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

Civil Appeal No 2 of 2000

BETWEEN:

Brian Stewart Orme
Waysang Kum Kee
Appellants

AND:

Meere Tiare
trading as Marine Dredging and Pile Driving Contracting
Respondent

Before: Casey JA
Bisson JA
Tompkins JA

Counsel: A'e'au Semi Epati for appellant
John Baulch SC for respondent

Date of Hearing: 2 April 2001
Date of Judgment: 5 April 2001

JUDGMENT OF THE COURT

[1] This appeal is about who owns a dredge, the MV Nautilus. It was owned by the respondent. On 3 April 1999 she signed an agreement purporting to sell the Nautilus to the first appellant Mr Orme for $15,000. By an agreement dated 13th April 1999 Mr Orme sold the Nautilus to the second appellant Mr Kum Kee for $33,000.

[2] The respondent commenced proceedings against both appellants challenging the validity of the sale to Mr Orme. After a seven day hearing in April 2000, the Chief Justice, in his judgment delivered on 28 April 2000, held that the agreement of 19 February 2000 had been induced by undue influence and was therefore void. The respondent remained the owner of the Nautilus. Following a hearing on 17 November 2000, he assessed the damages to which the respondent was entitled from both appellants at $150,000.

[3] The appellants have appealed against the finding on liability and the assessment of damages.

The sequence of events

[4] The Nautilus is a dredge. It was operating in Queensland. Mr Peter Smith, the husband of the respondent, interested a group of people in Australia in putting up sufficient money to buy the Nautilus and bring it to Kiribati for what they anticipated would be profitable work. This group of eight persons was referred to by the Chief Justice as investors. The Chief Justice found that the purchase price of the Nautilus was $125,000.

[5] The Nautilus came to Kiribati towards the end of 1997. It was registered in the respondent's name. She had a license to use it commercially for 12 months until 9 December 1990. Although the investors appeared to have put up the whole of the purchase price, it seems that they had no security over the Nautilus.

[6] It cannot have been long after the dredge arrived in Kiribati that an execution creditor William Mackie had the ship arrested as security for money owed to him by Peter Smith. The investors interpleaded. On 19 February 1998 the then Chief Justice made an order allowing the investors' claim and releasing the Nautilus from arrest.

[7] Mr. Henry Robert Spring Corrie was in 1998 the manager, at a weekly salary of $400, of the Tarawa Butchery and Sausage Manufacturers, a business of which the plaintiff was proprietor. The judge thought that he must also have been the manager of Marine Dredging and Pile Driving Contracting, the other of her businesses. He left Kiribati in June 1998.

[8] On 3 April 1988 Mr. Orme made an offer to the respondent and to Mr. Henry Corrie to buy the dredge for $10,000. According to Mr. Orme the offer was accepted.

[9] The parties met later that day. When Mr Corrie and the respondent found that Mr Orme was proposing to pay the bulk of the purchase price 45 days later, they increased the price to, $15,000. This was because they needed the money immediately for the butchery. The respondent and Mr. Orme then signed a document headed "Agreement to buy MV Nautilus" that was in these terms:

"1. I, Meere Tiare, being the owner of the vessel "NAUTILUS" ("the vessel") hereby agree to sell the vessel to Brian Stewart Orme for the sum of $15,000.00.

2. Brian Stewart Orme agrees to pay me $50.00 upon the execution of this agreement and to pay the balances of the purchase price within 45 days.

3. Should Brian Stewart Orme fail to pay as aforesaid the ownership of the vessel shall revert to me.

Dated this 3rd day of April 1998."

[10] Mr Orme found that this agreement was insufficient to transfer ownership of the Nautilus to him. He instructed his solicitor Mr Berina to prepare a bill of sale under the Merchant Shipping Act 1983. On 8 April 1998 he took it to the respondent's house where she signed it. It recorded the price of $15,000 and the transfer of the respondent's shares in the ship to Mr Orme.

[11] Mr Orme sold the Nautilus to Mr Kum Kee for $33,000. The agreement evidencing this sale is dated 13 May 1998, although that date may not be correct since the agreement records that the first payment was due on 14 April 1998. The agreement contains this clause:

"THIS Agreement is entered into between the Vendor and the Purchaser in the knowledge that the vessel is being claimed from the Vendor by some third parties and the Purchaser hereby agrees not to make any claim for the refund of any monies paid by him to the Vendor pursuant to this Agreement should the claim against the Vendor be successful provided the Vendor does everything possible to defend the claim against him by the said third party."

[12] On 6 August 1998 Mr Bradshaw, a barrister of Cairns, wrote to Mr Orme asserting that the bill of sale should be set aside on the grounds that it was unconscionable. He also asserted that the respondent was a trustee for the investors and that her signature on the bill of sale was a forgery.

[13] These proceedings were commenced on 4 September 1998.

The judgment in the High Court.

[14] These are the principle findings made by the Chief Justice:

•	He recorded that the respondent was in April 1998 living in the house of Mr Henry Corrie and was living as man and wife with his son Mr Sam Corrie. Her husband Mr Peter Smith has left Kiribati.

•	After referring to her limited education and employment he made the following assessment:

"Not only was Corrie a man in his 50's, the manager of her business but he was, also, in effect, the plaintiffs father-in-law and head of the household in which she was living. My assessment of the plaintiff, having seen her, heard her and heard about her, is that she is a not particularly intelligent (although possessing a degree of cunning), ill-educated young woman with no significant business experience. That assessment together with the circumstances in which she was living, lead me to conclude that she was very much under the influence of Corrie and would do, as a rule, what he told her."

•	Although this was disputed by Mr Orme, he found that the investors paid $125,000 for the Nautilus and that $40,000 was the cost of bringing the ship from Brisbane to Kiribati. Duty of $13,500 was paid, bringing the total cost to nearly $180,000.

•	Mr Orme was aware of the existence of the investors and that he was cutting them out.

•	Mr Bradshaw's letter of 6 August 1998 amounted to notice of avoidance of the contract.

•	It was a classic case of undue influence exerted by two men, Mr Corrie and Mr Orme, each of whom stood to gain from the transaction. He relied on these findings:

An ill-educated, not intelligent (although possessing a degree of cunning) young woman, inexperienced in business

The de facto daughter-in-law of a much older, more experienced man, the manager of her business

Already acquainted with the grantee, himself a man of experience in business affairs

A transaction concluded in haste, in a few hours

Enormous disparity between what had been paid for and expended on the vessel to get it to Kiribati and the price for which she sold it

No independent advice.

•	Mr Orme had failed to rebut the presumption of undue influence.

•	The Chief Justice found that Mr Kum Kee took with notice of the prior interest of the respondent and the investors.

•	On these findings, judgment was entered against both respondents. The agreement of 3 April 1998 was set aside and the agreement of 13 May 1998 declared to be of no effect. He does not expressly deal with the bill of sale of 8 April 1998, but with the agreement of 3 April 1998 set aside, the bill of sale cannot survive either.

•	On the credibility of the witnesses, he had this to say:

"Before I go on I should say something about the parties. I was not much impressed by any of them. I am unwilling to accept any piece of their evidence, unless admitted, if not confirmed independently from some other source. Fortunately, with one exception - the cost to the investors of buying and getting the vessel to Kiribati - all the facts needed for my decision are either admitted or plain on the face of the documents."

[15] The hearing to assess damages was on 17 November 2000. Damages were assessed on the basis of the loss of profits by the respondent through her being unable to operate the Nautilus. As the figures were in many respects unsatisfactory, a substantial discount of 50% was made to arrive at an award of damages of $150,000. We return to the Chief Justice's reasons later.

The first ground of appeal

[16] Mr. Epati submitted that the appellants were denied a fair hearing, contrary to Section 10(8) of the Constitution, in that an application for an adjournment made on the first day of the hearing, was refused. To consider this submission it is necessary to set out the sequence of events.

[17] A convenient starting point is an order made by Commissioner Lambourne on 22 October 1999 that the trial of the action was fixed for hearing on 10 April 2000.

[18] The proceedings themselves had been commenced on 4 September 1998. It is unnecessary to detail the interlocutory applications and adjournments that occurred between that date and the trial on April 10, 2000.

[19] An amended statement of claim was filed on 6 April 2000. We return later, in a different context, to consider this amended statement of claim in more detail. The first and second appellants each filed a detailed statement of defence to the amended statement of claim on 11 April 2000.

[20] In April 2000 Mr. Epati was counsel in a murder trial in Samoa. He anticipated that the trial would be finished before 10 April 2000 but that proved not to be the case. Accordingly, he was unable to be present when the trial was due to commence on 10 April 2000.

[21] On that day the appellants, apparently appearing on their own behalf, applied for further and better particulars and for time to file amendments to their defence. The judge recorded that he had postponed the beginning of the hearing until the next day, 11 April 2000. In his judgment he said:

When the matter was before me on 28 January 2000 I said as clearly and forcefully as I knew how that there would be no more adjournments: the hearing would begin today. Last Friday I relented to the extent of a day. But no more. If the defendants had taken seriously what I said they could have had any necessary amendments to their defence ready for filing in case the amendments to the statement of claim were allowed, as they were. They seem to have chosen to do nothing.

[22] For these reasons the applications were dismissed.

[23] The trial commenced on 11 April 2000. It lasted for seven sitting days. Mr. Orme, who is not a qualified lawyer, appeared on his own behalf. He was also allowed to represent Mr. Kum Kee, is itself a concession by the Chief Justice. It is apparent from the transcript that Mr Orme played a very active role in the trial, leading witnesses, and cross examining.

[24] In considering whether an adjournment should be granted the paramount consideration is the need to do justice to the parties. In O'Malley v Southern Lakes Helicopters Ltd 4/12/90, Tipping J, HC Christchurch CP513/89, his Honour said:

"However the essential question which the Court always has to consider when asked for an adjournment is whether or not that is necessary in order to do justice between the parties. One must not overlook that not only is it necessary to do justice to the party who is seeking the adjournment but also justice to the party who wishes to retain the benefit of the fixture. It is essentially a balancing exercise."

[25] The public interest in the efficient administration of justice (a fixture vacated may mean Court time lost) is an important factor, but one always subservient to the proper determination of the proceeding.

[26] In considering whether there was a denial of justice to the appellants, we have considered the following factors:

•	The fixture was made some six months in advance.

•	The parties had been forcefully warned by the Chief Justice on 28 January 2000, that there would be no further adjournment.

•	We accept that Mr Epati was engaged in a major trial in Samoa that commenced on 18 January 2000 and that he thought was going to be completed in time for him to be present at the fixture. However he must have known well before the fixture that he was not going to be available. He was aware of the fixture in mid February 2000.

•	Mr Epati said that he had made many attempts to obtain alternative counsel unsuccessfully. He gave all this information from the bar. That is unsatisfactory. He did not provide any detail of the attempts to obtain alternative counsel, when he did so, and how many counsel he approached. The amount Mr Epati required for his fees and disbursements had been paid, so there were funds available for an alternative counsel.

•	An adjournment would have caused a substantial delay. The appellants asked for an adjournment for two weeks, but the Chief Justice said that no time was available then. We do not know how long it would have been before the action could have been heard had the adjournment been granted, but it is likely to have been at least several weeks.

•	No affidavit has been filed by counsel or the appellants detailing any respects in which the appellants claim to have been prejudiced by the refusal. The factual issues were straightforward. Mr Epati referred to a number of claimed prejudices, but we do not find any of them to be particularly material. He referred to the evidence of Susan Roots, claiming that her evidence about the price paid for the Nautilus was hearsay. That is not apparent from the transcript. And there is evidence from a customs officer about the duty paid that is consistent with her evidence. He submitted that he would have urged that the comparison for the purpose of determining whether there had been undue influence should have been between the price in the agreement and the value at the time of the contract, not the price paid. He claimed that there would have been better evidence of the cost of slipping and repairs, but again no detail of that evidence has been provided.

•	However, we accept that there is a difference between proceedings conducted by a party in person and conducted by competent counsel. We do not exclude the possibility that counsel may have been able to conduct the trial more effectively than was Mr Orme on behalf of himself and Mr Kum Kee.

•	Mr. Epati submitted that the late filing of the amended statement of claim was in itself a reason for the adjournment been granted. We do not find this to be so. A comparison between the statement of claim filed with the original writ and the amended statement of claim shows that what the amended statement of claim provided was simply further details of the factual allegations in the original statement of claim. More importantly the detailed allegations set out in paragraphs 10, 11, 12 and 13 of the amended statement of claim are for all practical purposes the same as the allegations in the original statement of claim. It is these paragraphs that contained the allegations which, if established, would justify a finding of undue influence. The claims made by the respondent against the appellants are more detailed, but they are not materially different.

•	To allow the appeal on this ground would require the respondent, through no fault of her own, to go through the inconvenience and cost of a 7 day re-trial. The injustice to her that this would cause is a factor to consider.

[27] Having weighed all these factors, we are satisfied that the declining of the adjournment has not caused the appellants an injustice to a degree that would justify allowing the appeal on this ground. The Chief Justice, in determining the application for an adjournment, was exercising a discretion. It has not been shown that he did so on any wrong principle or that he took into account irrelevant considerations or failed to take into account relevant considerations.

[28] This ground of appeal cannot succeed.

Second ground of appeal

[29] The second ground of appeal is that the Chief Justice based his judgment on undue influence whereas unconscionable conduct was pleaded and defended. Mr. Epati further submitted that the Chief Justice did not find, on the facts, a relationship of ascendancy between the appellants and the respondent, of a nature where influence could be said to have been exercised by the applicants over the will of the respondent. The appellants, he submitted, were prejudiced throughout the hearing as they were effectively defending a claim for unconscionable conduct only. They were not aware, neither were they told at any stage of the hearing, that they needed to disprove the elements of a further claim of undue influence.

[30] The relevant pleadings in the amended statement of claim are paragraphs 10 to 15:

10. 	Further, or in the alternative, on the 3rd April 1998, the plaintiff, who was then 20 years of age, seven months pregnant and in a poor mental state, occupied premises with Mr Henry Spring Corrie who is a middle aged I-Kiribati citizen and purported to be a signatory as witness to the Bill of Sale on the 8th April 1998, hereinbefore referred to in paragraph 8 and was separated from her husband who was in Australia. Mr Corrie required the plaintiff to attend the Betio Motel where she met the first defendant. The first defendant is of Irish descent and an associate of Mr Banuera Berina who cross examined the plaintiff in the High Court on or about the 20th March 1998. The first defendant produced an Agreement which the plaintiff neither understood or had in any way negotiated with the first defendant, purporting to acknowledge the sale by the plaintiff of the MV Nautilus for $50 cash and the balance within 45 days. On querying the transaction she was instructed in a firm tone by Mr Corrie in the presence of the first defendant and with his apparent agreement to sign the document and take the $50, which she did.

11. 	In the circumstances hereinbefore stated, the first defendant by virtue of his association with Mr Corrie, acquired the dominion over the mind of the Plaintiff at the time of the transaction at the Betio Motel.

12. 	The plaintiff accompanied Mr Corrie to the Betio Motel, and had no clear understanding of what was happening in relation to the MV Nautilus, was introduced to the first defendant and was told to sit at his table by Mr Corrie. The first defendant produced an agreement whereby the plaintiff sold to the first defendant the MV Nautilus for $50 cash and balance within 45 days.

13. 	Further and in the alternative, the plaintiff never received any formal education in business affairs, and was involved in the MV Nautilus as the wife of Peter Raymond Smith, and was a housewife with a child and pregnant in the month of April 1998. On the 3rd April 1998 the plaintiff was required to attend the Betio Motel by Mr Corrie, a house guest and by virtue of his status and age, was the head of the household in the absence of the plaintiff's husband in Australia.

14. 	At the time of executing the said agreement on the 3rd April, the plaintiff had no independent advice.

15. 	The plaintiff accepted and obeyed the instructions of Mr Corrie in the presence of the first defendant.

[31] Paragraph 17 goes on to allege that Mr. Orme knew the respondent had no permission or authority to sell the Nautilus and knew that the sale amounted to an unconscionable bargain. The purported agreement was obtained by the unconscionable conduct of Mr. Orme.

[32] Mr. Epati is correct when he submits that the Chief Justice, despite that pleading, treated the claim as one based on undue influence. In his judgment his Honour makes no reference to unconscionable conduct. He approached the claim on the basis set out by Sir John Salmond in Brusewitz v Brown [1923] NZLR 1106 at 1109-10:

"Where there is not merely an absence or inadequacy of consideration for the transfer of property, but there also exists between the grantor and the grantee some special relation of confidence, control, domination, influence, or other form of superiority, such as to render reasonable a presumption that the transaction was procured by the grantee through some unconscientious use of his power over the grantor, the law will make that presumption, and will place on the grantee the burden of supporting the transaction by which he so benefits, and of rebutting the presumption of its invalidity. In such cases it is necessary for the grantee to prove that the suspected transaction has not its source in any improper influence over the mind or will of the grantee, or in any fraud, misrepresentation, mistake or concealment of material facts which ought to have been disclosed by the grantee to the grantor in view of the relation between them. Unless the grantee can prove this the transaction will be set aside at the suit of the grantor or his representatives."

[33] He went on to refer to the judgment of Hodges J in Union Bank of Australia Ltd v Whitelaw (1906 VLR 711):

"'Influence', as I understand the term in this connection, is the ascendancy acquired by one person over another. 'Undue influence' is the improper use by the ascendant person of such ascendancy for the benefit of himself or someone else, so that the acts of the person influenced are not, in the fullest sense of the word, his free voluntary acts."

[34] When the paragraphs in the amended statement of claim to which we have referred are looked at in the light of the principles stated in these two citations, it is apparent that what was being pleaded amounted to an allegation of undue influence, even although those words were not expressly alleged. From the allegations there emerges a presumption that the transaction was procured by the appellants through some unconscientious use of their power over the respondent. The allegations can only be read as claiming that the appellants had acquired an ascendancy over the respondent. Indeed this is expressly pleaded in paragraphs 11 and 15 of the amended statement of claim. On the basis of these allegations, it is difficult to see how the appellants could have been prejudiced by the omission from the amended statement of claim of the words "undue influence."

[35] The amended statement of claim alleged all the essential ingredients of the cause of action of undue influence. In these circumstances the Chief Justice was justified in basing his findings on liability on this cause of action.

[36] The second ground of appeal cannot succeed.

The third ground of appeal

[37] Mr. Epati submitted that in assessing damages the Chief Justice proceeded on an erroneous assumption of the law concerning the discretion available to the court to achieve practical justice. He submitted that if the respondent succeeded on an equitable cause of action the remedy to be allowed is restitution, not damages. The appropriate orders, he submitted, should have been the setting aside of the contracts, the returning of the Nautilus to the respondent, the refund by her to the appellants of the purchase price paid, an order for the appellants to account for profits of the operation of the boat to the respondent, and an order for any decrease or increase in the value of the Nautilus to be paid to the appropriate party,

[38] A separate hearing was held on 17 November 2000 to determine damages. At that hearing the appellants were represented by Mr. Epati. The respondent called evidence, which his Honour accepted, relating to possible earnings from the Nautilus. In that respect the Chief Justice referred to problems that the respondent had, first that there was no other dredge operating in Kiribati so no comparison can be made, and secondly the respondent did not have an opportunity to use the Nautilus to find out how much she could learn from it.

[39] He approached the assessment of the amount to which the respondent was entitled on the basis that if the normal equitable remedies do not provide a proper basis upon which to compensate the respondent for her loss, the court should seek to achieve practical justice between the parties. There it is ample authority for this approach. For example, in O'Sullivan v Management Agency and Music Ltd [1985] 1 QB 428, Fox LJ said at 466,

"Accordingly, it seems to me that the principle that the court will do what is practically just as between the parties is applicable to a case of undue influence even though the parties cannot be restored to their original position. That is, in my view applicable to the present case. The question is not whether the parties can be restored to their an original position; it is what does the justice of the case require?"

[40] The Chief Justice referred to the decision of May J in Mahoney v Purnell [1996] 3 All ER 61 at 88, where he said, after referring to O'Sullivan, that if the facts do not fit neatly into the scheme of the normal remedies, the court has to achieve practical justice between the parties. Later on the same page he said that practical justice required an award that was akin to damages. At 90 he referred to what McLachlin said in Canson Enterprises Ltd v Boughton & Company (1991) 85 DLR (4th) 129, 163:

"In summary, compensation is an equitable monetary remedy which is available when the equitable remedies of restitution and account are not appropriate. By analogy with restitution, it attempts to restore to the plaintiff what has been lost as a result of the breach, i.e. the plaintiffs lost opportunity"

[41] In the present case, adopting the course proposed by Mr. Epati would certainly not achieve practical justice between the parties. This is principally because, as a result of the undue influence exercised, the respondent has been deprived of the use of the Nautilus from the signing of the initial agreement on 3 April 1998 until trial. According to some accounts lodged on behalf of Mr, Kum Kee, the Nautilus showed an operating loss during that time it was in the control of Mr. Kum Kee. But it appears that he was not operating the Nautilus as a dredge during all, or least most, of that time. So the Chief Justice approached the assessment of damages by endeavouring to calculate what the Nautilus could have earned if the respondent had been able to put it to work as a dredge. It is not necessary for us to detail his Honour's approach, since the appellants do not seek to challenge the amount of $150,000 he arrived at on this method of assessment. It was the method, not the amount, which was challenged. For the reasons we have expressed, we consider that the Chief Justice was entitled, in the particular circumstances of this case, to adopt that method in order to achieve practical justice.

[42] However, there is an aspect that the Chief Justice did not take into account. If the agreements for the sale of Nautilus are to be held void, so that the ownership of the ship reverts to the respondent, Mr Orme is entitled to credit for the amount of the purchase price of $15,000 which he had paid. The appropriate course, therefore, is to deduct this amount from the damages assessed.

[43] At the hearing, we expressed some concern over the award of damages against Mr. Kum Kee as well as against Mr. Orme. It was obvious that Mr. Kum Kee was not in any way involved in the undue influence that led to the avoiding of the agreements. However, he bought the Nautilus with express knowledge of the possibility of the respondent or some other persons bringing a claim to the Nautilus. This is apparent from the clause in his agreement to buy the Nautilus from Mr. Orme which we have set out in [11].

[44] Again, there is a defect in the pleading. The amended statement of claim did not expressly plead a separate cause of action against Mr. Kum Kee. But at the hearing held to assess damages, it is apparent from the transcript that as far as Mr Kum Kee was concerned, the damages were to be assessed on the basis of detinue. Mr. Epati who, as we have said, was then representing Mr. Kum Kee, apparently made no objection to this approach. In his judgment on damages the Chief Justice confirmed that the submissions had proceeded on the basis that Mr. Kum Kee was sued in detinue. On this basis, the entry of judgment and assessment of damages against Mr. Kum Kee is appropriate. Mr Kum Kee is entitled to the same credit of $15,000 to take into account the purchase price paid.

The result

[45] The first two grounds of appeal are not established. The appeal is allowed to the extent that the damages assessed at $150,000 are reduced to $135,000.

[46] As the appeal has failed in all respects except for the reduction in the damages, the respondent is entitled to costs to be agreed or taxed.

Casey JA
Bisson JA
Tompkins JA