Alrite Steel and Services New Zealand Ltd v Wilex Samoa Packaging Solutions Co Ltd [2019] WSSC 24 (28 June 2019)

SUPREME COURT OF SAMOA

	Alrite Steel and Services New Zealand Limited v Wilex Samoa Packaging Solutions Co. Limited [2019] WSSC 24
Case name:	Alright Steel and Services New Zealand Limited v Wilex Samoa Packaging Solutions Co. Limited
Citation:	[2019] WSSC 24
Decision date:	28 June 2019
Parties:	ALRITE STEEL AND SERVICES NEW ZEALAND LIMITED v WILEX SAOA PACKAGING SOLUTIONS CO. LIMITED and EDDIE LOTASIANO WILSON
Hearing date(s):
File number(s):
Jurisdiction:	Civil
Place of delivery:	Supreme Court of Samoa, Mulinuu
Judge(s):	Patu F M Sapolu
On appeal from:
Order:	- Judgment for the plaintiff in the sum of NZ$25,607.70 which includes principal, interest at 18% pa applied per day up to 12 December 2014. - Interest at 18% pa as in (a) above to continue up to 26 June 2015. - Each party to bear its/his own costs. This is the first Samoan case on a cif contract and an international sale of goods and, therefore, in a way this is a test case. I have also done the bulk of the legal research myself.
Representation:	R Drake for plaintiff T Leavai for first and second defendants
Catchwords:	bill of lading – cif contract –consignee – contract of sale of goods – contract of guarantee – insurance policy – supplier of goods
Words and phrases:	“reasonable costs for recovery”
Legislation cited:	Comptoir D’Achat Et De Vente Du Boerenbond Belge S/A v Luis De Ridder Limtada (The Julia) [1949] AC 293 Dunlop v Lambert (1839) 6 CI & F600 Euro-Asian Oil SA v Credit Suisse A G et al [2018] EWCA 120 Flacker Shipping Ltd v Glencore Grain Ltd [2002] EWCA 1068 Johnson v Taylor Bros [1920] AC 144 Leigh and Sillavan Ltd v Aliakraon Shipping Co Ltd [1986] AC 787 Manbre Saccharin Co Ltd v Corn Products Co Ltd [1919] 1KB 198 Orient Co Ltd v Brekke & Howlid [1913] UKLawRpKQB 28; [1913] 1 KB 531 Scottish & Newcastle International Ltd v Othon Ghalanos Ltd [2006] EWCA 1756 Scottish & Newcastle International Ltd v Othon Ghalanos Ltd [2008] UKHL 11
Cases cited:
Summary of decision:

IN THE SUPREME COURT OF SAMOA
HELD AT MULINUU

BETWEEN

ALRITE STEEL AND SERVICES NEW ZEALAND LIMITED an incorporated company having its registered office in Manukau, Auckland New Zealand.
Plaintiff

A N D

WILEX SAMOA PACKAGING SOLUTIONS LTD an incorporated company having its registered office at Lelata.
First Defendant

A N D

EDDIE LOTASIANO WILSON Businessman of Lelata
Second Defendant

Counsel:
R Drake for plaintiff
T Leavai for first and second defendants

Judgment: 28 June 2019

JUDGMENT OF SAPOLU J
TEMPORARY JUSTICE OF THE SUPREME COURT
AND FORMER CHIEF JUSTICE

Introduction

1. These proceedings are primarily concerned with a contract of sale of goods and to a lesser extent with a contract of guarantee. The plaintiff, Alrite Steel and Services New Zealand Ltd (Alrite Steel), is the seller and is a company incorporated in New Zealand. It supplies steel products and services to its customers in New Zealand and elsewhere in the South Pacific. The first defendant, Wilex Samoa Packaging Solutions Ltd (Wilex), is the buyer. It is a company incorporated in Samoa. The second defendant, Mr Wilson, is the owner and managing director of Wilex and the guarantor in these proceedings. Alrite Steel brought these proceedings against Wilex alleging breach of the contract of sale of goods and against both Wilex and Mr Wilson alleging breach of the contract of guarantee. As I will explain later, Wilex cannot be sued as a guarantor.

Background

2. It appears from the documentary evidence tendered by Wilex and Mr Wilson that as of January, February and early March 2013, Wilex and Alrite Steel were in negotiations for the purchase of steel universal beams (steel beams) by Wilex from Alrite Steel. By email of 2 February 2013, Mr Wilson advised Alrite Steel that they needed steelframes urgently for rebuilding in the aftermath of Cyclone Evans. He requested Alrite Steel to proceed with the order, presumably from Wilex, and to allow them to pay when their insurance claim came through which was expected to be in another two weeks time. That would be around 16 February 2013 given that the date of Mr Wilson’s email was 2 February 2013. By email of 7 March 2013, Mr Wilson requested Alrite Steel to arrange for shipment of their order for steel beams and that they would pay for the order against the bill of lading.
3. On 13 March 2013, Alrite Steel and Wilex entered into a contract of sale of goods whereby Alrite Steel in Auckland was to supply Wilex in Samoa with three bundles of steel beams. This appears from both the amended statement of claim and the amended statement of defence. The contract of sale of goods, as it appears from the tax invoice (invoice), was on a cost, insurance and freight basis. In other words, it was a cif contract. The steel beams were loaded on board the vessel MV Southern Lilly operated by the Pacific Forum Line (PFL) as carrier at the port of Auckland. The Southern Lilly then shipped the steel beams to the port of Apia. It arrived in the port of Apia on 2 April 2013. Perhaps, I shall mention here that I do not agree with the suggestion from the submissions by counsel for the defendants that at some stage of this long drawn out matter, PFL was an agent for Alrite.
4. The total cif price of the consignment of steel beams in New Zealand currency was NZ$15,535.32. In terms of the invoice, the price was to be paid “at sight on receipt of the bill of lading copy”. This means that payment was to be made by Wilex as buyer when the bill of lading was presented to it. The port of discharge of the goods as shown from the invoice and the bill of lading was Apia and the port of loading was Auckland. The place of delivery of the goods was Apia as shown from the bill of lading. It also appears from the bill of lading that the goods were not to be released to the consignee, which would be Wilex, unless the original bill of lading has been received or unless authorised by Alrite Steel. On 27 March 2013, Alrite Steel emailed to Mr Wilson as managing director of Wilex the bill of lading and invoice with a request for payment to enable the goods to be released upon arrival in the port of Apia. In terms of the invoice, this would mean that payment of the goods was due from Wilex when its managing director Mr Wilson received the bill of lading from Alrite Steel. This would have been 26 March 2013 Samoan time.
5. By email of 1 April 2013, Alrite Steel followed up on its email of 27 March 2013 for payment of the steel beams. On 2 April, as already mentioned, the steel beams arrived in Apia. By email of 4 April, Wilex requested Alrite Steel to allow it to clear from customs the goods which have arrived in Apia and that it should be able to make payment by the end of next week as its insurance settlement was then being finalised. By email of 3 April (New Zealand time), Alrite Steel responded by requesting Wilex to provide a payment guarantee from its bank before the goods could be released. Alrite Steel continued to follow up payment of the goods by emails of 8, 17, 18 and 19 April to Mr Wilson. By email of 20 April, Mr Wilson requested a release of the goods against a personal guarantee from him and advised that his insurance money which was intended to pay for the goods was in the final stages. By email of 22 April, Alrite Steel again followed up on payment of the goods. Then by another email, probably of the same date, Alrite Steel again requested Wilex about a payment guarantee from its bank. Mr Wilson replied by email of 24 April that the insurance proceeds were still forthcoming and he could only provide a personal guarantee at that time. This was in order to minimise storage costs and bond fees at the Apia wharf. It appears from here that while Alrite Steel was requesting a payment guarantee from Wilex’s bank for release of the goods, Mr Wilson was only in a position to provide a personal guarantee of his own.
6. On 2 May 2013, Mr Wilson provided a personal guarantee which provided, inter alia, that: (a) payment of the goods would be made by Wilex by 31 May 2013, (b) failure to pay would entitle Alrite Steel to recover payment from Wilex and/or Mr Wilson and will include all reasonable costs for recovery, (c) the guarantee would be released immediately after payment of Alrite Steel’s invoice of NZ $15,535.32, (d) the guarantee will only become effective on approval by Alrite Steel to release the goods to Wilex for the purpose of clearing customs and have the goods transported to the premises of Wilex at Lelata, and (e) property in the goods remained with Alrite Steel until full payment had been made.
7. In consequence of the advice from Wilex through Mr Wilson that payment of the goods would be made on 31 May 2013 and the personal guarantee of Mr Wilson, Alrite Steel instructed the carrier PFL to release the goods to Wilex. However, Alrite Steel was notified by PFL on 27 May 2013 that despite many phone calls and emails to Mr Wilson the goods were still on the wharf and had not been cleared. By an email of the same date, 27 May 2013, PFL also notified Alrite Steel that they had spoken on the phone to Mr Wilson and he was aware of the shipment but was awaiting the government to approve the goods as cyclone materials. This would make the goods duty free.
8. By 31 May 2013, Wilex had still not made payment for the goods and on 21 June, Alrite Steel demanded full payment by 28 June. In its amended statement of defence, Wilex, through Mr Wilson, explained that Alrite Steel was advised that the insurance proceeds intended to pay for the goods were withheld due to a dispute between Wilex and its banker. On 28 June, Mr Wilson advised Alrite Steel that he would be clearing the goods from the wharf on Monday and that he had written to his insurer to make payment directly to Alrite Steel.
9. By 30 July 2013, Wilex had still not paid for the goods. By an email of that date, Wilex requested Alrite Steel to advise it of the interest owing from the date payment was due to 31 July 2013. Mr Wilson said that Wilex, however, did not make a commitment on the amount or rate of interest payment. Whilst that might have been so, in the email of 9 December 2013 from Mr Wilson to Alrite Steel, Mr Wilson said “I have advised that we will accept interest on top of the invoice”. By email of 14 January 2014, Alrite Steel provided Mr Wilson with an updated summary of the interest. This updated summary showed the interest on the outstanding invoice to be 18% per annum applied per day and commencing from 27 March 2013. Wilex did not indicate any objection or disagreement.
10. In response to a further request for payment by Alrite Steel on 26 November 2013, Mr Wilson advised by email of 9 December 2013 that the insurance claim which was intended to settle the payment of the goods had been postponed again until the outcome of Wilex’s court case. My Wilson also advised in the same email that he was currently working on clearing out the steel beams and store them in Wilex’s yard to find a buyer unless they could settle payment to Alrite Steel earlier. Mr Wilson also reaffirmed in the same email Wilex’s agreement to pay interest on the outstanding invoice.
11. In March 2014, Alrite Steel learnt that the goods which were still on the wharf had been auctioned by customs. The auction was held on 8 March 2014 according to the evidence for Wilex. This was after many requests to Wilex and Mr Wilson for payment of the goods.
12. In their amended statement of defence, Wilex and Mr Wilson state that the goods were supposed to be supplied by Alrite Steel on a cost, insurance and freight basis. Alrite Steel did not provide any insurance cover. It was therefore in breach of the cif contract. The oral evidence that was given by Mr Sharma, the managing director of Alrite Steel, was that insurance cover was taken out by Alrite Steel on the consignment of steel beams to Wilex. However, the insurance policy was not sent to Wilex. It was not the practice of Alrite Steel to send the insurance policy to its clients in a cif sale. No copy of that insurance policy was produced at the hearing of this matter.
13. Wilex and Mr Wilson also state in their amended statement of defence that Alrite Steel was aware that payment of the steel beams was to be provided from the proceeds of the insurance claim by Wilex for damage to its properties caused by Cyclone Evans and that the insurance claim was pending.
14. In relation to the contract of guarantee, Wilex and Mr Wilson claim that the guarantee refers only to “reasonable costs for recovery” and not just any costs. The guarantee was also to enter into force and take effect upon transportation of the goods to the Wilex premises at Lelata. For clarity as to what the guarantee provides in this regard, I will set out the relevant clause which provides:
    • “The guarantee will enter into force and take effect on approval of the supplier to release the subject goods to the buyer for the purpose of clearing customs and have these transported to the buyer’s site at Wilex Samoa site at Lelata, Apia, Samoa”.
15. In my opinion, the relevant clause of the guarantee is clear. The guarantee takes effect upon ‘approval’ by Alrite Steel as seller/supplier that the goods be released to Wilex as buyer for the purpose of (a) clearing customs, and (b) transporting the goods to the premises of Wilex at Lelata. So what was required was only for the seller/supplier to give ‘approval’ for the release of the goods to the buyer for the specified purposes. Once that ‘approval’ was given, the guarantee came into effect. With respect, I am not able to accept the defendants allegation that it was also a requirement of the guarantee that the goods had to be allowed by Alrite Steel to be cleared from customs and physically transported to the premises of Wilex before the guarantee could become effective. There is no such requirement expressed in the guarantee. Alrite Steel is also a New Zealand based company and Wilex is a Samoan based company. The goods were to be released to Wilex at the Apia wharf. It would be reasonable to expect Wilex when the goods were released to it to transport the goods itself to its own premises at Lelata rather than for Alrite Steel based in New Zealand to do so. In my opinion, that was what the guarantee contemplated. In terms of a cif contract, as it will be explained later, there is also no duty on the seller to deliver the goods to the buyer’s premises.
16. It is further alleged in the amended statement of defence in relation to the guarantee that it states that ownership of the goods remained with Alrite Steel until Wilex made full and final payment. I will come back to this issue about ownership and the passing of property under a contract of sale of goods in the course of this judgment.
17. Wilex and Mr Wilson admitted in their amended statement of defence that they did advise PFL that it was awaiting approval from the government for the goods to be treated as duty free cyclone materials. They also admitted that they had not paid for the goods by 31 May 2013 and that Alrite Steel on 21 June demanded full payment by 28 June 2013. They said, however, that they did explain to Alrite Steel that the insurance proceeds intended to pay for the goods were withheld due to a dispute they had with Wilex’s bankers. It would, therefore, appear that there were three reasons given by the defendants for non-payment of the goods. The first was that they were awaiting approval from government for the goods to be treated as duty free cyclone materials, secondly, that Wilex was awaiting the outcome of its court case on its insurance claim, and, thirdly, the insurance proceeds that were intended to pay for the goods were being withheld by Wilex’s bankers due to a dispute with the defendants.
18. Wilex and Mr Wilson, in their amended statement of claim, also admitted that on 28 June 2013, Mr Wilson advised Alrite Steel that he would be clearing the goods from the wharf on Monday and that he had written to his insurer to make payment directly to Alrite Steel. The defendants also admitted that on 30 July 2013 Alrite Steel’s invoice was still outstanding but they said that Wilex did not make any commitment on the amount or rate of interest owing. They also said that there was no agreement on the rate of interest to be charged and the interest was in, any event, to be passed on to whoever bought goods.
19. The defendants also admitted that in response to a further request for payment by Alrite Steel on 26 November 2013, Mr Wilson advised on 9 December 2013 that he was working on clearing the steel from customs to be stored in the yard of Wilex for a buyer to be found unless the defendants could pay before then. However, the defendants said that they were aware that Alrite Steel was trying to sell the goods to other parties.
20. The defendants in their amended statement of defence also said that they were not aware that the goods had been auctioned by customs in or about March 2014. The defendants also denied that they had failed to make payment pursuant to their guarantee. To a certain extent, the defendants are right. The guarantee was a personal guarantee by Mr Wilson. It was not a joint guarantee by Wilex and Mr Wilson. Wilex was the principal debtor and therefore could not have been guarantor of its own debt. A guarantor is the person who makes the promise to be answerable for the debt or obligation of another. In other words, you can guarantee another person’s debt but you cannot guarantee your own debt. The cause of action against both Wilex and Mr Wilson for breach of guarantee could only have been brought against Mr Wilson and not Wilex.
21. The defendants also denied in their amended statement of defence that the accrued interest on the outstanding invoice up to 12 December 2014 amounted to NZ$5,617.06 bringing the total outstanding amount to NZ$21,152.38. The defendants also denied that they should be liable to pay for the costs of recovery for Alrite Steel claimed as NZ$4,455.32. They also said that ownership of the goods remained with Alrite Steel and Alrite Steel should have taken out insurance cover to protect its interest. I will come back to this issue about ownership later in this judgment.
22. The defendants also claimed by way of a further defence that Alrite Steel was in breach of the contract of sale of goods by failing to insure the goods. As earlier mentioned, the managing director of Alrite Steel had said that Alrite Steel had insured the goods but it was not its practice to send the insurance policy to its clients in a cif sale. No copy of the insurance policy was produced at the hearing. The defendants further said that Alrite Steel was in control of the goods up to the time the goods were auctioned by customs but failed to ensure security of its possession.

The relevant law

23. The transaction in this case was an international sale of goods between the seller Alrite Steel in Auckland, New Zealand, and the buyer Wilex in Samoa. The type of contract involved was a cif contract. It is important to start here by referring to the authorities that explain what is a cif contract.
24. In Fawcett, Harris and Bridge on International Sale of Goods in the Conflict of Laws para 3.185, the learned authors state:
    • “The essential feature of a cif contract is that shipping documents are transferred to the buyer, as a result of which a contractual relationship is established between the buyer, on the one hand, and the insurer and carrier on the other hand. Payment of the price of the goods becomes due when these documents are tendered. Under a cif contract, the seller never delivers the goods to the buyer or even to the buyer’s agent. Since the documents stand in for the goods, the place where the goods were delivered or should have been delivered must refer to the place where the documents were transferred or should have been transferred. This is so even though the documentary sale is a sale of goods and not a sale of documents. There are a number of variants of the cif contract, such as the C& F (or CFR) contract and, more rarely, the cif and C contract, the cif and E contract, and the cif and C and I contract. All of these involve different obligations from the normal cif contract, but in none of them is the parties’ agreement as to delivery any different...”
25. In Manbre Saccharin Co Ltd v Corn Products Co Ltd [1919] 1KB 198, p.202, McCardie J stated:
    • “I conceive that the essential feature of an ordinary c.i.f. contract as compared with an ordinary contract for the sale of goods rests in the fact that performance of the bargain is to be fulfilled by delivery of documents and not by actual physical delivery of goods by the vendor. All that the buyer can call for is delivery of the customary documents. This represents the measure of the buyer’s right and the extent of the vendor’s duty. The buyer cannot refuse the documents and ask for the actual goods, nor can the vendor withhold the documents and tender the goods they represent”.
26. But it must be noted that the labelling or description of a contract as a cif contract is not conclusive on the question of whether such a contract is in fact a cif contract. In Comptoir D’Achat Et De Vente Du Boerenbond Belge S/A v Luis De Ridder Limtada (The Julia) [1949] AC 293, p.309, Lord Porter said:
    • “Not every contract which is expressed to be a cif contract is such”
27. In Euro-Asian Oil SA v Credit Suisse A G et al [2018] EWCA 120, para 46, Simon LJ said:
    • “I would accept that the use of the term CIF is not conclusive. This is both consonant with principle and supported by high authority, see for example, Comptoir d’Achat et de Vente du Boerenbond Belge SA v Luis de Ridder Limitada (The Julia) [1949] AC 293, Lord Porter at p.3019 – 310”.
28. In Sale of Goods (2000) by Professor Ewan McKendrick et al, cited by counsel for Alrite Steel, the learned authors stated at para 13-002, p.649:
    • “Whether a particular contract is or is not a cif contract is a question of substance. It cannot be resolved solely by reference to the label which the parties have chosen to attach to their contract. Thus in Comptoir D’Achat et de Vente du Boevenbond Belge SA v Luis de Ridder Limitada (The Julia) [1949] AC 293, p.309, Lord Porter stated that ‘not every contract which is expressed to be a c.i.f. contract is such’. For example, were the parties to describe their contract as a c.i.f. contract but the terms of the contract gave to the seller the option to supply the buyer with the goods but not the documents, then the contract would not, in law, amount to a c.i.f. contract because its own terms would conflict with the documentary obligations which lie at the heart of a c.i.f. contract. It does not follow from this that the label chosen by the parties is irrelevant. It can be adduced as evidence of the true nature of the contract, but it is not conclusive evidence”.
29. In this case, the invoice sent by Alrite Steel to Wilex showed the contract of sale of goods to be a cif contract. Both counsel for Alrite Steel and Wilex referred in their written submissions to the contract as a cif contract. But Wilex said that Alrite Steel was in breach of the contract because Alrite Steel never delivered to it the insurance policy. Alrite Steel admitted that it was not its practice to send the insurance policy to its clients but it does take out insurance cover for the goods shipped under a cif contract to its clients. Following that practice, Alrite Steel did not deliver the insurance policy to Wilex.
30. In Johnson v Taylor Bros [1920] AC 144, at p.155, Lord Atkinson in defining the characteristics of a cif contract, stated, in an often – cited passage, as follows:
    • “The authorities I shall presently cite establish clearly, I think, that when a vendor and purchaser of goods situated as they were in this case enter into a cif contract, such as that in the present case, the vendor in the absence of any special provision to the contrary is bound to do six things. First, to make out an invoice of the goods sold. Second, to ship at the port of shipment goods of the description contained in the contract. Third, to procure a contract of affreightment under which goods will be delivered at the destination contemplated by the contract. Fourth, to arrange for an insurance upon the terms current in the trade which will be available for the benefit of the buyer. Fifthly, with all reasonable dispatch to send forward and tender to the buyer those shipping documents, namely, the invoice, bill of lading and policy of insurance, delivery of which to the buyer is symbolic of delivery of the goods purchased, placing the same at the buyer’s risk and entitling the seller to payment of the price.” [To be accurate, only five performance characteristics of a cif contract were stated by Lord Atkinson instead of ‘six’].
31. Here again, the question comes up of what should be done in this case because the seller did not deliver the insurance policy to the buyer but only the bill of lading and the invoice.
32. In respect of the duties of a seller under a cif contract, the learned authors of Benjamin’s Sale of Goods (2006) 7th ed stated at para 19-010:
    • “In general. The duties of a cif seller are, first to ship (or procure shipment of) goods in accordance with the contract and, where necessary, to appropriate such goods to the contract; secondly to procure or prepare the proper shipping documents; and thirdly to tender these documents to the buyer, or as the buyer directs. He is not under any duty to ensure the actual physical delivery of the goods at the c.i.f. destination, though he is under a duty not to take active steps to prevent such delivery”.
33. In Sale of Goods (2000) by Professor Ewan McKendrick et al, the learned authors stated at para 13-005, p.650:
    • “The principal duties of a seller under a c.i.f. contract are to obtain and then tender to the buyer the documents relating to the goods themselves. These documents are usually the bill of lading, a policy of insurance (or, possibly, a certificate of insurance) and a commercial invoice. The seller must therefore make the necessary arrangements for the carriage of the goods and their insurance during transit”.
34. In Comptoir D’Achat et de Vente du Boerenbond Belge S/A v Luis de Ridder Limitada [1949] AC 293, p.309, Lord Porter said:
    • “[The] obligations imposed upon a seller under a c.i.f. contract are well known, and in the ordinary case include the tender of a bill of lading covering the goods contracted to be sold and no others, coupled with an insurance policy in the normal form and accompanied by an invoice which shows the price, and, as in this case, usually contains a deduction of the freight which the buyer pays before delivery at the port of discharge. Against tender of these documents the purchaser must pay the price”.
35. In respect of the concept of delivery in the context of a cif contract, the learned authors of Benjamin’s Sale of Goods (2006) 7th ed stated at para 19-072:
    • “Three stages of delivery. In a c.i.f. contract, there are ‘three stages of delivery’: a ‘provisional delivery’ on shipment, a ‘symbolic delivery’ on tender of documents; and a ‘complete delivery of the cargo’ when the goods are handed over to the buyer at the destination. The duties of the seller so far discussed relate to the first two of these stages; if the seller performs those duties he is not normally in breach merely because the third stage is not reached. This follows from the nature of a c.i.f. contract and from the rules as to risk as they apply to such a contract. Having shipped proper goods and tendered proper documents, the seller is not normally concerned with what happens to the goods in transit: the buyer’s remedies (if any) in respect of the failure of the goods to arrive are against the carrier or the underwriter, not against the seller...”
36. In Scottish & Newcastle International Ltd v Othon Ghalanos Ltd [2006] EWCA 1756 at para 43, Rix LJ, after referring to Benjamin’s Sale of Goods, as cited above, said:
    • “Talk of the ‘three stages of delivery’ is an attempt to highlight aspects of the contract; but, save where delivery and the transfer of title are delayed either by the need to purchase goods afloat or the reservation implicit in the retention of the documents, which is not this case, everything occurs at latest at shipment. The third stage, albeit called ‘complete delivery’, essentially reflects only the fact that the seller might (in theory) wrongly attempt to divert the goods at the last moment and that the buyer might still have an opportunity to reject the goods following inspection at the port of arrival. In every other respect, however, and, most significantly, in the sense that arrival of the goods at destination is no part of the seller’s duty..., actual delivery of the goods at destination is not part of the seller’s obligations in performance of his contract...” (emphasis mine).
37. As for the consequences of failure by the seller to deliver the shipping documents to the buyer under a cif contract, I refer first to Orient Co Ltd v Brekke & Howlid [1913] UKLawRpKQB 28; [1913] 1 KB 531. In that case, the sellers in Bordeaux, France, sold cases of walnuts to the buyers in Hull, England. The goods were shipped to the buyers and the sellers sent to the buyers a bill of lading and an invoice but not an insurance policy. In fact, the sellers had not effected any insurance at all notwithstanding that the sale was pursuant to a cif contract. The goods arrived safely and unharmed in Hull, England, but the buyers refused to accept the goods and the sellers sued for the price of the goods. The buyers set up as a defence that the sellers had not taken out any insurance cover for the goods and no insurance policy was sent to the buyers. The sellers were successful at the Court of First Instance. The buyers appealed. In allowing the buyers appeal, Lush J said at p. 536:
    • “If it is an essential condition of delivery that the goods shall be insured in favour of the buyer so that he shall be in a position to dispose of the goods with all the shipping documents which are necessary to give him a title and secure him against loss, then, apart from the question whether the policy must be tendered to him (buyer), it seems to me to be quite clear that, that condition not having been fulfilled, the plaintiffs (sellers) when they brought this action were not in a position to prove that they had delivered the goods to the defendants (buyers).
    • “With regard to the further question whether the policy of insurance ought to be tendered to the buyer I think that, in the absence of waiver, it is an essential condition of delivery under a c.i.f. contract that among the shipping documents tendered to the buyer the policy of insurance shall be included as an essential item. It is one of the documents that must be transferred to the buyer in order to effect a complete delivery to him of the goods under a c.i.f. contract.
    • “I am, therefore, of opinion that there was no evidence on which the jury could find that the plaintiffs (sellers) have performed, or were ready and willing to perform, their part of the contract. That being so, the verdict and judgment must be set aside and judgment entered for the defendants (buyers)” (emphasis mine)
38. Rowlatt J, the other member of the Court, said at p. 537:
    • “If one takes a business view of the matter, I think that it is reasonably clear. What is meant by saying that the goods have ‘arrived?’. To the buyer it means only that the ship has arrived which he is told contains the goods. The bill of lading must be given to him and, further than that, he is entitled to say that he will not pay the price unless a policy of insurance is handed to him along with it so that if anything has gone wrong with the goods he may acquire his rights under the policy in him of the goods themselves” (emphasis mine)
39. In Sale of Goods (2000) by Professor Ewan McKendrick et al, the learned authors stated at para 13-009 (b), p.655:
    • “The importance of documents. Documents are at the heart of the delivery obligation of a seller under a c.i.f. contract. Under the classic c.i.f. contract, the seller must tender a bill of lading, an insurance policy and a commercial invoice”
40. At para 13-035, p.670 of the same text, the learned authors stated:
    • “Documents must be tendered. Not only must the seller procure the relevant shipping documents, he must also tender them to the buyer. Generally, this is a straightforward matter. The obligation to tender the documents does not depend on the continued existence of the goods. Thus a seller remains bound to tender documents even in the case where the goods have, at the time of the tender, been lost or damaged. A seller who fails to tender the documents in the agreed manner will be unable to claim the price of the goods from the buyer and may also be liable to the buyer”
41. I will refer now to waiver and estoppel because of the reference to waiver in this context in the judgment of Lush J in Orient Co Ltd v Brekke & Howlid and the fact that counsel for Alrite Steel touched upon estoppel in her submissions. In Flacker Shipping Ltd v Glencore Grain Ltd [2002] EWCA 1068, paras 61 and 64, Potter LJ said:
    
    • “61. Although variation, waiver and estoppel by representation are traditionally treated as virtually interchangeable pleas in support of the assertion that, on the basis of particular facts, a party has lost or may not now enforce his rights under a written contract, they are by no means synonymous. In particular ... a variation alters the obligations to be performed under the original contract, whereas waiver and estoppel are conduct on the part of one party which does not alter the terms of the contract but merely affects the remedies in respect of a breach of those terms by the other party: see Enrico Furst & Co v WE Fricher Ltd [1960] 2 Lloyd’s Rep 340 per Diplock LJ at 349.
    • ....
    • “64. Broadly speaking, there are two types of waiver strictly so-called: unilateral waiver and waiver by election. Unilateral waiver arises where X alone has the benefit of a particular clause of a contract and decides unilaterally not to exercise the right or to forgo the benefit conferred by the particular clause. It has been described as:
      • “ ‘The abandonment of a right in such a way that the other party is entitled to plead the abandonment by way of confession and avoidance if the right is thereafter asserted, see Bowring v Wright [1972] 1 WLR 1972 per Hailsham LC at 97 C-D’
    • “In such a case, X may expressly or by his conduct suggest that Y need not perform an obligation under the contract, no question of an election by X between two remedies or courses of action being involved. Waiver by election on the other hand is concerned with the reaction of X when faced with conduct by Y, or a particular factual situation which has arisen, which entitles X to exercise or refrain from exercising a particular right to the prejudice of Y. both types of waiver may be distinguished from estoppel. The former looks principally to the position and conduct of the person who is said to have waived his rights. The latter looks chiefly at the position of the person relying on the estoppel. In waiver by election, unlike estoppel, it is not necessary to demonstrate that Y has acted in reliance upon X’s representation: see per Lord Goff of Chievely in The Kanchenjunga [1990] 1 Loyd’s Rep 391 at 399 RHC”.
42. At paras 67 and 68, Potter LJ went on to say:
    • “Waiver is closely associated with the law of estoppel in that, in the case of estoppel (and at this point I leave aside estoppel by convention), it is necessary for there to have been an unequivocal representation of fact by words or conduct and, in waiver, there must similarly have been unequivocal communication of X’s intention, whether by words or conduct. As observed by Phillips J in Youell and Ors v Bland Welch & Co Ltd (The Superhulls Cover-Case) (No.2) [1990] 2 Lloyd’s Rep 431 at 450:
      • “ ‘A party can represent that he will not enforce a specific legal right by words or conduct. He can say so expressly – this of course he can only do if he is aware of the right. Alternatively, he can adopt a course of conduct which is inconsistent with the exercise of that right. Such a course of conduct will only constitute a representation that he will not exercise the right if the circumstances are such to suggest either that he was aware of the right when he embarked on the course of conduct inconsistent with it or that he was content to abandon any rights he might enjoy which were inconsistent with that course of conduct’
    • “68. In relation to waiver, it is important to note certain features of the doctrine around which the submissions of the parties have evolved:
    • “(1) In order to demonstrate awareness of the right waived, it must generally be shown that X had knowledge of the underlying facts relevant to his choice or indication of intention: see Mathews v Smallwood [1910] UKLawRpCh 33; [1910] 1 Ch 777 per Parker J approved in the House of Lords in Fuller’s Theatre and Vandeville Co v Rofe [1923] AC 435 at 443 (in the context of waiver of a right of re-entry).
    • “(2) The Court will examine any act or conduct alleged to be unequivocal in its context, in order to ascertain whether or not it is sufficiently clear and unequivocal to give rise to a waiver: see United States Shipping Board v JJ Masters and Co (1922) 10 Lloyd’s LR 573 per Atkin LJ at 578 vol 2.
    • “(3) The Courts will also examine with care any agency relationship between X and any person alleged to have made the unequivocal communication on his behalf. If that person lacked the actual or ostensible authority to waive the right or rights concerned there will be no waiver: see Mardorf Peach & Co v Attoica Corporation of Libenia (‘The Laconia’) [1977] AC 850 at 871 B – 872 A”.
43. In relation to the passing of property and risk in goods in a cif contract, Lord Brandon in Leigh and Sillavan Ltd v Aliakraon Shipping Co Ltd [1986] AC 787 in a judgment with which Lord Brightman, Lord Griffiths, and Lord Ackner concurred, stated:
    • “[Under] the usual kind of c.i.f. or c and f contract of sale, the risk in the goods passes from the seller to the buyer on shipment, as is exemplified by the obligation of the buyer to take up and pay for the shipping documents even though the goods may already have suffered damage or loss during their carriage by sea. The property in the goods, however, does not pass until the buyer takes up and pays the shipping documents. Those include the bill of lading relating to the goods which has been endorsed by the seller in favour of the buyer. By acquiring the bill of lading so endorsed the buyer becomes a person to whom the property in the goods has passed upon or by reason of such endorsement, and so, by virtue of section of the Bills of Lading Act 1855, has vested in him all the rights of suit, and is subject to the same liabilities in respect of the goods, as if the contract contained in the bill of lading had been made with him”.
44. On the same subject about the passing of property and risk under a cif contract, Rix LJ in Scottish & Newcastle International Ltd v Othon Ghalanos Ltd [2006] EWCA 1750, paras 16 and 17, said:
    • “16. Before turning to Mr Lord’s primary submission, that this was effectively an ex ship contract for delivery in Limasol, it is necessary first to say something about the general rules under English law relating to delivery under international sales, especially those on C&F and CIF terms.
    • “17. The Sale of Goods Act 1979 contemplates that where, pursuant to the contract, a seller ships goods for transmission to a buyer, delivery to the carrier is prima facie delivery to the buyer; and that risk, title and possession of the goods are transferred on shipment”.
45. On appeal to the House of Lords in Scottish & Newcastle International Ltd v Othon Ghalanos Ltd [2008] UKHL 11 Lord Rodger stated at para 12:
    • “The subsection [s.32 (1) of the Sale of Goods Act 1979] reflects the position at common law. For example, in the (much discussed) case of Dunlop v Lambert (1839) 6 C1 & F600, a puncheon of whisky, which merchants in Edinburgh had sold to a customer in England was lost at sea during a voyage from Leith to Newcastle. The merchants, who had contracted with the carriers, sued them for the loss of the whisky. One of the questions which arose was whether the whisky had been delivered to the purchaser, so that the property or risk had passed to him, by the time it was lost. Lord Cottenham LC observed at p.620:
      • “ ‘It is no doubt true as a general rule, that the delivery by the consignor to the carrier is a delivery to the consignee, and that the risk is after such delivery the risk of the consignee. This is so if, without designating the particular carrier, the consignee directs that the goods shall be sent by the ordinary conveyance: the delivery to the ordinary carrier is then a delivery to the consignee, and the consignee incurs all the risk of the carriage. And it is still more strongly so if the goods are sent by a carrier specially pointed out by the consignee himself, for such carrier then becomes his special agent.
    • “He added at pp. 620-621:
      • “ ‘But though the authorities all establish the general inference I have stated, yet that general inference is capable of being varied by the circumstances of any special arrangement between the parties, or of any particular mode of dealing between them’”
46. Lord Roger then said:
    • “The rationale of the approach which the Lord Chancellor states must be that, when the consignor delivers the goods to the carrier, the consignee is then in a position to take delivery of them from the carrier at the other end”.

Discussion

47. On 13 March 2013, Alrite Steel and Wilex entered into a contract of sale of goods on a cif basis. Alrite Steel claimed that Wilex was in breach of the contract by failing to pay for the goods supplied to it pursuant to the contract of sale. As a result of Wilex failure to pay, Alrite Steel has also claimed against Mr Wilson for failing to honour his personal guarantee securing payment of the goods by Wilex. As it appears from the submissions of counsel for the defendants, Wilex and Mr Wilson have put up essentially three defences. I will deal with these three defences in turn.

(a) Non-delivery of the insurance policy by Alrite Steel to Wilex

48. There was no dispute that Alrite Steel did not send the insurance policy under the cif contract to Wilex. It is plain and clear from the authorities that under a cif contract, one of the principal duties of a seller is to tender the shipping documents, namely, the bill of lading, insurance policy, and commercial invoice to the buyer: Orient Co Ltd v Brekke & Howlid [1913] UKLawRpKQB 28; [1913] 1 KB 531, 536, 537; Johnson v Taylor Bros [1920] AC 144, p. 155, per Lord Atkinson; Comptoir D’Achat et de Vente de Boerenbond Belge S/A v Luis de Ridder Limitada [1949] AC 293, p. 309, per Lord Porter; Benjamin’s Sale of Goods (2006) 7th ed, para 19-010; Sale of Goods (2000) by Professor Ewan McKendrick et al, para 13-005, p. 650. Failure to tender the shipping documents, including the insurance policy, means that the seller will be unable to claim the purchase price from the buyer: Orient Co Ltd v Brekke & Howlid [1913] UKLawRpKQB 28; [1913] 1 KB 531, 537, per Rowlatt J; Sale of Goods (2000) by Professor Ewan McKendrick et al para 13-035, p. 670. It is not enough for a seller to take out an insurance policy on the goods and then not deliver the insurance policy to the buyer. The insurance policy must be tendered to the buyer. On the basis of those legal principles, Alrite Steel would have been unable to claim the price of the goods from Wilex if Wilex had refused to pay on the ground that no insurance policy has been tendered by Alrite. However, Wilex never refused to pay. It was always willing to pay, but at the same time it was always giving excuses for not paying, until it was brought to Court by Alrite for failure to pay. Wilex then manifestly refused to pay and gave reasons for its refusal in its amended statement of defence and the written submissions of its counsel.
49. The question arises whether waiver or estoppel applies to this case to preclude Wilex from now saying that it was entitled not to pay for the goods because Alrite Steel had never tendered the insurance policy. In my opinion, waiver would not apply in this case. There was no evidence to show that Wilex or Mr Wilson was aware that Alrite Steel as seller was under a duty to tender the insurance policy to it and that failure to do so would entitle Wilex to refuse payment for the goods. Given that this is the first Samoan case on a cif contract, I would not expect Wilex to have been aware that if Alrite did not provide the insurance policy then Wilex was entitled to refuse payment of the goods . The actions of Wilex all along from 2 April 2013 when the goods arrived in Samoa to 8 March 2014 when the goods were auctioned by customs, suggest that Wilex was not aware of such entitlement. That being so, it cannot be said that Wilex intentionally or unequivocally waived something it was not aware of. Waiver therefore does not apply.
50. In respect of estoppel, counsel for Alrite Steel in her submissions said that the defendants did not at any time require the inclusion of the policy of insurance amongst the shipping documents provided. Whilst that was so, I must say that it is irrelevant whether the buyer required the seller to tender to him the insurance policy or not. The seller must provide the insurance policy to the buyer for that is one of the duties of the seller under a cif contract. It is risky for the seller not to do so. Anyhow, Mr Wilson is an experienced businessman and must be familiar with cif contracts and the type of shipping documents, namely, a bill of lading, insurance policy, and commercial invoice that a seller is required to provide to a buyer under such a contract. Even though in this case, no insurance policy was provided by Alrite Steel from the time the contract of sale was concluded on 13 March 2013 until the goods were auctioned by customs on 8 March 2014, there was no believable evidence that the defendants ever asked Alrite Steel for the policy of insurance or showed that they were not willing to pay unless the insurance policy was tendered to them first by Alrite Steel. All along from 2 February 2013 until the goods were auctioned by customs on 8 March 2014, the defendants were always willing to pay but there was also at the same time always a reason for the defendants not being able to pay. It was only when this matter was brought before the Court that the defendants referred to the absence of an insurance policy from Alrite Steel. With respect, I also find it difficult to believe that the defendants were finally able to clear the goods from customs only after they became aware that the goods had been auctioned by customs. If this is genuine, it was regrettably too late for the defendants to be finally able to clear the goods. I accept the submissions for Alrite Steel that in the circumstances, the defendants should be estopped from relying on the insurance policy not being tendered as ground to refuse payment of the goods to Alrite Steel.

(b) Mr Wilson’s personal guarantee

51. Counsel for the defendants in her submissions said that Mr Wilson’s personal guarantee was issued on the premise that the goods will be physically available for customs clearance and transportation to the factory of Wilex at Lelata. Thus, when the goods were not physically available for customs clearance and transportation to the factory of Wilex, Mr Wilson’s guarantee ceased to become operable. These matters do not appear from the guarantee and do not form part of the guarantee. Mr Wilson gave his personal guarantee to Alrite Steel in consideration of Alrite Steel agreeing to permit Wilex to clear the goods from customs and to transport the goods for storage at the Wilex premises at Lelata. So by email of 7 May 2013, Alrite Steel gave instructions to the carrier PFL to release the goods to the defendants. However, the defendants did not clear the goods because they were awaiting approval by government to import the goods as duty free cyclone materials. According to the evidence for Alrite Steel, after it instructed PFL on 7 May 2013 to release the goods to the defendants, it was notified by PFL on 27 May 2013 that despite many phone calls and emails to Mr Wilson the goods were still on the wharf. The response from Wilex was that it was awaiting government approval for its steel beams to be imported duty free cyclone materials. So the reason for the non-clearance of the goods from customs was the non-payment of the duty by the defendants and not any action by Alrite Steel. Counsel for the defendants submitted that when Alrite Steel terminated the release of the goods on 27 May 2013, the guarantee lapsed. I do not agree. Alrite Steel was willing all along to release the goods to the defendants and instructed PFL to release the goods to the defendants. It was because of the defendants failure to pay the duty that the goods were not cleared from customs.
52. I, therefore, do not accept this defence put up by the defendants that Mr Wilson’s personal guarantee had lapsed on 27 May 2013 because of the fault of Alrite Steel. The personal guarantee did not lapse as submitted for the defendants. If anyone was at fault, it was the defendants and not Alrite Steel.

(c) Property in the goods never passed to the buyer as payment was never made

53. As Lord Brandon said in Leigh and Sillavan Ltd v Aliakraon Shipping Co Ltd [1986] AC 787:
    • “[Under] the usual kind of c.i.f. or c and f contract of sale, the risk in the goods passes from the seller to the buyer on payment... The property in the goods, however, does not pass until the buyer takes up and pays the shipping documents”.
54. In Scottish & Newcastle International Ltd v Othon Ghalanos Ltd [2008] UKHL 11, para 12, Lord Rodger cited with approval Dunlop v Lambert (1839) 6 CI & F600 where Cottenham LC observed at p. 620-621:
    • “It is no doubt true as a general rule, that the delivery by the consignor to the carrier is a delivery to the consignee, and that the risk is after such delivery the risk of the consignee...
    • “But though the authorities all establish the general inference I have stated yet that general inference is capable of being varied by the circumstances of any special arrangement between the parties, or of any particular mode of dealing between them”.
55. Whilst counsel for the defendants is right that property (ownership) in the goods has not passed to Wilex because the goods were never paid, the action by Alrite Steel was for non-payment of the goods and not for whether the property in the goods had passed to the buyer. The contract that Alrite Steel and Wilex entered into was for Alrite Steel to sell and Wilex to buy steel beams at a specified price. By email of 2 February 2013 Mr Wilson advised Alrite Steel to proceed with the order from Wilex and to allow the defendants to pay when their insurance claim came through which was expected to be in another two weeks which would be about 16 February 2013. That never happened up to the time the time the goods were auctioned by customs. Then by email of 7 March 2013, Mr Wilson advised Alrite Steel to arrange for shipment of the order for steel beams by Wilex and that the defendants were going to pay against the bill of lading. Alrite had already arranged and shipped the Wilex order which arrived in the port of Apia on 2 April 2013. On 27 March 2013 (New Zealand time), Alrite emailed the bill of lading and invoice to Mr Wilson. In terms of the invoice, the price of the goods was to be paid at sight on receipt of the bill of lading copy. That means that payment was to be made by Wilex as buyer when the copy of the bill of lading was presented to it. That must have been done on 26 March 2013 (Samoan time). Up to the time the goods were auctioned by customs on 8 March 2014, Wilex had never paid. That is what Alrite Steel has sued Wilex for - the price of the goods it had supplied to Wilex or damages for breach of the contract of sale by Wilex.

Interest

56. Counsel for the defendants in her submissions said that there was no agreement between the defendants and Alrite Steel as to the amount or rate of interest. That is right, there was no express agreement as to the rate of interest. However, it must be remembered that when Wilex had still not paid for the goods by 30 July 2013, Mr Wilson requested Alrite Steel by email to advise of the interest owing from the date payment was due to 31 July 2013. So it was the defendants who first raised the question of interest because they were late with payment of the goods. When by email of 14 January 2014, Alrite Steel provided a summary showing the amount of interest that had accrued on the outstanding invoice and the rate of interest to be 18% per annum applied per day from 27 March 2013, the defendants did not object or protest. Anyhow, 18% per annum applied per day is too high a rate of interest. The Court may either reduce the rate of interest or perhaps leave the rate of interest as it is but limit its duration. I have decided to limit the duration of the interest to 26 June 2015 when this case was heard.

Conclusions

57. As sought by Alrite Steel in the prayer for relief in its amended statement of claim, I give judgment for the plaintiff as follows:
    • (a) Judgment for the plaintiff in the sum of NZ$25,607.70 which includes principal, interest at 18% pa applied per day up to 12 December 2014.
    • (b) Interest at 18% pa as in (a) above to continue up to 26 June 2015.
    • (c) Each party to bear its/his own costs. This is the first Samoan case on a cif contract and an international sale of goods and, therefore, in a way this is a test case. I have also done the bulk of the legal research myself.

Patu F M Sapolu
Temporary Justice of the Supreme Court and
Former Chief Justice