Meredith & Associates Ltd v Bon Pacific Ltd [2009] WSSC 105 (11 September 2009)

IN THE SUPREME COURT OF SAMOA
HELD AT APIA

BETWEEN:

GEORGE MEREDITH & ASSOCIATES LIMITED
a duly incorporated company having its head office at Apia
Plaintiff

AND:

BON PACIFIC LIMITED
a duly incorporated company having its head office at Auckland, New Zealand.
Defendant

Counsels: Mr. Enari for plaintiff
Mrs. Drake for defendant

Judgment: 11 September 2009

JUDGMENT OF THE COURT

Background

1. The plaintiff is an incorporated company carrying on business in Samoa as engineers, architects and planners. It also operated in American Samoa under the trade name Mapex International. In the years 1997 and 1998 the plaintiff was engaged in two construction projects in American Samoa. The first project was the "Tulao project", which is the subject of the plaintiffs claim.

2. The defendant is a company incorporated in Auckland New Zealand and carrying on business as exporters and merchants. Prior to and subsequent to the implementation of the Tulao project the defendant had on requests from the plaintiff and Mapex International sourced the supply of merchandise, organized their freight, insurance and payment of those goods. The defendant’s costs for the supply of some of those goods including the goods supplied for the Tulao project is the basis of the defendant’s counterclaim against the plaintiff.

3. The Tulao project involved the construction by the plaintiff of a hall for the Latter Day Saints Church ("the Church") at the village of Tulao in American Samoa. Simpson coded fixings were specified in the construction drawings as the pulling down hardware for the roof structure. Simpson fixings were manufactured in the United States, but the plaintiff as a result of inquiries to the supplier in the United States determined that undue delay to the Tulao project would eventuate if the Simpson fixings were ordered from the United States. It then sent a fax to Mr. Sharma of the defendant company on the 28th October 2007, enclosing a copy of the response from the supplier in the United States, and requesting the defendant to inquire and to confirm if there was a Simpson agent in NZ. The fax was on the plaintiffs letterhead.

4. By faxed letter of the 29th October 2007 Mr. Sharma of the defendant company advised the plaintiff that he was unable to locate a Simpson agent. He also enclosed Lumberlock product as recommended alternatives to the Simpson coded product as well as reminding the plaintiff of its overdue accounts with the defendant.

5. Tinai Gordan and Associates, a firm of Civil and Structural Engineers were the consulting engineers of the church for the Tulao project. On the 29th October 2007 the plaintiff faxed to Mr. Gordon of Tinai Gordon and Associates both the response from the supplier in the United States of the Simpson products as well as the response from the defendant, and requested Mr Gordon to approve the Lumberlock products as alternatives to the Simpson products to avoid delay in completing the project. Some Lumberlock brackets were approved. Other Lumberlock products required design modification to incorporate the Simpson coded products. The cyclone ties CT 600 and CT 200 were two of the items which required design modification.

6. Gang Nail Ltd was the manufacturer and supplier of the Lumberlock Product in NZ. Its manager Mr. Castledine communicated directly with Mr. Gordon over the CT 600 and CT 200 required modifications. By faxed letter dated the 28th January 1998 Mr. Castledine wrote to Mr. Gordon referring to their telephone discussions the day before and attaching copies of the test reports for the Lumberlock cyclone ties and joist hangers product offered by Gang Nail Ltd as alternatives to the Simpson specified brands. By faxed letter of the same date Mr. Gordon responded to Mr. Castledine expressing concerns that the intended substituted cyclone ties do not resemble a closer approximation of the Simpson product. He also attached illustrations of the Simpson brand and standard which the substituted Lumberlock product must meet.

7. On the 2nd February 1998, Mr. Gordon in response to a faxed letter from Mr. Castledine the day before, issued Mr. Castledine with revised details for the CT 200 and CT 600 for the Lumberlock product. He also requested an Engineer’s certificate and load rating. A copy of this fax was sent by Castledine to the defendant. On the following day the 3rd February 1998 Mr. Castledine faxed to Mr. Gordon illustrations of the CT 200 and CT 600 together with the Engineers certificate and load ratings.

8. Neither the plaintiff nor the defendant were involved or had any input in the dialogue between Mr Gordon and Gang Nail Ltd.

9. On the 26th January 1998, Mr. Aloialii, the plaintiffs quantity surveyor forwarded to the defendant a purchase order number 240 for the supply of Lumberlock brackets to be air freighted to American Samoa. The purchase order was on the letter head of Mapex International. In response the defendant on the 29th January 1998 faxed to Mr. Aloialii quotation of prices and quantities of goods to be supplied as per purchase voucher 240 for confirmation. The order was confirmed by Mr. Aloialii.

10. On the 3rd February 1998 Mr. Aloialii, on Mapex International letterhead again placed another order number 280 for the stainless CT 600 and CT 200 together with their corresponding nails and requested that they be air freighted together with the purchase order number 240 as soon as possible. It also requested the defendant to hold the other orders.

11. The two orders 240 and 280 were processed and air freighted to the plaintiff as requested and a commercial invoice in the amount of US$3736.10 dated 13th February 1998 was issued and sent to the plaintiff.

12. Before the two orders were placed Mr. Aloialii did travel to Auckland New Zealand and was accompanied to Gang Nail Ltd by Mr. Sharma of the defendant company on the 12th January 1998. On his second visit to Gang Nail Ltd on the 14th January, Mr. Aloialii uplifted samples of brackets and ceiling ties including CT 600 and CT 200 which he hand carried to Samoa.

13. The goods received by the plaintiff from the orders 240 and 280 were installed and applied to the Tulao building project. On the 20th February 1998 Mr. Gordon in response to an alarm being raised by an employee of the church concerning the appearance of the CT 600 being installed by the plaintiff visited the project site and immediately ordered a stop notice to the project as the CT 600 installed did not correspond to the description he forwarded to Gang Nail Ltd. As the CT 600 have been securely fastened and incorporated into the building structure they were not removed.

The Plaintiffs claim

14. The plaintiff contended that the CT 600 and CT 200 received by the plaintiff from the defendant at a cost of US$26,000 were ordered by the plaintiff as a result of consultations between the defendant and the consultant engineer for the church. But as a result of supplying the CT 600 and CT 200 which were not ordered, the goods were rejected by the consulting engineer.

15. Paragraph 6 of the Statement of Claim then alleges that the defendant as the agent of the supplier should have known from discussions between the agent and Mr Gordon that the agent was supplying the wrong goods.

16. As a result of a rejection of the wrong goods supplied the plaintiff lost the contract resulting in loss of profit of US$74,550; cost to the plaintiff of US$50,287 for remedial work, and has suffered damage to its reputation as a building contractor.

Discussion

17. The claim that the CT 600 and CT 200 cost the plaintiff US$26,000 is outrageously misleading. When the plaintiff placed purchase order 280 on the 3rd February 1998 with the defendant, it requested 380 CT 600 and 650 CT 200 (Exhibit P4 for the plaintiff). The invoice for the purchase order 280 and purchase order 240 amounted to only US$3,736.10 (Exhibit D9 for the defendant). The cost to the plaintiff of 380 CT 600 was US$684 and US$435.50 for the 650 CT 200. In addition, the consulting engineer for the church, called by the plaintiff as a witness, told the court that only the CT 600 were non compliant and were considered as non compliant. The CT 200 were not rejected.

18. The contention that the goods were ordered after consultation between the defendant and the consulting engineer is also untrue. Both the consulting engineer for the church and the managing director for the plaintiff told the court that the consulting engineer communicated directly with the supplier, Gang Nail Ltd.

19. Similarly there is nothing in the evidence to suggest that the defendant was the agent of the supplier. It was only upon receiving requests and purchase orders from the plaintiff that defendant made contact with the supplier to source the goods requested by the plaintiff. Payment for the services provided by the defendant were charged to the plaintiff, not the supplier.

20. In his written submissions counsel for the plaintiff cited section 14 of the Sale of Goods Act 1975 which provides for the sale of goods by description, section 15 which provides for implied warranty or condition as to the quality or fitness of the goods, section 16 which deals with implied condition if it is a sale by sample, and section 35 which define what amounts to acceptance of the goods.

21. Section 35 provides:

"The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been delivered to him, and he does any act in relation to them which is inconsistent with the ownership of the seller, or when after the lapse of a reasonable time he retains the goods without intimating to the seller that he has rejected them.

The CT 600 were rejected by the consulting engineer. He was not the buyer. The plaintiff was the buyer. When it received the CT 600, the plaintiff installed and fastened them into the building structure. Those CT 600 are still within that structure, they could not be returned to the defendant or to Gang Nail Ltd whoever was the seller. The plaintiff in installing the CT 600 onto the building structure where they will remain forever has done an act inconsistent with the ownership of the seller and the right of rejection is accordingly lost. What the plaintiff did in relation to the CT 600 upon their receipt closely resembled what the respondents did in James C Scott v John McGreath and Willam Gresham [1899] GLR 268 and were held to have accepted the goods which they claimed to have rejected. The Court must therefore accept the submissions of the defendant that the plaintiff accepted the CT 600 which they received and used on the project for which they were purchased.

22. In any event the sale of the CT 600 cannot be described as a sale by description or a sale by sample. The expression sale by description as used in the Sale of Goods Act with respect to sales of specific goods means a sale of the goods described in the contract itself as belonging to a particular kind, class or species. See Harrison v Knowless [1917] 2KB 606. And in Taylor v Combined Buyers Ltd [1923] NZGazLawRp 133; [1924] NZLR 627 Justice Salmond says at page 638:

"... that even though the goods may have been described by the vendor, there is no sale by description unless the descriptive statement is incorporated in the contract as a term thereof, so that it is not a mere representation external to the contract."

When the plaintiff through its quantity surveyor Mr. Aloialii lodged the purchase order on the 3rd February 1998, that purchase order simply requested:

1. Stainless Steel CT 600 = 380

2. Stainless Steel CT 200 = 650

(50% left 50% right hand).

No other description was given.

23. It cannot be ignored that when Mr. Aloialii left Auckland New Zealand with samples of the CT 600 in January 1998 neither he nor any other representative of the plaintiff advised the defendant of its unsuitability before the order of the 3rd February 1998 was placed. If there was a sale by sample, the CT 600 delivered to the plaintiff in response to its purchase order were in accordance with the sample hand carried by Aloialii to American Samoa in January 1998. Indeed his faxed letter of the 17th November 1998 to the Managing Director of the plaintiff indicated that he believed that the samples he hand carried were approved for the project. That letter reads (exhibit P7):

"Please find attached Gang Nail letter to Bill Gordon "PRODUCER STATEMENT- DESIGN" concerning the disputed CT 600.

"Also note in Tinai Gordon letter (as underlined) confirming that the sample I brought from NZ and approved by Bill Gordon are not the same with what Gang Nail supplied later (and now installed on site)."

Regards

To’o

But when Mr. Aloialii hand carried the CT 600 to Samoa in early January 1998 Mr. Gordon and Gang Nail have not commenced dialogue on the Lumberlock substitution for the Simpson brand of CT 600. That dialogue in writing commenced on the 28th January 1998. Mr. Gordon was also firm in his evidence under cross examination that Mr. Aloialii did not show him any sample of the CT 600. He could not have approved any sample of CT 600 shown to him by Mr. Aloialii simply because he was not shown any sample.

He

24. What is blatantly obvious from the evidence is that the plaintiff deliberately and knowingly accepted the CT 600 which they installed before the consulting engineer for the church was alerted that the CT 600 being installed did not match the Simpson coded product preferred by the church.

It follows the plaintiffs claim should be dismissed.

The Defendant’s Counter-Claim

The defendant’s counterclaim is premised on unpaid invoices for the goods it supplied to the plaintiff including the goods supplied pursuant to purchase orders 240 and 280 totaling $12,264.88 made up as follows:

Invoice 1163	$6,618.90
Invoice 1169 – 3	3,736.10
Loss on Invoice 1147	1,909.88
	$12,264.88

27. Invoices 1163 and 1169 – 3 were for the goods supplied for the Tulao project. Invoice 1147 amounting to US$8,059.67 was for goods supplied for the second project in American Samoa which did not materialise.

28. The managing director for the plaintiff conceded that the second project in American Samoa did not eventuate and goods supplied for that project by the defendant were not paid. As a result the defendant resold the steel and mesh at a loss of $1,909.88.

29. As for invoices 1163 and 1169 – 3, the plaintiff contended that those two invoices were included in the summary judgment entered against the plaintiffs managing director in the New Zealand District Court, Auckland Registry on the 12th December 2000 in the sum of NZ$58,351.84. Judgment was entered against the plaintiffs managing director on the basis of his written undertaking dated 30th November 1998 to pay the plaintiffs outstanding debts to the defendant as a result of a meeting between the parties at Auckland in November 1988. That judgment was registered in this Court on the 23rd August 2001 followed by a petition by the defendant for bankruptcy against the managing director of the plaintiff to enforce the judgment.

30. In his application to set aside the judgment entered against him in New Zealand and to adjourn the bankruptcy proceedings sine die, one of the issues which this court had to decide was whether the two invoices (1163 and 1169.3) were included in the written undertaking of the managing director of the plaintiff dated 30th November 1998. The Court ruled the two invoices were not included. See In re Bankruptcy of M G Meredith [2003] WSSC 26 3/2/2003.

31. It follows the counterclaim must succeed.

Orders

(a) The Statement of Claim is dismissed.

(b) Judgment for the defendant on the counter claim in the sum of US$12,264.88.

(c) Counsel for the defendant to file memorandum of costs within 14 days. Counsel for the plaintiff to file response 7 days after.

JUSTICE VAAI