hyundai Motors. I have decided that the evidence of the sales manager of Hyundai Motors is to be preferred over the evidence of the plaintiff.

[18] After the plaintiff had been to Hyundai Motors and decided to purchase the Tucson vehicle priced at $57,850, she returned to the bank for an additional loan as the loan which the bank had earlier approved to her for the purchase of the Toyota Echo from the defendant company was only $47,000. The plaintiff then had to go through the same process again which she had to go through for her original loan.

[19] On 1 February 2006 after the plaintiff had her additional loan approved by the bank, she went to Hyundai Motors and purchased the Tucson vehicle for $57,850.

Plaintiff’s claim for damages

[20] The plaintiff claims from the defendant damages for non delivery of goods under various heads in the total amount of $27,293.54. The first claim by the plaintiff, which was the real focus of these proceedings, is for $11,000 being the additional loan the plaintiff had to obtain from the bank for the purchase of the $57,850 Tucson from Hyundai Motors. The correct amount for the claim should have been $10,850 being the difference between the price of the Tucson vehicle and the price of the Toyota Echo vehicle.

[21] The second claim by the plaintiff is for $840 for the hire of a rental car. This rental car was hired by the plaintiff on 23 January 2006 for six days before she discovered on 26 January that the defendant had sold the Toyota Echo to a third party in breach of the contract of sale. The hire agreement for the rental car shows that even though the rental car was hired on 23 January for six days, it was not to be returned to the rental car company until 31 January. I have decided that the defendant should not be liable for the total hire of the rental car from 23 January to 26 January. On the evidence given by the plaintiff the only paperwork that was done for her loan after 23 January was the execution by her elderly parents of a deed of mortgage at the office of the bank’s lawyers on 25 January and her visit with her parents to the bank to sign the loan agreement and a guarantee on 26 January 2006. A rental car which is expensive was not essential, for the plaintiff could have hired a taxi which was a lot cheaper. I will award the plaintiff what would be a reasonable amount for taxi fares but not the total hire for the rental car. I am also of the view that the defendant should not be liable for the plaintiff continuing to hire the rental car after 26 January. It is clear that on 26 January, the plaintiff had already hired the rental car for six days to be returned on 31 January. So whether or not the defendant breached the contract of sale on 26 January, the plaintiff was going to use the rental car up to 31 January anyway. The breach of the contract of sale by the defendant was therefore not the cause of the plaintiff continuing to use the rental car after 26 January.

[22] The plaintiff also claims $1065 for the increase in insurance premium she has to pay for the Tucson which was more expensive than the Toyota Echo.

[23] For additional legal and bank fees the plaintiff incurred on her additional loan, she claims a total amount of $6,000. It is not clear how the plaintiff arrived at that figure. For the additional loan of $11,000 the plaintiff obtained from the bank she was charged by the bank with an establishment fee of $1,657. Whether that figure included the fee for the bank’s lawyers is not clear. Then for the additional loan of $11,000, the plaintiff said she incurred extra legal and bank fees of $2,000. If this is correct, then it is difficult to see how the total amount of legal and bank fees incurred by the plaintiff on her additional loan could have been $6,000.

[24] In her written submissions, counsel for the plaintiff also claims exemplary damages. Such damages are not pleaded or sought in the statement of claim.

Applicable law

(a) Relevant provisions of Sale of Goods Act 1975

[25] The essence of the claim by the plaintiff as buyer is for damages for non delivery of goods by the defendant as seller in breach of the contract of sale. The relevant statutory provision is s.50 of the Sale of Goods Act 1975 which provides:

" (1) Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may maintain an action against the seller for damages for non-delivery.

" (2) The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the seller’s breach of contract.

" (3) Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered, or if no time was fixed, then at the time of the refusal to deliver."

[26] Section 53 of the Act then provides:

" Nothing in this Act shall affect the right of a buyer or the seller to recover interest or special damages in any case where by law interest or special damages may be recoverable, or to recover money paid where the consideration for the payment of it has failed."

[27] The corresponding provisions of the Sale of Goods Act 1979 (UK) are s.51 and s.54. In terms of the discussion of those English statutory provisions in McGregor on Damages (2003) 17th ed at para 20-003, s.50 (2) of our Act is framed in terms of the first rule in Hadley v Baxendale (1854) 9 Ex. 341 excluding the element of the defendant’s knowledge of special circumstances. Section 50(3) of our Act states the normal measure of damages under the first rule in s.50(2). In terms of the same discussion in McGregor on Damages, s.53 of our Act would bring in the second rule in Hadley v Baxendale (1854) 9 Ex. 341 which in appropriate cases will displace ss.50(2) and 50(3) and allow increased damages.

[28] The difficulty is that whilst it is straight forward to state that s.50(2) of the Act is framed in terms of the first rule in Hadley v Baxendale (supra), there is no judicial unanimity on a modern formulation of the first rule in Hadley v Baxendale. This is evident, for instance, from Victoria Laundry v Newman [1949] 2 KB 528 at 539-540 where in the English Court of Appeal Lord Asquith restated the rules laid down in Hadley v Baxendale and the subsequent decision of the House of Lords in Czarnikow v Koufos [1969] 1 AC 350 where Lord Reid was particularly critical of Lord Asquith’s restatement of the rules. See further on this point the discussion in McGregor on Damages (2003), 17th ed at para 6-146 to para 6-184.

[29] Criticisms of the rules in Hadley v Baxendale appear in the New Zealand text of Law of Contract (1997) by Burrows, Finn and Todd, where the learned authors say in para 20.2.3 at p. 721:

" Indeed in several cases Cooke P has questioned the value of referring to the Hadley v Baxendale formula at all. In Stirling v Poulgrain [1980] 2 NZLR 402 at 419 he invoked the opinions of Wilde B [in Gee v Lancashire and Yorkshire Railway Co [1860] EngR 1133; (1860) 6 H & N 211] and of Lord du Parcq [in Monarch Steamship Co Ltd v Karlshamns Ollefabriker (A/B) [1949] AC 196 at 232-233] in support of the view that in the end the assessment of damages is a question of fact and rules capable of meeting all cases are unlikely to be devised. His Honour returned to the attack in McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39 at 42-43 saying with regard to contemplation he respectfully continued to demur to suggestions that Hadley v Baxendale is a classic authority on remoteness of damages, except in the sense of being a ritual incantation in discussions of the subject. He recognised that the distinction between the usual course of things and communicated special circumstances has proved viable, but in either case it is rarely if ever necessary to prove that the damages were such as would arise in most cases of that kind. Something less, reasonably to be contemplated or foreseen, is commonly enough."

[30] The learned authors of Law of Contract (supra) then go on to say:

" Hardie Boys J observed that Alderson B’s judgment in Hadley v Baxendale has become hallowed by age and quotation but must not be regarded either as Holy Writ or statute. Reasonable contemplation or foresight will provide a proper and sufficient test in the majority of cases, but there will be those in which that test is not sufficient, for it does not answer the further question, how likely must the occurrence of the foreseeable eventuality be."

[31] The learned authors then conclude their discussion by saying at p. 723:

" For the time being Hadley v Baxendale is likely to remain influential with the New Zealand Courts. It clearly is the primary point of reference in any consideration of remoteness issues. However, the application of the principle undoubtedly requires judgment and evaluation. It is not in any sense a mechanical process. Cooke P’s views perhaps do not go very much beyond recognizing this truth."

[32] Perhaps, I should also point out that in Law of Contract (supra) the learned authors go on to say at para 20.2.3 (b) at p. 723:

" Whatever other criticisms may be leveled at Hadley v Baxendale, the distinction between loss in the usual course of things and loss resulting from special knowledge is widely recognised as a helpful mode of analysis."

[33] In this case, counsel for the plaintiff after referring to Hadley v Baxendale and the judgment of Alderson B in that case took a factual approach taking into consideration issues of loss directly and naturally resulting from the breach of the contract of sale as well as foreseeability. In my respectful view, the approach taken by counsel for the plaintiff is within the spirit of McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39 at 42-43 where Cooke P said:

" The field is a difficult one, however, and as to principle I do no more than express the opinion, with diffidence, that whatever position, if ascertainable, may for the time being represent English law after the vagaries of nearly a century and a half since Hadley v Baxendale should not automatically be adopted in New Zealand. In the result in The Heron II [1969] 1AC 350 speeches the test ‘not unlikely’ perhaps represents the nearest approach to a consensus, although it would apparently mean that Hadley v Baxendale was wrongly decided. It is clear at least that reasonable foresight or contemplation, which appear to be interchangeable terms, are always an important consideration. I doubt whether they are the only consideration. Factors including directness, ‘naturalness’, as distinct from freak combinations of foreseeable circumstances, even perhaps the magnitude of the claim and the degree of the defendant’s culpability, are not necessarily to be ignored in seeking a just balance between the parties.

" In the end it may be best, and may achieve more practical certainty in the New Zealand jurisdiction, to accept that remoteness is a question of fact to be answered after taking into account the range of relevant considerations, among which the degree of foreseeability of harm is usually the most important."

[34] In relation to s.50(3) which provides for the normal measure of damages where there is a breach of the contract of sale due to non delivery of goods by the seller to the buyer, there are also difficulties. One of those difficulties is that the normal measure of damages in s.50(3) is a prima facie rule which only applies where there is an "available market". However, the English Courts have not been consistent in the views they take of the meaning of what constitutes an "available market.": see McGregor on Damages (2003) 17th ed, para 20-006, at p.687.

[35] In this case, counsel for the plaintiff does not rely on s.50(3) but on s.50(2). I assume that she considers s.50(3) not to be applicable in the circumstances of this case. She is entitled to rely on s.50(2) if the prima facie measure in s.50(3) does not apply. I suspect that counsel for the plaintiff has chosen to rely on s.50(2) and not on s.50(3) because when the plaintiff first spoke on the phone to the defendant’s sales manager about her wish to purchase a Toyota vehicle, she was told that the defendant had only two Toyota Echos in stock and that the defendant will not be importing anymore Toyota Echos. So when the defendant’s sales manager sold to a third party the Toyota Echo that was to be sold to the plaintiff, that must have been the last Toyota Echo for sale as no more of such vehicles would be imported. And the defendant did not tell the plaintiff that it still had any Toyota Echo remaining in stock. Arguably, there was no longer a market for Toyota Echos at that time because if the plaintiff was to go elsewhere to look for a new Toyota Echo to buy, she would find none. The defendant company is the sole dealer in Toyota vehicles in Samoa. Perhaps this is why the argument for the plaintiff has been founded on s.50(2) and not on s.50(3). I will deal with the argument for the plaintiff on the basis it has been presented by her counsel.

(b) Mitigation

[36] The defence put forward by counsel for the defendant is based on the so-called duty of a plaintiff to mitigate his loss. The nature of the duty to mitigate was explained in Darbishire v Warran [1963] EWCA Civ 2; [1963] 1 WLR 1067 at p. 1075 where Pearson LJ said:

" It is important to appreciate the true nature of the so-called ‘duty to mitigate the loss’ or ‘duty to minimise the damage’. The claimant is not under any contractual obligation to adopt the cheaper method: if he wishes to adopt the more expensive method, he is at liberty to do so and by doing so he commits no wrong against the defendant or anyone else. The true meaning is that the claimant is not entitled to charge the defendant by way of damages with any greater sum than that which he reasonably needs to expend for the purpose of making good the loss. In short, he is fully entitled to be as extravagant as he pleases but not at the expense of the defendant."

[37] Counsel for the defendant relies on a passage cited from Luteru v Accident Compensation Board [2003] WSSC 7 where this Court said:

" It is the fundamental principle of the law of damages that a plaintiff should be restored as far as money can do to the same position he was in before the wrong was committed. But that fundamental principle is qualified by another which imposes on the plaintiff the duty of taking all reasonable steps to mitigate the loss consequent upon the commission of the wrong by the defendant and debars the plaintiff from recovering any apart of the damage which is due to his neglect to take such steps. In the leading English textbook on the law of damages which is McGregor on Damages the learned author in the 14th edition of that work in para 285 at p. 171 sets out those principles in these words:

" The extent of the damage resulting from a wrongful act, whether tort or breach of contract, can often be considerably lessened by well-advised action on the part of the person wronged. In such circumstances the law requires him to take all reasonable steps to mitigate the loss consequent on the defendant’s wrong, and refuses to allow him damages in respect of any part of the loss which is due to his neglect to take such steps. Even persons against whom wrongs have been committed are not entitled to sit back and suffer loss which could be avoided by reasonable efforts or to continue an activity unreasonably so as to increase the loss. This well-established principle finds its most authoritative expression in the speech of Viscount Haldane L.C. in the leading case of British Westinghouse Co. v Underground Ry [1912] UKLawRpAC 43; [1912] AC 673, 689 where he said:

‘ The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this first principle is qualified by a second, which impose on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps.’

‘British Westinghouse was a case on breach of contract and a claim for pecuniary loss. But it has been generally held in England, Australia and New Zealand, that this principle of mitigation applies generally to actions in both contract or tort for pecuniary and non-pecuniary losses. The question of whether the plaintiff had taken all reasonable steps to mitigate his loss consequent on the wrong committed by the defendant is one of fact and not of law.’

[38] In Tanoai v Ah Kam [1993] WSSC 12 it was said in relation to the test to be applied in considering the question of mitigation of loss:

" [The] test to be applied when considering the question of mitigation is one of reasonableness and whether the plaintiff has taken reasonable steps to mitigate his loss is a question of fact to be decided by looking at all the circumstances of the case. It must be added that whilst the plaintiff carries the burden of proving the fact and the amount of damage, the burden of proving that the plaintiff has failed to take reasonable steps to mitigate his loss is on the defendant and not the plaintiff: see for instance McGregor on Damages 4th ed, paras 1516-1517."

[39] It was also said in Luteru v Accident Compensation Board [2003] WSSC 7 that the onus is on the defendant to show that the plaintiff in the circumstances ought reasonably to have taken steps to mitigate the loss consequent on the wrong committed but failed to do so: Roper v Johnson [1873] UKLawRpCP 11; (1873) LR 8 CP 167; Garnac Grain Co v Faure & Fairclough [1968] AC 1130.

(c) Exemplary damages

[40] Counsel for the plaintiff in her written submissions seeks exemplary damages. She relies on a decision of the Supreme Court of Canada in Royal Bank of Canada v W Got & Associates Electric Ltd (2000) 178 DLR (4th) 385. I must point out that as the common law presently stands, the position in Canada with regard to the availability of exemplary damages in an action for breach of contract differs from the position in England, Australia and New Zealand. In Esera v Samoa Realty & Investments Ltd [2007] WSSC 26, this Court decided to follow the decision of the New Zealand Court of Appeal in Paper Reclaim Ltd v Aotearoa International Ltd [2006] NZCA 27 and held that exemplary damages are not available for breach of contract. This Court in Esera v Samoa Realty & Investments Ltd said:

"In respect of the plaintiff’s claim for exemplary damages, the trend of authorities throughout the common law world is that exemplary damages is not available for breach of contract. This is explained in detail in Paper Reclaim Ltd v Aotearoa International Ltd [2006] NZCA 27 where the New Zealand Court of Appeal comprising of Anderson P, Chambers and O’Regan JJ stated:

"[167] So far as we are aware, this Court has never granted or approved a grant of exemplary damages for breach of contract. Nor has it ever definitely pronounced on whether exemplary damages could be awarded for breach of contract, although in fairness, it should be noted that in Telecom Corporation New Zealand Ltd v Business Assocs Ltd CA 7/93, State Insurance Ltd v Cedeneo Foods Ltd CA 216/97 6 August 1998, and Attorney-General v Gilbert [2002] NZCA 55; [2002] 2 NZLR 342 there are indications that in principle exemplary damages might be available. In none of those cases, however, did any party mount a full-on attack on the availability in principle of exemplary damages as a remedy for breach of contract. Mr Judd has advanced such an attack in this case. We are bound to deal with it.

"[168] Because there is no binding authority in this country, it is useful to review what the position is in other comparable jurisdictions.

"[169] Exemplary damages are not available for breach of contract in Australia. That position has been clear since Butler v Fairclough [1917] HCA 9; (1917) 23 CLR 78 and has recently been reaffirmed in Gray v Motor Accident Commission (1998) 196 CLR 1 at 6-7 and Hospitality Group Pty Ltd v Australian Rugby Union Ltd [2001] FCA 1040; (2001) 110 FCR 157 at [142]- [143]. See further Seddon and Ellinghaus Cheshire and Fifoot; Law of Contract (8 Aust ed 2002) at [3.2]

"[170] The position is the same in the United Kingdom. The current position is summarized in Treitel The Law of Contract (11 ed 2003) at 935 as follows:

" As a general rule punitive damages cannot be awarded in a purely contractual action, since the object of such an action is not to punish the defendant but to compensate the claimant. Punitive damages are not available even though the breach was committed deliberately and with a view to profit. If the Court is particularly outraged by the defendant’s conduct, it can sometimes achieve much the same result by awarding damages for injury to the claimant’s feelings. In theory such damages are meant to compensate the claimant for mental suffering, rather than to punish the defendant. But in practice the distinction is often hard to draw and from the defendant’s point of view-to perceive. However, where the claimant has a cause of action both in tort and for breach of contract, he may be able to recover punitive damages by framing the claim in tort. For example, a landlord who unlawfully evicts his tenant is guilty both of a breach of contract and of a trespass, and punitive damages have been awarded in such a case.

"[171] To similar effect, see Beale (ed) Chitty on Contracts (29 ed 2004) at 26-109...

"[172] The question has also been examined in detail by the England and Wales Law Commission. In its 1997 report, Aggravated, Exemplary and Restitution Damages (Law Com No 247 1997), it recommended that exemplary damages should not be available for breach of contract: at 105 and 118-119. Its reasons for this recommendation were succinctly set out at 118...

"[173] In Ireland the common law position is that exemplary damages are not available for breach of contract. The Irish Law Reform Commission has investigated and consulted on the topic of exemplary damages. Its final report, issued in 2000, Report on Aggravated, Exemplary and Restitution Damages (LRC 60-2000), recommended that the availability of exemplary damages should not be extended to cases of breach of contract: at [1.66]. The Commission considered that an extension of exemplary damages to contract cases would be at odds with the traditional concept of contract law as having an exclusively private law character: at [1.54]

"[174] The United States represents a confused picture. The Restatement (Second) of Contracts (1981) says at [355]"

"Punitive damage is not recoverable for breach of contract unless the conduct constituting the breach is also a tort for which punitive damages are recoverable.

"[175] Notwithstanding that general rule, different state jurisdictions have recognised other circumstances in which exemplary damages may be awarded for a breach of contract...

"[176] The Supreme Court of Canada has recently considered whether exemplary damages should be available for breach of contract. In Whitten v Pilot Insurance Co (2002) 209 DLR (4th) 257, the Court held that exemplary damages could be awarded in a breach of contract claim provided that the defendant’s conduct was such as to give rise to an ‘independent actionable wrong’...That independent wrong need not be a claim in tort. In that regard, the Court’s conclusion deviated from the position in the American Restatement.

"[177] The Supreme Court’s position has been subject to some fairly trenchant criticism. For instance, Professor McCamus, in an article ‘Prometheus Bound or Loose Canon? Punitive Damages for Pure Breach of Contract in Canada’ (2004) 41 San Diego L Rev 1491 at 1504, said that the Court had given ‘no explanation for the proposition that although one single breach of duty suffices for punitive damages in the tort context, punitive damages in contract require two breaches of duty.’ Indeed, he went on, ‘it appears that no coherent justification can be offered for the latter requirement.’ Professor McCamus said that the decision failed to supply a convincing reason for making an extension of the scope of punitive damages in the contract context beyond cases of breach of contract that also constitute tortious wrongdoing: at 1519.

"[178] An even more damning view of the decision is Adjunct Professor Swan’s article ‘Punitive Damages for Breach of Contract: A Remedy in Search of a Justification (2003-04) 29 Queen’s LJ 596. He concludes that the Supreme Court’s judgment is ‘deeply disappointing’ at 644...

"[179]..."

"The New Zealand Court of Appeal then states at [180]:

"[180] The clear trend of overseas authority is against the possibility that exemplary damages should be available in breach of contract cases. We are of the view that the position in New Zealand should conform with that trend. We are particularly influenced by the detailed reports undertaken by the Law Commissions in the United Kingdom and Ireland. Those reports were formulated following extensive consultation. We find their reasoning compelling and adopt it. "

"At [183] the New Zealand Court of Appeal left open the possibility that exemplary damages may be available in circumstances where the breach of contract also constitutes a tort for which exemplary damages are recoverable."

[41] Without the benefit of full argument and citation of relevant authorities, I am not prepared to accede to the plea on the plaintiff’s behalf for exemplary damages. The New Zealand Court of Appeal had obviously given careful and extensive consideration in Paper Claim Ltd v Aotearoa International Ltd [2006] NZCA 27 to the question of whether exemplary damages should be available in an action for breach of contract and decided against it.

Discussion

[42] As earlier pointed out in para [20] of this judgment, the real focus of these proceedings was on the question of whether the plaintiff is entitled to the difference between the contract price of the Toyota Echo sold by the defendant to a third party in breach of the contract of sale with the plaintiff and the price of the Tucson purchased by the plaintiff as a result of the breach. The evidence that I accept shows that when the plaintiff went to the defendant’s premises with the letter from the bank which had approved her loan for the release of the Toyota Echo, she became extremely disappointed and upset when told that the vehicle had been sold to someone else. The plaintiff then went to Hyundai Motors for a car. Even though she was shown a comparable car with a price of $48,000, she wanted to buy the Tucson, a more expensive car which cost $57,850. That was the car which the plaintiff eventually bought after obtaining an additional loan.

[43] It has been submitted by counsel for the defendant that even if the defendant was in breach of the contract of sale, the plaintiff was under a duty to take reasonable steps to mitigate her loss consequent on the breach. By purchasing an expensive car from Hyundai Motors instead of the comparable car shown to her, the plaintiff was not acting reasonably to mitigate her loss. Therefore, the plaintiff should not be entitled to claim from the defendant, the difference between the price of the car the defendant was supposed to sell to her and the car she eventually bought from Hyundai Motors. Based on principle, I have decided to accept the submission by counsel for the defendant. However, if the plaintiff had bought the comparable car shown to her at Hyundai Motors which cost $48,000, she would still have incurred a loss of $1,000 as the car the defendant was supposed to sell to her cost $47,000. In my view, the defendant should be liable to the plaintiff in the sum of $1,000.

[44] Evidence was given for the defendant that the defendant had in stock other cars which cost $47,000 and were comparable to the Toyota Echo the plaintiff was going to buy, but the plaintiff did not enquire of the defendant whether it had any comparable cars after she was told the Toyota Echo had been sold earlier on the same day to someone else. I do not accept this evidence as going to show that the plaintiff failed to take reasonable steps to mitigate her loss consequent on the breach of the contract of sale by the defendant.

[45] I have to say that the defendant’s sales manager was fully aware that the plaintiff had applied for a bank loan to purchase the Toyota Echo. The plaintiff had also been granted an extension of time to finalise her loan while the defendant held the Toyota Echo for her. To then sell the Toyota Echo a few hours before the plaintiff turned up with the letter from the bank for the release of the car was extremely disappointing and upsetting to her. The plaintiff at the time must have felt that she had been let down very badly that she did not want to have anything more to do with the defendant. She must have lost all trust and confidence in the defendant. The plaintiff’s immediate reaction of going to another company to look for a car was an understandable human reaction in the circumstances. I do not consider that the plaintiff was acting unreasonably in going to another car dealer without enquiring of the defendant whether it had other cars like the one the defendant had just sold to someone else in breach of the contract with her. Furthermore, the defendant did not tell the plaintiff that it had any comparable cars in stock at that time.

[46] It has also been submitted by counsel for the defendant that the plaintiff failed to shop around for a comparable car. There is no evidence to show whether at the relevant time there were comparable cars at another dealer in Apia apart from Hyundai Motors where the plaintiff went to and which had a comparable car which cost $48,000. The onus is on the defendant to prove that the plaintiff failed to take reasonable steps to mitigate her loss. The only evidence adduced by the defendant to show that there was a comparable car available elsewhere in Apia was the evidence of the sales manager of the Hyundai Motors. According to the evidence of that witness, the price of the car they had which was comparable to the Toyota Echo was $48,000. That is $1,000 more than the price of $47,000 for the Toyota Echo which the defendant was supposed to sell to the plaintiff. Even though the plaintiff did not buy that car, I am of the view that the defendant should be liable to the plaintiff in the sum of $1,000 under this part of the claim.

[47] For the claim of $840 for the rental car hired by the plaintiff, I have decided not to award the total hire of the rental car. I would only award what I consider to be a reasonable amount for taxi fares to enable the plaintiff and her parents to go to the office of the bank’s lawyers to execute a deed of mortgage on 25 January and for the plaintiff and her parents to come to the bank on 26 January to sign the loan agreement and a guarantee. In this connection I would award only $80 given the fact that the plaintiff’s parents had to be brought from and returned to Afega.

[48] I will also not make an award for the hire of the rental car after 26 January. It appears from the rental agreement that the rental car was hired on 23 January for six day at the daily rate of $140 to be returned on 31 January which was more than six days. Thus when the contract was breached on 26 January due to the non-delivery of the Toyota Echo to the plaintiff, the plaintiff was going to continue using the rental car until 31 January in terms of the rental agreement. So it was not the breach of contract which occurred on 26 January that made the plaintiff continue to have the use of the rental car up to 31 January because even if the contract of sale was not breached, the plaintiff would still have had the use of the rental car up to 31 January in terms of the rental agreement.

[49] I am also unable to accept the plaintiff’s claim of $1,065 for the increase in insurance premium she has to pay on the Tucson vehicle she purchased from Hyundai Motors. The reason for this is that because the defendant should not be liable for the difference between the price of the Toyota Echo and the price of the more expensive Tucson, it follows that the defendant should also not be liable for the increased insurance premium based on the price of the Tucson.

[50] For the claim of $6,000 for extra legal and bank fees on the additional loan of $11,000, there were evidential difficulties during the trial in relation to this part of the claim. Anyway, I have held that the defendant should only be liable for $1,000 being the difference between the price of the Toyota Echo and the price of a comparable car that was available at Hyundai Motors. Therefore, the defendant is not liable for the difference between the price of the Toyota Echo and the price of the Tucson bought by the plaintiff.

[51] Given the circumstances of this case, I would have to assume that even if the plaintiff had purchased the comparable car which cost $48,000, she would still have had to obtain an additional loan of $1,000 in order to be able to purchase that car. That means the plaintiff would still have incurred some additional legal and bank fees.

[52] As it appears from the loan agreement of 1 February 2006, the establishment fee charged by the bank was $1,157. It is not clear what this fee means and whether it includes legal fees for the bank’s lawyers. It is also not clear what the establishment fee would have been if the additional loan was for only $1,000. However, it would seem odd if the establishment fee or the legal and bank fees for a loan of $1,000 were more than the amount of the loan. The onus is on the plaintiff to prove her claim for damages. Given the evidential difficulties, I will award only $500 under this part of the claim. This necessarily involves some arbitrary element.

[53] In respect of the claim for exemplary damages, I have decided not to make such an award as this is an action for breach of a contract of sale. Exemplary damages was also not pleaded in the statement of claim, even though that was not necessary given that this is an action for breach of contract.

Judgment

[54] I give judgment for the plaintiff in the total sum of $1,580. In the circumstances, and as the defendant has succeeded substantially in its defence, each party is to bear her and its own costs.

CHIEF JUSTICE

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