In the High Court of Kiribati
Civil Jurisdiction

High Court Civil Case 177 of 2009

Held at Betio
Republic of Kiribati

Between:

Kiribati Supplies Company Ltd
Plaintiff

And:

Freddy Raiha t/a Microcean Trading
Defendant

For the Plaintiff:	Ms Botika Maitinnara
For the Defendant:	Ms Taoing Taoaba

Dates of Hearing:	20 & 21 April 2010

JUDGMENT

Claim by the plaintiff for the return of $15,650 with interest, being half the price to be paid by the plaintiff to the defendant for five container loads of cement. Counterclaim by the defendant for $15,650 with interest being the other half of the price.

The plaintiff operates a business of selling and trading goods. The defendant is an importer of goods.

The parties have done business before. The arrangement between them had been for Supply to pay half the purchase price on the making of a contract and half on delivery of the goods and to be responsible for paying customs duties and port charges. Normally the port charges have been quite small as Supply would clear the cargo immediately.

This time it was different. Microcean ordered cement from his supplier in Lae, PNG, to be consigned to "Ministry of Works & Utilities". The consignment arrived on "Kiribati Chief" (voyage 87) on 15 October 2006. [This date is given in a letter (Exhibit D4) written by Mr Michael Takabwebwe then representing Supply to the People’s Lawyer, then representing Microcean].

The Ministry did not go on with the transaction. Microcean looked for another buyer. The letter of Wednesday November 15th 2006 to Supply (Exhibit P1):-

PARADISE PORTLAND CEMENT

We have five containers of Paradise Portland cement at the Kiribati Port and are looking for any customers to buy them.

Should you be interested, contact us at your earliest to avoid extra local cost. The price of the cement remain as per our current price offered to you.

We look forward to continue doing business with you.

Yours faithfully

(Sgd) Freddy Raiha
Manager

In his evidence Mr Raiha said he had already approached Supply verbally to buy the cement. This had not been put to the witnesses for the plaintiff. There is no mention of an earlier verbal approach in the letter of November 15th. Supply accepted the offer on 23 November and paid $15,650.

A problem arose. The Supply Customs Clearing Officer went to pay customs duty and to clear the cargo. The Bill of Lading which he presented shewed the consignee as "Ministry of Works & Utilities". The Kiribati Port Authority would not release the cargo to Supply but only to the consignee shewn: the Bill of Lading would have to shew Supply as the consignee. There was a delay of some days before Freddy Raiha had the Bill of Lading changed.

In the meantime port charges were accumulating. They applied from 
20 November. The rate charged was $5 per tonne of cargo per day. The Bill of Lading shews the cargo weight in each container as 27,200 kg (27.2 tonnes). There were five containers each of that weight. By the time Supply could present the Bill of Lading as the consignee the charges were over $10,000. Supply could not afford to go on the deal: it would not be economic.

That is the account given by the witnesses for the plaintiff. The defendant to the contrary was adamant that he had only ever given one Bill of Lading to the plaintiff and that Bill of Lading shewed the plaintiff as consignee:-

I didn’t give them a Bill of Lading shewing consignee as Ministry of Works. I had already amended the Bill of Lading after they expressed interest.

The weight of evidence is against the defendant. Freddy Raiha’s letter of November 30th to Supply (Exhibit P4):-

FINAL PAYMENT FOR FIVE FCL CEMENT

Thank you for the first part payment for the five FCL of Paradise Portland cement which are at the Kiribati port.

We have received the documents for the consignment and kindly request for the final payment of $16,650.00. We apologize for the calculation error in our debit note stating total cost of $31,300.00 which should be $32,300.00. This is in accordance with our initial price offer to you which is still effective up till now.

The copies of the documents are attached and we look forward for your favourable services.

The documents attached are part of the exhibit. One is the Bill of Lading. It shews the consignee as "Ministry of Works & Utilities". The defendant could not suggest how Supply could have come by that Bill of Lading unless he had sent it. I reject his evidence and accept that of the witnesses for the plaintiff. On the balance of probabilities that Bill of Lading was one of the documents attached to the letter of 
30 November. The plaintiff could not use it to clear the cargo.

The defendant has been in business for a number of years. He must be taken to have known that port charges are normally imposed 21 days after the vessel landing the cargo leaves the port of Betio. Unlike their previous transactions the charges this time were already being levied before the contract was made. The defendant did not disclose this. He should have and the responsibility for the delay after the contract was made was his: he first gave Supply a Bill of Lading which Supply could not use to clear the cargo.

By the time Supply had a Bill of Lading shewing it as consignee the accumulated port charges were over $10,000. The transaction was not worthwhile to Supply. Supply wrote to the Kiribati Ports Authority on 13 December (Exhibit D1d):-

Re:	Storage – 5 fcl paradise cement

We wish to seek your kind assistance in respect of the above.

Originally the consignment was for the Min PW&U but for some unknown reasons the agent of Paradise Cement (Mr Freddy Raiha) had approached us to buy the consignment from him.

We were told that storage charge has accumulated to more than $10,000.00 which is huge and would be difficult for us to meet and if we were to include the storage in our mark-up, definitely the cement would not sell.

We are requesting your good self, your Management team and your Board if you could waive the storage charge in the circumstances and/or grant other alternatives that would assist us in releasing the said consignment and when selling the same, hopefully we will not be in a position to impose heavier tariffs to the general public compared to the current market price.

Your favourable assistance would be appreciated.

The KPA did not waive the charges.

What follows as a matter of law? Unlike their previous transactions in which port charges had been small, Microcean did not warn Supply that port charges were already running. He should have because it quite altered the basis on which, up till then, they had always done business and which Supply was entitled to assume was still the basis. The omission amounts to a misrepresentation.

A representation is a statement made by one party to the other, before or at the time of contracting, with regard to some existing fact or to some past event, which is one of the causes that induces the contract. ….. A misrepresentation is a representation that is not true. (Cheshire and Fifoot’s Law of Contract 5th Australian edition @ p. 270).

The defendant’s silence amounted to a misrepresentation. The plaintiff is entitled to rescission of the contract.

Furthermore the "huge" port charges frustrated the contract: the plaintiff could not go on with it.

Unforeseen contingencies which occur after formation of the contract may discharge the parties from further obligation on the ground that the contract has been frustrated. ….. a doctrine has gradually been evolved which provides for the termination of a contract if events occur which radically alter the situation envisaged by the parties at formation. (Cheshire and Fifoot @ p. 639 and see generally Ch. 23 Section 1 and the references in it to Codelfa Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337).

The plaintiff is entitled to a discharge of the contract for the Frustration. 

On both bases the plaintiff is entitled to the return of its money. It follows that the counterclaim must fail.

There will be judgment for the plaintiff for $15,650 on the claim. The counterclaim is dismissed.

Dated the day of April 2010

THE HON ROBIN MILLHOUSE QC
Chief Justice