IN THE KIRIBATI COURT OF APPEAL
CIVIL JURISDICTION
HELD AT BETIO
REPUBLIC OF KIRIBATI

Civil Appeal 13 of 2009

BETWEEN:

KIRIBATI SHIPPING SERVICES LTD
Appellant

AND:

WAYSANG KUM KEE and TENETI KUM KEE
Respondents

Before: Hardie Boys JA
Tompkins JA
Fisher JA

Counsel for Appellant: Ms Taoing Taoaba
Counsel for Respondent: Ms Botika Maitinnara

Date of Hearing: 22 August 2009
Date of Judgment: 26 August 2009

JUDGMENT OF THE COURT

Introduction

[1] The appellant Kiribati Shipping Services Ltd ("KSSL") appeals against a High Court judgment of 17 March 2009 awarding the respondents $390,000. The $390,000 was held to be the unpaid balance of the price of the ship MV Teitinraoi bought from the respondents by KSSL.

Background

[2] The respondents were the owners of MV Teitinraoi. The active respondent in all dealings with KSSL was Waysang Kum Kee ("Waysang").

[3] KSSL was and is a state owned company governed by a board of directors.

[4] Waysang offered to sell Teitinraoi to KSSL. He made the approach through the then Minister for Communications, Transport and Tourism, Hon Patrick Tatireta. As the relevant government minister, Mr Tatireta worked closely with the directors and officers of KSSL.

[5] Communicating through the Minister, Waysang successively sought $2M, $1.2M, and then $700,000 for the vessel. At that point KSSL gave him a cheque for $70,000 which Waysang understood to be part of the purchase price. The cheque was handed to him by the Deputy Chairman of KSSL’s Board, Tenenekai Baikawa, and Veronika Teibaba, KSSL’s finance manager, in the presence of the Minister.

[6] Waysang then attended a meeting of the KSSL Board and management. Also present was the Minister. At the meeting Waysang reduced his price to $500,000. He offered to sell for that figure.

[7] On the following day KSSL’s finance manager, Nei Veronika, telephoned Waysang and arranged to meet him at the bank. There she gave him a second cheque for $40,000 and acknowledged that a balance of $390,000 was still to be paid.

[8] The Teitinraoi was lying at Betio wharf. On board were three engineers and a watchman in the respondents’ employ. Following the meeting between Waysang and Veronika KSSL took possession of the vessel, took over the employment of the engineers and watchman, and spent a little under $10,000 on repairs to the vessel.

[9] The $390,000 balance was still outstanding when Mr Tatireta ceased to be the Minister and the Government set up a Commission of Inquiry into the circumstances surrounding the sale of the ship.

[10] On 22 May 2008 KSSL wrote to the respondents advising that "KSSL Management is to lay off their hands from MV Mataraoi (MV Teitinraoi) from the 12th May 2008 until the completion of the Commission of Inquiry investigation on the previous matters relating to the said vessel".

[11] The balance of the purchase of $390,000 has never been paid. The respondents eventually issued proceedings against KSSL for that sum.

High Court Proceedings

[12] In the High Court the Chief Justice recorded that "the thrust of the defence to the action is that to do his friend, in financial difficulties, a favour the Minister obliged the defendant, against the judgment of its Board and officers, to buy Teitinraoi from the plaintiff. That being so there was, to use Ms Taoaba’s words in her final address ‘no meeting of minds’: there was no contract between the parties.

[13] On that subject the Chief Justice accepted that there had been coercion from the Minister. Although not a member of the KSSL Board, the Minister appears to have exercised considerable influence over it. The Chief Justice accepted that he had dismissed three members of the Board who refused to agree to the purchase from the respondents and replaced them with more pliant persons who agreed; threatened a Board member/Assistant Secretary with removal unless she signed the first cheque; and demanded that the General Manager also sign that cheque. The Chief Justice also accepted that Waysang and the Minister were longstanding friends; that Waysang was in financial difficulties; and that the Minister had gone out of his way to ensure that KSSL would buy the vessel from the respondents to get them out of their financial difficulties.

[14] However, the Chief Justice found that there was no evidence that the respondents knew anything of the Minister’s acts in putting pressure on KSSL directors and officers. He accepted Waysang’s evidence denying knowledge of such conduct. He commented that friendship was not enough to prove collusion. 

[15] There still needed to be a contract on which the respondents could sue. On that subject the Chief Justice traversed the evidence and concluded that:

I find that payment of $40,000 together with Nei Veronika’s words confirmed an oral contract for the purchase by KSSL of  MV Teitinraoi for $500,000 of which $110,000 had been paid: a balance of $390,000, none of which has been paid.

[16] There being a binding contract for sale of the ship for $500,000, and it being common ground that KSSL had not paid the balance of $390,000, the Chief Justice entered judgment for that sum.

The Appeal

[17] In this Court Mrs Taoaba relied upon the same defence, namely that to the knowledge of Waysang, KSSL had been subjected to improper pressure from the Minister. She submitted that this precluded the meeting of minds necessary to constitute a contract. 

[18] There are real difficulties in the way of that argument. The starting point is that for the purpose of the law of contract, offer and acceptance are to be assessed objectively. If a purchaser outwardly conducts itself in a way which makes it reasonable for a vendor to conclude that the purchaser is accepting the vendor’s offer, it is immaterial whether the purchaser privately had other intentions. Nor is the vendor concerned to inquire into the factors which may or may not have motivated the purchaser to communicate an acceptance. All that is necessary is that, to a reasonable person in the position of the vendor, the purchaser appears to be accepting the vendor’s offer.

[19] The question in the present case is therefore whether it was reasonable for Waysang to conclude that KSSL was accepting the offer made at the Board meeting to sell for $500,000. After hearing the witnesses the Chief Justice held that Veronika accepted the offer on the Board’s behalf. She did so by making the further payment of $40,000 and acknowledging that there was a further $390,000 still to pay.

[20] It has not been argued that Veronika lacked the actual or apparent authority of KSSL to communicate acceptance of the offer. Veronika was the Finance Manager, had taken part in the payment of the first $70,000, was present at the Board meeting when the offer to sell for $500,000 was made, and demonstrated that she had the power to make a further payment of $40,000 on KSSL’s behalf. In all the circumstances it was reasonable for Waysang to conclude that KSSL had given her the authority to finalise the contract on its behalf.

[21] Even had there been any doubt on that subject, it would have been removed by KSSL’s actions after the arrangement between Waysang and Veronika. KSSL’s acts in taking possession of the vessel, taking over the employment of crew on the vessel, and effecting repairs to the vessel, would have conveyed to a reasonable purchaser in the position of the respondents the clear impression that KSSL had confirmed the purchase on the terms proposed.

[22] The sole ground advanced in support of the appeal fails. The only reasonable conclusion is that, viewed objectively, KSSL’s actions represented acceptance of the respondents’ offer, that there was a binding contract to buy, and that in failing to pay the $390,000 KSSL breached the contract.

Result

[23] The appeal is dismissed with costs to the respondent to be agreed or taxed.

Hardie Boys JA
Tompkins JA
Fisher JA