HIGH COURT SOLOMON ISLANDS

Civil Case No. 208 of 2000

QUARTER ENTERPRISES PTY LTD

v

ALLARDYCE LUMBER COMPANY LIMITED
(First Defendant),

JOHN HENRY HOWDEN BEVERLEY
(Second Defendant)

and

DEVON GEORGE MINCHIN
(Third Defendant)

Date of Hearing: 5th August - 22nd September 2005
Date of Judgment: 23rd March 2007

Mr. P. King with Mr. C. Hayes with their Agent Mr. A. Radclyffe for the plaintiff.
Mr. J. Sullivan QC, with Mr. R. Kingmele for the Defendants

JUDGMENT

Brown J: The Plaintiff, a foreign limited company incorporated in Australia is suing the 1st Defendant, a limited company incorporated in the Solomon Islands (having foreign corporate shareholders), the 2nd Defendant, (the Managing Director of the 1st Defendant) resident in the SI and the 2nd Defendant, a (director of the 1st Defendant and since March 2000 the Chairman of the Board of Directors) resident in Queensland, Australia. The claims relate to losses claimed to be suffered by the plaintiff (Quarter) as a result, it says of breach of contract to supply logs from a logging concession managed by the defendant company (Allardyce) at Vangunu Island, Western Province. As a consequence the plaintiff also alleges tortuous wrongs by two directors of Allardyce and seeks damages.

The Plaintiff says that as a result of approaches made by a Marovo area landowner to Allardyce in about March 1996, Mr. Beverley later communicated the possibility of a new resource logging area on Vangunu Island to his directors, the 3rd defendant Mr. Devon Minchin and the chairman, then, Mr. Harold Wilkie (later deceased). Beverley had seen the area at Dakolae on Vangunu and in July of that year he spoke in Honiara to Mr. Ron Gibbs, the managing director of Quarter about a trade finance arrangement to facilitate Quarter's log sourcing and sales business from a dedicated timber resource at Dakolae in consideration for which Quarter would underwrite a loan to Allardyce from a bank in the Solomon Islands to buy machinery and equipment and Allardyce to log and deliver to Quarter.

I paraphrase the plaintiff's factual summary since it adequately touches on salient matters and puts the plaintiff's case. I am indebted to the plaintiff's lawyer Mr. King for a succinct statement of the plaintiff's claim.

In March 1996 following a meeting of the Marovo Area Council a landowner in the Dakolae area approached an employee of the 1st defendant, Allardyce with a proposal for the company to become involved in logging the concession (for want of a better name) which the landowner, Mr. Jack Solomon claimed to control. Mr. Alastair Martin recommended the resource to Mr. Beverly, Allardyce's managing director who passed details to directors, Mr. Minchin and Mr. Wilkie.

The plaintiff then suggests a reason for the interest shown by Allardyce which was then logging in Vella La Vella, much further northwest in the Western Province. The plaintiff says the defendant company needed new logging opportunities for the Vella La Vella resource was running down and it had problems with landowners who in fact gave rise to the cessation of logging by the company late in 1997 for a long period. The risk to Allardyce was a risk to its financial condition for it had entered into a substantial trade finance sales agreement and loan with Itochu Hong Kong Ltd ("Itochu") (secured by guarantees signed by fellow directors Mr. Devon, Minchin and Mr. Howard, Mr. Wilkie and witnessed by Mr. Beverley) giving Allardyce a trade loan of US$ 1,000,000 against a promise of "first priority" to Itochu of all logs extracted by the company until termination or repayment of the advance out of the proceeds of future shipments.

Consequently the plaintiff pleaded that Allardyce was not, despite Mr. John Beverley's assertion to the contrary, in sound financial condition when Quarter entered into its separate trade agreement, for the future shipments to Itochu called for some 21 shipments averaging 5,000m3 per shipment to repay the loan out of log sales to Itochu (when Allardyce's Vella La Vella resource was becoming problematical), a plea supported by the evidence for Mr. Beverley, the plaintiff says, treated the court with contempt by failing to disclose the fact of the Itochu terms in discovery. That failure reflected upon Mr. John Beverley's credit for when questioned specifically about the possibility of such a document, Mr. John Beverley's response in cross-examination, that "difficult to believe ... in some parts of the world such deals are done on the shake of a hand", rather contrasts with the fact, later proven that Mr. Beverley actually witnessed the guarantee of the loan agreement. As well it transpires that the Itochu agreement was breached and Itochu called up its personal guarantee given by Mr. Minchin. I shall deal with that argument later. This is but part of the plaintiff's allegations that it was, by false representations by Allardyce, Mr. Beverley and Mr. Minchin, induced into entering into the agreement. Mr. Beverley's behaviour evinced in court is relevant on that issue.

The Agreement

The contract under which the plaintiff sues was entered into on the 21 February 1997 in Sydney after negotiations had taken place in the Solomon Islands and Sydney. It deals with the supply of Solomon Island round logs.

The Pleadings

The plaintiff pleads 27 heads of claim in the consolidated various amended statements of claim (the "statement of claim"). They can be said to be for damages for breach of contract by Allardyce, and for specific performance; claims in restitution (including an alternate claim under the Law Reform (Frustrated Contracts) Act 1943 (UK) for recovery of moneys paid to Allardyce's bank under the facility established by Quarter in accordance with the trade agreement (called "the standby letter of credit")) and for an account and damages. The claims against the individuals, Mr. Beverley and Mr. Minchin are for misrepresentation deliberately or negligently made and claims against all defendants are made alleging civil conspiracy relating to misrepresentation concerning the status of landowner relationships affecting Jack Solomon's claims to Dakolae before the date of the agreement; for inducing breaches of contract in respect of the first log shipment; for misrepresentations in relation to the 1997 and 1998 accounts and the removal of plant and equipment purchased to harvest the Dakolae resource from the area.

Pre-contract misrepresentations

The plaintiff presented its case in a chronological fashion, so that the factual matters going to the plaintiff's claim of pre-contract misrepresentation were first brought; the plaintiff's director, Mr. Ron Gibbs giving evidence by affidavit and in court about various conversations he had had with Beverley and Mr. Minchin leading to the time of the agreement.

That evidence and supporting evidence of other witnesses called by the plaintiff gave rise to the plaintiff's case of pre-contract misrepresentation in these material matters.

The first matter is that the plaintiff says it was led to believe the Dakolae resource was a "good forest where the quality of the timber is very good with good density" expressed to be 58.36m3. This came from a resource survey prepared by one Bennegay, an employee of Allardyce. Secondly Mr. Beverley and Mr. Minchin alleged that Allardyce had "very good relations with the landowners on Vangunu Island" and "there are no land disputes and no difficulties with landowners". The third matter is that Allardyce would provide exclusive selling rights to the resource in return for trade finance to "gear up" to harvest the resource. In the course of the negotiations when it became necessary, the plaintiff says Mr. Beverley, Mr. Minchin and consequently Allardyce represented that the financial position of Allardyce was sound.

On the strength of those representations, Quarter entered into the agreement. The plaintiff says the representations were material, relied upon by the plaintiff, erroneous and caused the plaintiff loss.

Subsequent to the agreement on the 21 February 1997 the trade facility contemplated was put in place by Quarter, Allardyce arranged a loan on the strength of the trade facility (the standby letter of credit or standby LC) and purchased plant for logging the resource on Vangunu, set up camp in anticipation and commenced work at Dakolae. Then later in the year occurred one of those exigencies which could be both expected and feared by traders of commodities the world over. There was an inexplicable precipitous fall in the market for South Seas round logs. The seller, Allardyce was obviously anxious to sell at the best price while the buyer, Quarter was obliged to take the best price offered it from overseas buyers.

The time limited for the first shipment came and went. The lending bank to Allardyce claimed under the standby LC, and was paid out by the banker to Quarter under the standby LC. A first shipment of logs was made by Allardyce to Itochu and thereafter some three shipments made to Quarter but before the contemplated total logs were shipped, Allardyce claimed frustration of the agreement with its buyer, Quarter and denied liability for any moneys claimed to be owing by Quarter under the standby LC or at all. When the realisation came, Quarter commenced these proceedings to recover what it says is owed it.

The pleadings relating to alleged failure to ship

I propose to set out the plaintiff's statement of claim in part dealing with the shipments for the pleadings relating to those shipments raise important issues where the court need find facts, facts also relevant to the plaintiff's later claim for unjust enrichment.

A. It was an express term of the Agreement that the First Defendant shall use its best endeavours to make logs available for monthly shipments of approximately 4500 cubic meters, the first shipment of logs to be ready for loading within 6 months from the date on which the standby letter of credit was received by NBSI with subsequent shipments ready for loading at monthly intervals.

The defendants say the agreement document more correctly particularises the meaning of the clause; the plaintiff joins issue.

B. It was an express term of the Agreement that the First Defendant shall not sell any timber felled by it on Vangunu Island under its logging agreement with Dakolae to any other party unless and until the First Defendant had supplied 40,000 cubic meters of round logs in accordance with the agreement.

The defendant say that para 8 is in substantially the same terms but that clause 20 "is expressed not to operate where the plaintiff is in default under the agreement". The plaintiff joins issue.

C. "In breach of contract the 1st defendant made a sale in October 1997 and/ or in January 1998 to Itochu", a pleading denied.

D. On or about 2 February 1998 the First Defendant made available for the first monthly shipment 4493.780 cubic meters of logs pursuant to the Agreement which logs were shipped by the Plaintiff on the MV Naval Pride on or about 2nd February 1998.

On or about 8 April 1998 pursuant to notice given by the First Defendant to the Plaintiff on 24 February 1998, the First Defendant made available to the Plaintiff for shipment on board the MV Sea Treasure 4381.057 cubic meters of logs which logs were shipped by the Plaintiff on the said vessel on 8 April 1998.

On or about 17 June 1998, pursuant to notice given by the First Defendant to the plaintiff on 17 May 1998, the First Defendant made available 520.261 cubic meters of logs for the third shipment pursuant to the contract on the MV Dooyang Opal and the said logs were shipped by the Plaintiff on the vessel on or about 17 June 1998.

In breach of contract, the First Defendant has failed or refused to deliver in accordance with the contract or to make available any further logs for monthly shipment under the said agreement or at all whereby the plaintiff has suffered loss and damage.

The plaintiff's log shipments

(The plaintiff details shipment of logs commencing 2 February 1998 4,493.78 m3 shipped on MV Naval Pride - 8th April 1998 4,381.057 m3 shipped on MV Sea Treasure and 17 June 1998, 520.261m3 shipped MV Dooyang Opal.).

In breach of contract the defendant failed or refused to make any further log deliveries in accordance with the contract.

These shipments are admitted, save the defendant say the Naval Pride was not the first shipment made available the plaintiff, and denies any breach of contract.

E. In the alternative the plaintiff pleaded:

"Further and alternatively, at a time unknown to the Plaintiff in 1998, the First Defendant moved the equipment which was purchased by it, pursuant to the loan facility provided by NBSI to it, to Vella La Vella Island and thereafter to Ovau Island in the Shortland Islands".

The defendant at 10(a) Admits that during February 1999 it moved equipment purchased and financed by the NBSI facility ("the Equipment") from Vangunu Island to Vella La Vella.

(b) Admits that during November 1999 it moved some of the Equipment to Ovau, Shortlands.

(c) In September 2000 the same was moved back to Vella La Vella

(d) Otherwise denied

F. The plaintiff pleads the fact of further shipment of logs of the type contemplated by the contract between the parties, in April 2000 logs felled removed and transported to the vessel using the equipment financed by the plaintiff.

The logs were shipped from Ovau Island (not Vangunu) and the defendant denied the implications of breach of contract in terms of the pleadings.

G. It was an express or implied term of the Agreement that in the event that the First Defendant is unable, within six months after receipt by the NBSI of the standby letter of credit, to provide a log shipment from Vangunu Island within two months after the previous shipment has been exported, then the First Defendant may provide an alternative shipment of logs from another source in Solomon Islands and the provisions of the Agreement shall apply mutatis mutandis to any such shipment and any such shipment shall be deemed to have been provided in satisfaction of the First Defendant's obligations under the Agreement.

In breach of contract the First Defendant elected to make further logs available for monthly shipments of the type contemplated by the Agreement, but did not make such logs available to the Plaintiff, whereby the Plaintiff has suffered loss and damage and will continue to suffer such loss and damage.

Alleges Breach of clause 19 of the Agreement dated 21st February for that within 6 months after receipt by the NBSI of the standby letter of credit, the defendant shall provide a log shipment from Vangunu Island within 2 months after the previous shipment has been exported, then the defendant may provide an alternative shipment from another source in the Solomon Islands whilst logs were made available to others in breach of contract.

The defendant admits clause 19, but pleads that the defendant had the right but not the obligation to provide alternative shipments. The breach is denied.

H. It was an implied term of the Agreement that in the event that the First Defendant shall use the equipment provided pursuant to the Agreement to it to log alternative sources in Solomon Islands, then the First Defendant will not log those sources and will not make the logs available to any other person other than the Plaintiff for sale or commercial exploitation unless it made the logs available firstly to the Plaintiff.

In breach of contract the First Defendant has used the said equipment on other islands and has logged alternative sources but has not made the logs available to the Plaintiff whereby the Plaintiff has suffered loss and damage.

And the plaintiff alleges an implied term that the equipment obtained by the defendant company through the agreement with the plaintiff, would not be used to provide logs for others without first making such logs available to the plaintiff, and in breach the defendant has logged alternate sources with such equipment without offering the logs to the plaintiff.

The defendant admits logging operations on Ovau Island using some of the equipment but denies the implied term, breach and loss or damage.

I. A standby letter of credit facility was opened by the plaintiff with the NBSI through the Commonwealth Bank of Australia in May 1997 which standby LC secured an advance pursuant to a loan agreement between the NBSI and the defendant company of US$1,3000,000 which was advanced to the defendant company.

On the 14 November 1997 the defendant company defaulted on the loan agreement (the Allardyce Facility).

The defendant admits that the Facility was secured by the S/BLC and admits the default under the loan agreement, but says the default was caused solely by the plaintiff's breach of its obligations under the agreement.

J. The Plaintiff pleads that on the 24 November 1997, NBSI negotiated the S/BLC in its favour so that on the 28 November 1997 the CBA paid the NBSI the sum of US$1,257,913.17 whereupon the plaintiff was debited with such amount to an overdraft account held with the CBA, together with interest in the sum of US$1,100.67 and that further, on the 19 December 1997 the CBA paid the NBSI the sum of US$4925.77 pursuant to the S/BLC with a further debit to the overdraft account, leaving a total debit balance in the plaintiff's overdraft account of US$1,263,939.61.

The Plaintiff subsequently reduced that debit by payment from its own resources and paid out the CBA overdraft facility from a loan advance by the Howard Group, while various interest fees and charges took place in relation to those facilities all to which, the defendant seeks to put the plaintiff to strict proof.

Further the plaintiff says the defendant company paid, on various dates to the 23rd July 1998 three payments pursuant to the S/BLC following log shipments.

The defendant further says that each of the said sums was received by CBA because, pursuant to clause 17 of the Agreement, clause 16 thereof applied mutatis mutandis and CBA, having paid NBSI pursuant to the standby LC, was subrogated to NBSI's rights there under and thus was entitled to receive one fourth of the proceeds of each commodity LC established under the Agreement.

Further, the plaintiff claims interest on the S/BLC facility, at the rate of 10.5% p.a., (although the interest has not been agreed if found to be due) and continuing.

K. Further and alternatively, it was an implied term of the Agreement that in the event that the First Defendant does not perform the contract and provide the 40,000 cubic meters of logs promised under the agreement, then it would repay to the Plaintiff the monies negotiated by the NBSI upon default by the Plaintiff in respect of the Allardyce Facility secured by the NBSI's standby letter of credit.

N. The Plaintiff says that:

On or prior to 21 February 1997 and in order to induce the Plaintiff to enter into Agreement of the same date between it and the First Defendant, the Second Defendant made certain representations to the Plaintiff.

Particulars

(i) That the monies provided by the Plaintiff under the facility referred to as the standby letter of credit in the said Agreement were for use by the First Defendant for the purchase for equipment and other expenses leading to the ultimate shipment of logs to vessels provided by the Plaintiff under the Agreement.

(ii) That it was unnecessary for the First Defendant to grant a bill of sale over its assets in undertaking to secure repayment of the facility provided by the plaintiff referred to as the standby letter of credit facility under the Agreement as the First Defendant was a net lender to the banks and it was in a strong financial position.

(iii) That there existed no impediment, problem or concern regarding the landowners of western province and Vangunu Island in particular that would prevent performance by the First Defendant of the contract tonnage.

(iv) That a preliminary resource assessment had been made which was accurate as to resources available on Vangunu Island and that the said assessment was competently and properly prepared.

(v) The Second Defendant made the said representations to Mr. Gibbs, the Managing Director of the Plaintiff, by the facsimile transmission and oral communications between July 1996 and February 1997.

The said representations made by the Second Defendant to the Plaintiff were false and erroneous.

Particulars

(i) The monies obtained by the Plaintiff, pursuant to the standby letter of credit facility provide by the Plaintiff under the Agreement, and were intended for use by the First Defendant to purchase equipment to finance the making available of logs from other parts of the Solomon Islands for separate business purposes of the First Defendant.

(ii) The First Defendant was in a poor financial state and did not meet the first repayment to its lender under the Allardyce facility.

(iii) There were problems with the customary landowners of Vangunu Island and there existed litigation between the First Defendant and the said landowners in this Honourable Court or a dispute regarding the same which was not disclosed to the Plaintiff.

(iv) The resources available for the provision of logs under the said Agreement were insufficient to provide 40,000 cubic meters of logs and the said preliminary resource assessment was inaccurate in its assessment of the available resources.

The assertions were false and erroneous and were made by the 2nd Defendant fraudulently or recklessly not caring whether they were true or false.

The misrepresentations were (para 57) alleged in the alternative, to have been made negligently, and in breach of the 2nd defendant's duty of care to the Plaintiff, whereby the Plaintiff has suffered loss and damage.

Each of the said representations was made by the Second Defendant fraudulently or recklessly, not caring whether they were true or false.

Each of the said misrepresentations were material to the Plaintiff in entering into the Agreement dated 21 February 1997, whereby it has suffered significant loss and damage.

As a consequence of the misrepresentations the Plaintiff entered into the said Agreement dated the 21 February 1997, whereby it has suffered significant loss and damage.

Further and alternatively, the said misrepresentations were made negligently and in breach of the Second Defendant's duty of care to the Plaintiff whereby the Plaintiff has suffered loss and damage.

The misrepresentations alleged, leading to the time of the agreement on 21 February 1997

These particularised in paragraphs 53 et cetera; were alleged to have been made by Mr. John Beverley and if found, bind ALC.

There was an objection by Mr. Sullivan to the manner in which the plaintiff conducted its case for that the case pleaded differed materially from that presented at trial. Mr. King says the defendants had no doubt of the case they had to meet. Mr. Sullivan's objection in his final submissions at the trials conclusion addressed the pleaded misrepresentations.

(i) "the monies provided by the plaintiff under the standby LC facility" was wrongly attributed as facilitating a loan by Allardyce when the real purpose the defendant argued, was that moneys were always intended to be borrowed from NBSI by ALC against the security of the standby LC, which in turn, was to secure Quarters' obligations to ALC (to buy the logs supplied).

This interpretation on the documents and evidence given in court is favourable to the defendants and does, in my view, illustrate that the defendants understood the plaintiff's case while relying as the defendant does, on the particular Agreement as affording a defence to the pleading, and shows the defendant has not been materially prejudiced, if at all by the manner in which the evidence unfolded.

(ii) "it was unnecessary to grant a bill of sale over the assets (purchased)" again was addressed by Mr. Sullivan on submission since it was predicated on the asserted strength of Allardyce's financial position. Since the 10th August 2005, the plaintiff discovered further relevant documents, including for instances, the 1st defendant's audited financial accounts for the year ending 1996, 1997 and 1998 at ALC office, Ranadi on the 16th and 17th August 2005. Clearly, to argue, as the defendant seeks to do, that it has been disadvantaged by the plaintiff's short pleading and particulars in the face of this clear failure to discover relevant material from its own office is, as Mr. King says disingenuous. The plaintiff is faced with proving the pleading as it stands, notwithstanding the obvious breach of the obligation to disclose touched on here.

(iii) "There existed no impediment, problem or concern regarding the landowners of Western Province and Vangunu Island in particular, etc"; the particulars furnished in the Statement of Claim evidencing a particular fax from Mr. John Beverley to Mr. Ron Gibbs dated 16 October 1996 (doc 66-118) where at 4:

"Our office is open and staffed by our long term expatriate administration manager Steven Daddow. Relationships are excellent with the local people. Kevin Donohoe made a visit to the site last week and held further meetings with contiguous landowners, all very positive".

In Mr. Ron Gibb's 1st affidavit in support he deposes at great length and in detail about these representations about landowners, and contiguous areas. Mr. Sullivan criticises that evidence for it came from affidavits drawn some 5 to 9 years after the events. He sounds the warning that Mr. Ron Gibbs purports to recall very precise conversations at times at great length on a quote unquote basis. He goes on to say the conversations are closely adapted to the pleadings. Gibbs practice was to make contemporaneous notes. The pleadings normally follow particular instructions and in this case on the question of the material representations the author of the affidavits was the principal person to whom the representations were made. Having heard the evidence of both principal witnesses it is apparent on a reading of these reasons where there is a conflict in particular recollections why I prefer the recollection of Gibbs.

Mr. Sullivan points to the Defence filed, para 5(a) (iv) where the defendants plead ALC was dealing with represented customary landowners who had established their right to grant timber rights and that no landowner problems in relation to operations were foreseen. Mr. John Beverley pleaded truth and a belief on reasonable grounds; also that the Hogotasina nuisance claim had been settled.

Mr. King argues the inclusion, by agreement in the agreed bundle of exhibit "13", of file notes of relevant conversations (coupled with the manner in which the case has been argued) which recognise the underlying premise in O.21 r 6 of the High Court Rules, that "such particulars as may be necessary shall be stated in the pleadings".

When I look at the Rules, it is accepted that "particulars are an extension of the pleadings; they control the generality of the pleadings" (see O'Leary, Hogan "Principles of Practice and Procedure" Butterworths 1976 at 105).

Mr. Kings' references to the Aga Khan -v- Times Publishing Company (1924) 1 KB 675 echoes in Mr. Sullivans' argument, for in fact the defendants have pleaded where imputations are made for instance by the plaintiff, truth or a reasonable belief in the truth of the facts alleged to be false, but that case is clear authority for the proposition advanced by the plaintiff that while a party is entitled to an order for particulars for the purpose of ascertaining the nature of his opponents case, he is not entitled to particulars of the evidence by which his opponent proposes to prove it.

In this trial, the evidence has come from the parties and their witnesses, affidavits of which were continually being read throughout the trial; viva voce evidence; exhibits and documents read from the agreed bundle which in the end exceeded the earlier agreed bundle put on computer disk and much came from the possession of the defendant company after physical search carried out by the plaintiff's officers at the premises of the defendant. (I will deal with that later).

I am satisfied the defendants have not been prejudiced for that they have had a reasonable opportunity to meet the plaintiff's case. The defendant's officers had clearly not made proper search for relevant documents required by the various orders for discovery, for on hearing, Mr. Beverley certainly was not embarrassed by his apparent refusal to assist with the discovery process.

In the absence by themselves of any request for Further and Better Particulars by the defendants during the course of the trial, I cannot accept Mr. Sullivans' assertions that the plaintiff has failed to properly particularise his claim; whether he has come up to proof of course is for the court.

The defendant Mr. Beverley's affidavit of discovery

HC Rules O.33 r.10

At the commencement of Mr. King's cross examination of Mr. John Beverley, the topic was the managing director's responsibility to discover the documents relevant, in the defendant's possession or control, for the witness had sworn the affidavit of discovery. Since the trial commenced the instructing solicitor for the plaintiff, Mr. Hayes and another employee and bookkeeper, Ms. Bourke had rummaged through the defendant company records at its office at Ranadi, Honiara, and many relevant documents were discovered, on Tuesday and Wednesday 16th and 17th August 2005. The financial accounts of the defendant were annexed to Ms. Bourke's affidavit of the 25 August and such material also formed part of Mr Beverley's 2nd affidavit sworn on the 29 August 2005.

Further documents came from the defendant's camp at Vella La Vella after the trial commenced.

When Mr. King sought to imply Mr. John Beverley had failed to properly discover documents the cross examination went like this:

MR KING: And when you swore your affidavit of documents did you make any enquiry to ensure that you were complying with the directions of this Court in relation to discovery.

MR. BEVERLEY: Enquiries from whom - who do I enquire from.

MR KING: Well - for a start your employees.

MR. BEVERLEY: I'm sorry I misunderstand - you will have to explain...

MR KING: Did you make any enquiry...

MR. BEVERLEY: Did I make any enquiries to my employees that I am complying with the directions of the Court. The employees wouldn't know the directions of the Court.

MR KING: Thank you. That's your best answer to that question is it.

MR. BEVERLEY: I think so.

MR KING: So are you saying to this Court that - I withdraw that - what is your explanation for the lack of existence today of the documents, that is, the negotiations between you and Itochu relating to that offer.

MR. BEVERLEY: If those documents existed and were relevant to this matter they would have been discovered but I think, if you will permit me, Your Lordship I should make the observation maybe to assist - when the discovery process at the outset was commenced I gave completely unhindered access to those people appointed to do the process. I have no problem telling you that I personally did not dig through boxes of files nor did I go to the warehouse or anywhere else. There was complete access - there were no documents interfered with or touched throughout that discovery process.

MR KING: Well just on that MR. Beverley - is it - are you aware that Mr David Hayes, the solicitor for the Plaintiff in these pleadings ...

MR. BEVERLEY: Yes.

MR KING:... has had to spend five days for a limited period in the late afternoon of the first and second week of this hearing...

MR. BEVERLEY: Yes.

MR KING: ... attempting to find relevant document such as accounts - such as diaries - such as reports at your office at Ranadi - just some six metres away from where you normally sit - are you aware of that.

MR. BEVERLEY: Six metres.

MR KING: Yes.

MR. BEVERLEY: I sit in a different building. An entirely different building to where Mr Hayes was searching. I do not sit in the shed.

MR KING: Alright - where is your office MR. Beverley.

MR. BEVERLEY: My office is at that property at Ranadi in the concrete building.

And Again:

MR. BEVERLEY: I swore it on the basis that I believed what I said was true as I always do when I swear an affidavit.

MR KING: Do you now accept that that was wrong.

MR. BEVERLEY: No - not entirely.

MR KING: So you will say that the audited accounts of 1996 of the First Defendant, Allardyce, are not relevant. Is that what you are saying?

MR. BEVERLEY: No I am not saying that at all. I am saying ...

MR KING: Then they should have been discovered shouldn't they.

MR. BEVERLEY: In the process of discovery I think I have made it quite clear - the matter was essentially a matter concerning Dakolae and as I said people were given access freely to all of the relevant information on Dakolae and that's why there was some financial information on Dakolae.

MR KING: I suggest to you it concerns Allardyce MR. Beverley not just Dakolae.

MR. BEVERLEY: No - I mean the Dakolae project not the land - I am not talking about the land. And the 1996 accounts would probably not have been included in the filing cabinet or in the shed where the Dakolae land was.

MR KING: So you say do you that ....

MR. BEVERLEY: They were not deliberately withheld - I assure you of that.

MR KING: So you say do you that it was up to Mr Andrew Radclyffe and other persons acting on behalf of the Plaintiff to search out your offices at Ranadi to find the audited accounts and you didn't have to discover them - is that your evidence.

MR. BEVERLEY: No I don't - I don't think it was up to them at all but the discovery process started many years ago – many years ago.

The witness has clearly treated the obligation to discover with the distain apparent in his demeanour and voice, distain reflected in his answers. His reference to the storeroom in the shed where Mr. Hayes was obliged to search is factitious.

While I must be cautious to treat his evidence fairly, despite the facile nature of his remarks, this attitude does leave me with a sense of disquiet when I see he has sworn an affidavit of discovery.

Mr. John Beverley sought to ridicule Mr. King's cross examination of him when Mr. King suggested there were documents going to support Itochu's trade loan of some US$1m early in 1996. Despite earnest efforts by Mr. Sullivan to derail the questions put to Mr. Beverley (see p.14, 15, 16 & 17 of day 18) the cross examination elicited these answers;

MR KING: As I understand it MR. Beverley the - the trade finance deal you had with Itochu was - had involved ongoing obligations to Allardyce in relation to future shipments.

MR. BEVERLEY: Do you know - I never saw a document in respect of an agreement other than a guarantee to pay them the money - I never saw a document that you are referring to - if you are referring to some sort of supply agreement. But if there is one - show me it.

MR KING: Well actually I'd like you to show us MR. Beverley.

MR. BEVERLEY: Well I don't believe there was one. I actually don't believe there was one.

MR KING: Well you have described it in the accounts - no doubt on your instructions - as trade finance - that means that Itochu gave Allardyce in excess of three million dollars during the year 1996 in return for a promise to provide shipments out of which the moneys would be repaid - is that a fair summary.

MR. BEVERLEY: That's probably true.

MR KING: Well where is the contract MR. Beverley.

MR. BEVERLEY: There may not be one.

MR KING: You say ...

MR. BEVERLEY: It might - it might Mr King be difficult to believe but I assure you that in this country and in Papua New Guinea and in some parts of the world such deals are struck on the shake of a hand.

Then, on the 13 September 2005, from the offices of Sol Law, his lawyers, Mr. John Beverley produces the very documents detailing the trade finance agreement with Itochu. It beggars belief that an overseas company which Mr. Beverley was at pains to paint as of such financial strength and size would do business involving the advance of a loan of some US$1m., by a handshake. The court may presume the global identity described by Mr. Beverley also had audit requirements of a kind where documentary proof would be expected.

Again his facile answers must be treated carefully so as not to undermine any particular factual matter but on the issue of his trustworthiness in relation to his obligation to discover documents, he has been shown to have little credibility. His assertions in his affidavit about listing documents in his possession or power, documents of the company; Mr. Minchin or himself have been shown ultimately, to be untrue. His use of "belief" in his answers does tend to focus the courts attention to that issue.

The material evidence in the pre-contract misrepresentation case

The resource issue

The plaintiff asserts the defendant knew of the fact a resource assessment of some 20,000 m3 affecting Dakolae for that assessment was known to Alistair Martin who spoke of "a small but sweet one (resource)" of approximately 20,000 m3 (exhibit 44 i). The plaintiff's case was that no thorough and professional survey of the Dakolae timber resource had been done to the time of the Agreement and that in the light of this earlier resource assessment by one Sogetee on behalf of the original proposed logging contractor, Tung Shing Development. Mr. John Beverley should have been particularly careful about accepting his later resource survey of July 1996, Pablo Bennegay, when that survey showed a net resource of 58,360 m3, or one almost three times the size of that earlier assessment.

I am satisfied Mr. John Beverley knew of this earlier assessment. (doc 30-73 etcetera - fax dated 8th July 1996 from Martin to Beverly - Dakolae Survey). I am satisfied (exhibit 44 ii) that Mr. John Beverley applied to the Sogetee survey figure of 20,000 m3 a recovery rate of 50 m3 per ha of saleable logs to ascertain an operable area for Dakolae of 400 ha, for as he stated in his reply to Martin (exhibit 44 ii) "no map, which is essential". Unless, in those 23 pages received from Martin, an operable area of 400 ha was mentioned, but there is no evidence of this. It is plain however, from a view of the two faxes, that Mr. John Beverley was aware of three variables, the operable area at Dakolae, the saleable logs, and the recovery rate/ha. (I am also satisfied that the material, 23 pages, received from Martin was the material sent Mr. Minchin in Australia, the material which underlay Mr. Minchin approach to Donohoe).

In cross examination, dealing with Martin's fax of the 13 March 1996 (ex. 44i) Mr. King asks:

MR KING: And that he states that Mr Sogati's estimate - or he infers if he doesn't state it directly - of the resource at about twenty thousand cubic metres is about right.

MR. BEVERLEY: I have never heard of Mr Sogati and he also says that Francis has never seen a copy. Apparently a survey was done - the survey was commissioned by Tung Shin so I - Martin - would suspect that twenty thousand is about right. We have no map - we have no map - we have no details of the survey - we don't know what land they are talking about except broadly described as Dakolae.

MR KING: Did you conduct any research of investigation into the information that Mr Martin gave you in that fax.

MR. BEVERLEY: In that fax. None whatsoever.

MR KING: You didn't think it would have been prudent ...

MR. BEVERLEY: No.

For earlier he had asked Mr. John Beverley whether Martin had in fact told Mr. John Beverley that the estimated resource available was 20,000m3 to which Mr. John Beverley had replied:

I wouldn't have taken much notice of that because one of the things I always insist on is that we have a public meeting and we determine what the resource is, ourselves".

I take it to mean that the resource survey carried out by Bennegay was in the back of Mr. Beverley's mind when he gave that answer, for Jack Solomon the spokesman of Dakolae customary landowners, later said he walked part of Dakolae when that survey was carried out. Yet Mr. John Beverley's evidence about the Australian country wide survey makes plain he was prepared to rely on what could only be described as an estimate of resource as the basis for his approach to his other directors to justify a recommendation in favour of the Dakolae resource.

On the 10 May, before the survey Mr. John Beverley wrote to his other directors, Mr. Wilkie and Mr. Minchin and while dealing with Dakolae land said, (since this goes to the companies need for additional resources) 65,000 (55 m3 +) propose to get Kevin there as soon as possible to supervise a survey and "bed-down" all matters on the island – housing, loading etc.

Mr. King's cross examination elicited the information that the 65000 m3 resource figure was taken from a comprehensive forest survey carried out under the auspices of the Australian Government. He apparently arrived at the figure of 65,000 m3 from a print out of documents obtained by his driver from the Forestry Department. The documents shown him, (MFi "AA") were not tendered in evidence since Mr. John Beverley quibbled about the documents shown him in this fashion, yet sought to base his resource estimate on an Australian Government general survey never produced.

MR KING: Well we have got to do the best we can MR. Beverley. And what I am suggesting to you is that you obtained from the computer around about that time a representation of an area that you thought might be big enough to give you a product of sixty five thousand cubic metres - is that right.

MR. BEVERLEY: I think that's a reasonable conclusion but I stress not necessarily from the three pieces of paper I have got in my hand.

MR KING: But they were certainly part of it weren't they.

MR. BEVERLEY: No necessarily. In fact I said before that there were not part of it - that certainly that came to mind but I don't recollect these - I think I said that five minutes ago.

I upheld the objection to their tender. The papers were never put into evidence but I am satisfied Mr. John Beverley used the Forestry papers. I am satisfied, however, the papers that he saw, papers obtained from the Forestry Department gave rise to his assertion in his fax to two directors, Mr. Wilkie and Mr. Minchin dated 10 May 1996 that the resource at Dakolae was "probably no less than 65,000 (55 cm+) (girth)", for from where else could that estimate have come, the earlier by the employee Martin of 20,000 having been apparently ignored (Mr. John Beverley's evidence in court); Tun Shin's survey report also having been dismissed (see extract of transcript above) and Bennigay's survey not having been done. It is this assertion, this willingness to rely on estimates of forest resource prepared, it is claimed by "the Australians", coupled with his disparaging comments about other survey sources which obviously were focused on the particular land parcel, that weighs heavily when I look to the plaintiff's deceit claim.

The Bennegay Survey

Whether this draft Dakolae Land Operational Plan 1996 (doc 29 – 53/72) included a resource survey carried out by Pablo Bennegay and further, if so whether that survey was a thorough and professional survey.

The defendant's position (for part of the resource survey was sent the plaintiff at the time of the meetings about the 11 July 1996) was that the resource survey was carried out by Bennegay and was accurate. A difficulty was that no operational plan was in evidence from subpoenaed material produced by the Department of Forests and the defendant did not discover any such document so it has not been satisfactorily established just what survey Bennegay is presumed to have carried out. This failure supports the plaintiff's case.

The defendants did adopt the draft Operational Plan in effect as the plan necessary to have been submitted to Forests, for part of the survey material (relating to the available resource) in the draft plan was faxed Gibbs (pages 3,4,5,12,13) and the map of Dakolae land (scale 1:50,000 - exhibit "25") and the defendants did not resile from the detail of the resource set out in that draft operational plan.

I'm satisfied that a resource survey of sorts was done by Bennegay (Mr. John Beverley's evidence and more importantly the contemporaneous report of Martin - doc 30 - 73/78).

I am not satisfied that the survey, per se, related only to Dakolae land. (Doc 30 - 2; "both Dakolae and Aravo people happy for this parcel to be included in the survey and any timber extracted to be moved through Dakolae land").

I accept Dr. Albert Solomon's evidence about a meeting at Rove with Mr. Beverley when Mr. Beverley was put on notice by Albert Solomon, Ramus Solomon and John Dennie that John Dennie, the Chief of the Vavae tribe did not have the consent of the Vavae to log Vavae land. Clearly there was a real issue about the boundary of Vavae land as it abutted Dakolae land and that issue should have been immediately apparent to Mr. Beverley at the time of the meeting. The meeting was not recorded; rather Mr. John Beverley's response in the witness box was to include these visitors if so they be, in his characterisation of landowners seeking a separate benefit, and to be managed by his employees on the spot. I prefer Albert Solomon's recollection of the meeting, he had others with him and risked contradiction; he was vitally interested for it was his customary land; and the plan he referred to was that plan 1:50,000 - Dakolae land - included in the draft operational plan of the defendants. Mr. John Beverley's evidence about this meeting was exculpatory in the sense that had he recalled such an important visit about a new resource project which the defendant coy had been in the throes of instituting, it would be reasonable to expect the managing director to recognise that issue as one to be addressed. He had no recollection and ipso facto, the meeting was not one which deserved his attention.

Consequently the extent of the survey about Dakolae and Aravo land remains unclear for the surveyor, Bennegay did not give evidence. To expect detail of sacred sites on a 1:50,000 map is stretching credulity without Bennegay to link detail to his instructions from Jack Solomon, for instance.

There was great variation by all parties' witnesses confronted by maps put to them, variation of Dakolae land and particular land-marks. None had a background in or apparent understanding of topographical maps and frankly I was unable to assess the worth of their evidence about the extent of the survey on the ground by reference to maps. Mr. Beverley did not impress me on that aspect for he consistently said he relied upon Bennegay who was not called, and I do not accept the defendants where they say Beverly was entitled to consider the whole of Dakolae as shown in doc 29 - 72 (-map) when Dakolae is not distinguished by marks on the ground, rather it speaks of "features" which are amorphous areas in heavily forested precipitous country about a 1:50,000 map annexed to the plan. (The scale means an inch on the map represents approximately 1388 yards on the ground.)

The thoroughness of just what was surveyed was attacked by the plaintiffs also during the weekend when Mr. Beverley was at the site whilst Bennegay was carrying out a survey, for he seemed not to have gone far into the bush, and he made clear that was Bennegay's business.

The defendants relied on Bennegay's expertise for he had been Mr. John Beverley's principal surveyor. The court is unable to accept any survey as that of the resource for there was no evidence to show how Bennegay had determined his boundaries, he was not called and frankly, although hectares are mentioned in his survey, whether Aravae was included or not is a moot point.

The flaw in the defendant's position, on the document must be those points coupled with the weakness which I find in the methodology employed and recounted by Bennegay (doc 29 - 58/59) when contrasted with that of Crequer Forest Land on Vangunu undertaken in December 1993 (exhibit 29) where Wetering's survey, at 4, 5 affords a real opportunity to quantify the resource by later inspection. Weterings methodology provided bearings and distances for strip lines, with numbered marking tapes for later reference. Although Bennegay (doc 29 - 59) in a paragraph describes his methodology, nowhere could a subsequent inspection correlate his strip lines to the "over 10 percent of the proposed 1996 logging area", surveyed, let alone delineate the boundaries of Dakolae land on a 1:50,000 scrap of map photocopied in the draft plan. I consequently find Bennegay's supposed survey does not afford me sufficient basis on which to rely on the thorough professional surveyor Bennegay was portrayed to be by the defendants. After the event, Mr. Beverley admitted Bennegay was seriously out in his calculation of resource, the logging trails had to be relocated as did the permanent camp site and the proposed site for the wharf was changed. Was there point, then for the defendants to call Bennegay when Beverly had made the concession?

Issue

Did Mr. Beverley have a genuine belief in the Bennegay survey assessment of resource?

Mr. Beverley was aware of Green's serious doubts about the resource in December 1997 but this was long after the agreement signed on the 21 February that year whilst Martin (doc 30 - 75) in his report speak of Bennegay going to correlate his survey figures, again the original indicated volume of 20,000 m3 was written by Martin (qualified after talking to Bennegay) but a resource only one third of that finally found by Bennegay. Mr. Beverley had already told Mr. Minchin and Mr. Wilkie of the much greater resource before the time of Bennegay's survey and quoted a resource of about 60,000m3. There was a warning by Albert Solomon not to encroach on Aravae land, probably about the time of the survey. Mr. Beverley had seen the material he had sent on to Mr. Minchin when recruiting Donohoe, material which clearly alluded to boundary disputation to the north of Dakolae. Mr. Minchin denies reading the material but I find that not plausible for he was the director to whom Mr. Beverley sent reports and this material was relevant to the possible induction of a new employee and Mr. Minchin's memory, while dubious, cannot excuse what would be a dereliction were he not to have read material about a new resource that Allardyce was contemplating. Mr. Beverley also asserted in his affidavit of the 29 July 2005 that he "walked a good deal of the land with Bennegay". "I recall it was very wet. I satisfied myself as to the extent of the resource". In his cross examination it became clear he did not walk far. Bennegay's camp was moved as a consequence. The preponderance of evidence by Mr. Beverley was that the responsibility for the survey was left to Bennegay. (Mr. Beverley XX-31 August am @ 14) Mr. Beverley had not satisfied himself of boundaries of Dakolae, nor obtained maps particular to the area (Mr. Beverley XX-31 August am @ 15, 16, 17). That evidence in cross examination is at odds with his earlier affidavit where he deposed to the fact that he satisfied himself as to the boundaries.

No proper feasibility study had been carried out by Mr. Beverley, the person principally responsible in the Solomon Islands to relate Bennegay's survey of resource with the actual area comprised in Dakolae or that land free of the possibility of dispute by those conflicting persons or tribes. I had no survey in fact which may reliably be called Bennegay's. I am left with the evidence as it now stands. Mr. Beverley was at pains to distance himself from responsibility for survey, yet failed to call the surveyor or to substantiate the defence case that a survey (which lacked precision, explanation and proper maps) was professionally done. So far as the part survey sent Gibbs is concerned Mr. Beverley sent it with the expectation that Gibbs would treat it as Mr. Beverley has asserted in court, that it was professionally done but well knowing that it was a selected part, and that the survey results were at odds with an earlier survey; and without any enquiry having been made of the survey or to explain deficiencies and those discrepancies apparent on reflection, about the resource estimates of his other employees, especially in the face of the Croker work. Not least, there was the absence of the "bounds" description which may be expected to have accompanied a proper plan of the resource and contiguous named areas, to illustrate the surveyor's reliance on particular boundary marks but which Jack Solomon was not in a position, it seems to display.

For it was the question of boundaries which should have alerted Mr. Beverley to the possibility of dispute after the meeting at Ranadi with Dr. Solomon which satisfies me Mr. Beverley was indifferent as to the possibility and consequently careless as to the consequence. The tenor of his evidence was that it fell to Jack Solomon to resolve problems and the practise was to facilitate litigation through Jack Solomon when occasion arose.

So whilst it may be said Mr. Beverley was entitled to rely on the Bennegay survey, once Dr. Albert Solomon had forewarned him of the likelihood of conflict with Aravo land, Mr. John Beverley's actions in pressing ahead in the face of the warning, the obvious huge discrepancy between the earlier resource survey and Bennegay's survey coupled with the very real doubt about the inclusion of Aravo land in the survey (which may account for the discrepancy); leaves me satisfied that Mr. Beverley was indifferent as to the real size of the Dakolae resource once the Bennegay survey accorded with his notion of the resource based on the Solomon wide survey, for the principal purpose was to maintain consistency of resource size once Gibbs had become interested. (Donohoe affidavit annex c page 1 - last entry).

It follows that I am satisfied Gibbs relied on the assertion by Mr. Beverley contained in the document faxed him while at his hotel in Honiara following the meeting in June (Ex 25 - 60,000 m3). Before the 21 February 1997 when the agreement was signed, Mr. Beverley had material made known to him to suspect the veracity of Bennegay's survey for the reasons I have given. None of these reasons require any consideration of the discrepancy of recollection about the actual conversation at that June meeting, my reasons rely on documentary material, and in so far as the actual assertion as to resource by Mr. Beverley at the meeting is concerned, can be related to the fax sent Gibbs afterwards (ex. 25). The sensitivity to land disputes (in a generic sense) was acknowledged (xx-31 August am at 27) factually the Dakolae resource survey was wrong. (Mr. John Beverley's concession that Bennegay in error by more than 5%) (Mr. Beverley XX-31 August am @ 32).

The conclusion then is that Mr. Beverley should have had cause to doubt the results of the resource survey of Bennegay's;(cause that sprang from the very variation of figures); the failure to take heed of the warning of Dr. Albert Solomon and that trait exhibited throughout his cross examination, a willingness to divest responsibility unto others (Mr. Beverley XX - August 31 @ 41, 42, 43, 44). His failure to recollect the meeting with Dr. Albert Solomon in about June 1996, is symptomatic of that divestment, since a warning of that nature should have put Mr. Beverley on notice. Mr. Beverley acted according to what he asserted to be his practise. That was to refer matters of custom to Jack Solomon. It wasn't (Mr. Beverley XX - 31 August am @ 36- Dakolae Manager, consultants and agent).

I am satisfied Mr. Beverley knew Gibbs relied upon him for the accuracy of the survey. I'm further satisfied Mr. Beverley had knowledge of these serious discrepancies in relation to the resource survey such that required them to be disclosed to Gibbs. There was no disclosure, rather the Bennegay survey (later admitted to be erroneous) was let stand leading to the signing of the agreement. This was misleading and calculated to deceive.

Issue

Was Allardyce in a financial position which was described to Gibbs as a "reasonably sound financial position" or "was in a strong financial position" and was "a net lender to the banks".

For it was pleaded (clause 52) by the plaintiff that the defendant asserted it was unnecessary for Allardyce to grant a bill of sale over its assets in undertaking to repay the SBLC facility in terms of the Agreement, based on the assertions made by Mr. Beverley as to the companies financial position.

It was alleged the representations were oral, made at the July luncheon meeting and subsequently and that the references in fax of Allardyce of the 19 January 1997 to Gibbs "throughout most of 1996 we were a net lender to the banks" (annex 4 to Gibbs 1st affidavit) and "a registered second ranking floating charge over all the assets" was "over full security" (doc 94 - 153) clearly supported the plaintiff's case that the representations were made. Of that I'm satisfied for Gibbs recollections of the originating meeting in July, supported by his contemporaneous note, and of the subsequent meeting in Sydney on the 27 November 1996 clearly deal with an issue which a prudent businessman would satisfy himself about, if an Agreement of this nature was to be contemplated. I prefer Gibbs recollections of the original meeting in any event, since when I consider Mr. John Beverley's manner whilst under cross examination, I cannot help but find the tenor of his evidence was debate rather than recollection (Mr. Beverley 31 August pm - XX @ 33).

The Plaintiff's case relies to an extent, on the assertion made early in the proceedings that Allardyce (ALC) was in need of new logging opportunities for its financial condition was dependent on its meeting its commitments to Itochu Hong Kong Ltd (Itochu), for that foreign company had entered into a trade finance sales agreement and loan to ALC in January 1996. US$1m was paid to ALC on the 29 January 1996. The money had to be paid back and the Plaintiff says, ALC's financial condition was not strong at the time of the business meeting between the 2nd defendant, Mr. Beverly (Mr. John Beverley) and the plaintiff's director, Mr. Ron Gibbs (Mr. Ron Gibbs) in July 1996. That loan was for two years with a term requiring interest payments to be remitted monthly during the loan currency. The term of the loan was recited in the Itochu documents which came to light late in the trial. At the time the agreement with Quarter was executed in February, 1997 the Itochu agreement had been in place some 12 months.

Consequently I must ask myself whether that broad assertion by Mr. King in his submissions, had support in fact. He relied upon the financial accounts of ALC for the year to 31 December 1996. The independent audit report by McLean Charge Partners, Chartered Accountants qualified the accounts importantly in this respect.

The accounts have been prepared under the growing concern convention. Due to the extent of the losses incurred in several recent years and also in the year ended 31 December 1996, the application of the going concern convention to the preparation of the accounts is subject to:

• Continued financial support from the company's shareholders; and

• Securing the necessary logging licences in new areas applied for to generate sufficient funds to cover the subsequent increases in commitments in capital equipment costs and development expenses incurred to date.

Ignoring for the moment, the Plaintiff's assertions that Beverly made particular reference to ALC's financial position at this meeting in July, the audited accounts show a net operating loss for the year of SI$1,049,663 following a loss for the previous year of SI$5,537,777. The qualification about the necessity to maintain the support of the shareholders and obtain fresh concessions then, for the reasons expressed, can be understood by reference to the profit and loss account, if the company was to continue trading.

The parties fenced about the purpose of the meeting at Honiara in July 1996 between Mr. Beverley and Mr. Ron Gibbs. For at that time Mr. Ron Gibbs had been interested in buying campnosperma logs, although I am not, despite Mr. Sullivan QC's insistent point that this issue was the reason Mr. Ron Gibbs followed up with Beverly (for it was Mr. Ron Gibbs who came from Sydney) I am not satisfied "Dakolae" played any part in Mr. Ron Gibbs mind until specifically raised by Mr. Beverley for Mr. Ron Gibbs was concerned with campnosperma logs supply. "Dakolae" was then but a suggestion, importantly by Mr. Beverley when one has regard to the auditors' reservations and Mr. John Beverley's own comments later.

The real question is "what did Mr. John Beverly want of Mr. Ron Gibbs", and I'm satisfied the question was the answer. It was money. That was the main chance and that grew to become the Agreement which facilitated the loan advance to ALC from NBSI, an advance of US$1.3m secured by the CBA standby LC facility arranged by QE.

How did Mr. John Beverley go about it? The Plaintiff says Mr. Ron Gibbs was taken to lunch at the Lealei Restaurant, where Mr. John Beverley proposed selling the Dakolae resource to QE provided QE arranged trade finance for ALC to purchase machinery and equipment to facilitate logging at Dakolae (for ALC's other operations in the Western Province left no machinery spare for this new resource).

This was a departure from QE usual modus operandi, for Mr. Beverley's proposal was for the whole resource, sourced from Dakolae, to be made available to QE were QE prepared to facilitate logging, rather than Quarter seeking particular log shipments from various suppliers about the Solomons.

Whilst I'm satisfied QE was not a reluctant bride, ALC was clearly the suitor. It had then little working capital and was forced by the bank to subordinate shareholder loans to bank advances, since the balance date in December 1996.

Beverly denied earlier in cross examination any idea of promoting the Dakolae concession to Quarter, yet Mr. Beverley had Gibbs to lunch on the 11 June and followed up that meeting with a fax detailing to some extent, the resource. Since Mr. Peter Gibbs was seeking particular species logs, campnosperma, I am satisfied the luncheon conversation did relate to a separate proposal which eventually became the Agreement. Mr. John Beverley's denials then (Mr. Beverley 31 August pm XX @ 26, 27) coupled with his clear dissembling (answer @ 28 line 28) left me in no doubt (@29) Mr. Beverley could not to be relied upon for any part of his recollection about that meeting. Then there was further debate about "sound" or "reasonably sound financial position" (@40, 41 and 42). That related to a meeting at the offices at Castle Hill, Sydney on the 27 November 1996 when Mr. Peter Gibbs and Deborah McCammon were present with Mr. Beverley and Gibbs. I prefer the plaintiff's account of the recollection of what transpired, for Mr. Beverley again denied conversation of matters which common sense would suggest would be raised in such a meeting, (especially that of Allardyce's financial position) yet Mr. Beverley had in his earlier affidavit deposed affirmatively to the fact. I am satisfied then, that Mr. Beverley did at the meeting of the 27 November speak of Allardyce's "sound financial position" and in support asserted the company was a net lender to the Banks (@ 42).

Whether these assertions about the financial strength of Allardyce were true or not became the subject of evidence from the two accountants called by respectively the plaintiff and defendants.

It is their evidence on which I rely for while the plaintiff has shown that the Itochu trade finance effectively kept Allardyce going in 1996 and realistically in 1997, both Morris and Thompson agreed, even taking the fact of the Itochu loan into account, for that in the absence of any conditions placed on the transaction by Itochu, Mr. Thompson would regard the transaction as being the same as any other "source" of finance. Such money borrowed from a third party is an asset of Allardyce, with a corresponding liability to the third party and thus money borrowed from Itochu and deposited with a bank can be taken into account in respect of the "net lender" issue. So that the company was in a reasonably sound financial position for it had been meeting its debts and had no reason to believe the shareholders would call up advances then included in shareholders funds. Again, the company was in effect, a "net lender to the banks" so that the plaintiff fails on his assertions that factually, the representations, although made, were manifestly wrong and know to be wrong to Mr. Beverley.

What was not apparent at the time this evidence was given was the actual documentation surrounding the sales and loan arrangements for the loan whereby the loan recited that the principal sum shall be used by the borrower solely and exclusively for the purpose of obtaining the material for the goods, acquisition of new resource and infrastructure development and was to be repaid with interest after 2 years.

Of course the fact that Mr. Minchin was subsequently obliged to meet Itochin's demand under its trade finance facility when repayment fell due, under a guarantee while reflecting perhaps on the trading weakness of Allardyce cannot be brought to account as reason enough to criticise the company's balance sheet strength at that earlier point in time, the end of 1996.

Issue

Whether representations were made by Mr. Beverley and/or Mr. Minchin about landowners which, to Mr. Gibbs were material considerations in the light of the Agreement.

There is a subtle but important distinction between the cases argued by the parties. The plaintiffs pleading in its particulars (clause 52 iii) has Mr. Beverley asserting there existed no impediment, problem or concern (regarding the landowners) which would prevent performance by the company, Allardyce. That the company subsequently relied upon the very same nature of these assertions as affording it the right to treat the Agreement as frustrated cannot, ipso facto help the plaintiff, for it was the situation leading to the time of the agreement, which is the relevant period. But the defendants have sought to refute the plaintiff that "no landowner problems" were extant at that time, extant in the sense of open disputation (for Mr. Beverley scrupulously avoided involvement in any such matters (docs. 101, 102, 114)). It is clear from argument, the plaintiff relies on the possibility of open disputation arising from incipient causes known to Mr. Beverley, causes which to someone with his knowledge and experience would be matters of concern which may lead to landowner problems for the company. The plaintiff has sought also to show that the incipient causes actually became the basis for the "frustrating acts" relied upon by the defendants, consequently the causes were material and Mr. Beverley by his failure to alert the plaintiff misrepresented the position.

There is, then a real need to decide whether Gibbs firstly, understood the importance of settled landowner relations and secondly if he made plain his reliance on Mr. Beverley. When I see Gibbs affidavits and having heard his evidence (Gibbs XX15 August pm @ 14; 15 Aug pm @ 24;16 Aug pm @ 19, 26; 16 Aug pm @ 27; Mr. John Beverley's 1st affidavit; pars 126, 127) I am left in no doubt Gibbs was cognisant of the importance of good relations amongst landowners about the proposed resource and relied on Mr. Beverley for that assurance. Since this was of such importance to Gibbs, I accept his evidence about the assertions made by Mr. Beverley (Gibbs 1st affidavit; paras 9, 10) that "ownership issues are straightforward" and "there are no problems at all with landowners. A logging agreement with them is a formality" and later in Mr. John Beverley's fax (doc 66 - 118) where he says "relationships are excellent with the local people" and "all very positive", for Gibbs had every reason to remember these, going as they do to an issue that a prudent business man looking to a long term agreement to take south seas logs from a particular resource site, would deem crucial.

The defendant's position was this; where there is conflict between the evidence given by the principals, Mr. Beverley and Gibbs, Mr. Beverley should be preferred for written material fails to support Gibbs recollections of the representations. In other words, Gibbs has failed to notate such recollections and send such notations back to Mr. Beverley as a record of the various conversations. Since Gibbs diary notes do make reference to the representations, Mr. Sullivan says I should disregard them for they suffer from the suggestion they have been contrived for the purposes of this case. I do not accept the defendant's argument. As Mr. King says, they cannot approbate and reprobate in so far as these diary notes are concerned. Gibbs background as a District Officer in Papua New Guinea, the supporting evidence of Ms. Bourke and Mr. Peter Gibbs about Gibbs practice, and the manner in which such notes were used to enable others to pursue the various actions necessary, eg. Shipping, to conduct the business of Quarter while Gibbs was out of the office, all go to satisfy me as to Gibbs' practise. Mr. Beverley kept no file notes or diary, rather relied on the wireless log, retained faxes and other documents generated in the course of business as his journal or record.

For Mr. Sullivan to argue that Gibbs should not be believed on the issue of the representations made before the agreement by Mr. Beverley and Mr. Minchin because Gibbs sent not one document to Mr. Beverley before the 21st February 1996 about landowner issues is disingenuous, for why would he, when Mr. Beverley had as I have found, on various occasions satisfied him there was nothing to worry about. I accept Mr. Ron Gibbs on that point.

Issue

Were there incipient landowner problems which can be traced back from the "frustrating acts" relied upon by the defendants or about which Mr. Beverley was aware in the period leading up to the Agreement?

The defendants attack Gibbs as a witness who cannot be believed in respect of his evidence and his file note about the meeting and consequently his evidence about all other meetings must also be suspect. Gibbs is also criticised on the same basis about his evidence involving Mr. Minchin in the "no land owner problems" issue, for it was that meeting, the defendants say where Gibb alleges Mr. Minchin adopted and voiced Mr. John Beverley's assertions and representations.

There are a number of difficulties with that position on the evidence. So far as the 1st meeting in July was concerned, I am satisfied Gibbs put off his flight back to Australia (Gibbs xx 15th August am - p.12) and that was directly referable to Mr. John Beverley's invitation to lunch to discuss the Dakolae resource. Consequently I am also satisfied Gibbs evidence of Mr. John Beverley's approach at the Mendana Hotel is to be believed, despite Mr. John Beverley's denials. For Mr. Beverley says in his affidavit Gibbs contacted him and the same day they lunched together at the Lealei Resort. Gibbs, in his affidavit, says he "ran into Mr. Beverley at the Mendana Hotel" and as a consequence of Mr. Beverley asking him, lunched on the 11th July together. There was no dispute that Mr. Beverley paid and I prefer Gibbs evidence of the circumstances leading up to the lunch, having heard both in cross examination. I am satisfied that the representations in paragraphs 5 and 6 of Gibbs 1st affidavit made by Mr. Beverley at those two meetings at the Mendana and Lealei were made. Mr. Beverley in his 1st affidavit, at paragraph 51 says "I recall telling Gibbs to the effect that I was impressed with the quality of the resource and also with the landowner commitments to ensure a successful operation".

At that time in July 1996, Mr. Beverley had had a "bundle of documents" given him by Jack Solomon (Solomon and Tito of the Girokana line) including the Marovo Area Council minutes of the Dakolae Timber Rights Public hearing of the 18th October 1995. For these documents were sent to Mr. Minchin by fax for Donohoe. When I read these various minutes, the Marovo Area Council decision of the 16th November 1971 (awarding Dakolae land to the Girokana line (finally vesting in the late Besa Tuana); the subsequent determination of the Acquisition officer at the behest of Besa, Tila, Peter Belajama and Letipika of Keloketo and Pepeteina of Bemili, to sell Dakolae in terms of Land and Titles Ordinance s.63); the appeal against that determination granting leave to dispose of the land (an appeal upholding the acquisition officers findings on the facts); (accepting the Butubutu of Minakana as paramount in determining the Minakana's rights to Dakolae) the subsequent appeal to the High Court of the Western Pacific (Native Land Appeal 11 of 1973) reverting right and native title to Letipiko Balesi representing the Girokana line given by the Chief Justice on the 30th October 1973; and the Form II certificate of Customary ownership under the Forest Resources and Timber Utilisation Act 1990 it is clear, since Mr. Beverley had these documents from Martin that they formed the basis of Jack Solomon's right, as it were to approach Allardyce with a view to log Dakolae. For (Francis) Jack Solomon, had executed at Ketoketo on the 2nd February 1996, a pro-forma Logging Agreement in favour of "Dakolae Company" given by the representatives of the Dakolae (Girokana) clan/line. It was these documents which encouraged Mr. Beverley to pursue Dakolae. It was these documents which clearly evidenced an earlier dispute over ownership of Dakolae in a wider sense and importantly, in this case a dispute over the extent of Dakolae land asserted in the timber rights hearing. For Robert Ratu of Lolovuro Village said, on page 3 "I stand here today to object the map that publicised that to our understanding Dakolae land map is over-lapse (sic) to different areas and those areas are owned by different people". In the determination the Area Council noted "11. An objector, Mr. Robert Ratu of Lolovaro village didn't object the land but boundary of the Dakolae and both Lotipiko Baesi and Ratu rectified it during the meeting".

The map referred to in the minutes was not attached. It was not, on the evidence possible to identify which of the various maps or plans put forward during the trial was that relied upon at the hearing nor what if any variation to the boundary of Dakolae land were made.

Nevertheless, the visit by Dr. Albert Solomon and Tito to Mr. Beverley about the middle of 1996, at Ranadi should have alerted Mr. Beverley to the very issue already raised by the minutes. I have dealt with that meeting.

The defendant's case on that issue was to criticise Donohoe. The failing memory of all witnesses, of events so long ago requires me to place weight on the documentary evidence as corroborative of the respective party's case. Donohoe's oral testimony then needs be corroborated if the plaintiff's assertions are to have weight, for the defendants had shown the danger of reliance solely on memory in Donohoe's case. Donohoe's recollections of his initial meeting with Mr. Minchin must stand for the various documents to which I alluded were given him then. I consequently do not accept Mr. Minchin's recollection and prefer Donohoe where he says he was asked by Mr. Minchin to "go up and investigate and sort it out". Clearly specific disputes had not then arisen (Allardyce was not then on the ground in May 1996) but Mr. Minchin and Mr. Beverley, on the strength of the "various documents" given Donohoe, must have had understanding or be imputed with knowledge of this incipient dispute over the extent of the Dakolae resource and that the Hogatasina people were of the Minakana for on a reading of the Acquisition officer, John Roscoe's determination of the 1st May 1972, he says:

"5. If the former alternative were to be accepted, it would be necessary for Besa to substantiate his claim to have assumed the powers of Kane'avoso. This he has failed to do and moreover the evidence regarding the land distribution at Hogatasina in 1960 leaves no doubt that Besa has never succeeded in any general recognition of his claim to own Dakolae.

6. Both parties claim that "Ndakolae extends from the one river; the claimant that its further boundary is the Segege and the Representatives (Besa, Tito, etc) that it is the Rakata River. Thus the "Ndakolae" which his integral with the islands certainly includes the land claimed by Lukumu (Minakana line). No claim other than that of the representatives has been laid to the land north of the Segege River."

The issue then about the extent of the Dakolae land surveyed is one properly for the surveyor Pablo Bennegay. He was not called. The defendant's criticism then of Donohoe is off the mark for the responsibility to ensure the resource, Dakolae was correctly identified, by marks, previous plans relating it to the Land Council determination and perhaps tribal members versed in the affair, lay not with Donohoe but Bennegay for he was Mr. John Beverley's surveyor, and on whom Beverly relied.

As the plaintiff says, the land disputes at Arovo by the Hogatasina people (Minakana line) revolved about boundaries, the thread of which can be seen through the "bundle of documents" given Donohoe. As an experienced surveyor, Pablo Bennegay must be presumed to know the risks of misapprehending actual boundaries by relying on unskilled map readers marking maps, especially maps of scale 1:50,000 Bennegay might be expected to walk the ground with persons able to actually point to marks, stones, rivers etc and hence the boundaries. Mr. Beverley certainly presumed that expertise. The defendants evidence that this was done cannot satisfy me in the face of the presumption of overlapping claims threading through the "bundle of documents"; the absence of Bennegay to testify; the general confusion over maps and markings in court; the absence of a proper survey accompanying the defendants logging plan; the clear warning by Dr. Albert Solomon given Mr. Beverley and finally, the acknowledged (by Mr. Beverley) visit by John Hiuare on the 17 February 1997, only days before the signing of the agreement. Mr. John Beverley's response to that visit was again to refer the matter to Jack Solomon (114) but that does not absolve Mr. Beverley from knowledge and presumably an understanding of the issue when one has heard his recitation of years of undoubted experience in logging in the Solomon Islands.

The "landowners" misrepresentations argued by the plaintiff are-

• a long running dispute between the Minakana and Girokana line peoples.

• the reservations exhibited by the Marovo Area Council minutes bout Dakolae boundaries.

• Mr. John Mr. John Beverley's reliance on Jack Solomon's Group to the exclusion of making his own enquiries.

• absence of any proper map of the defendants actually shown to have been drawn in consultation with Dakolae Sawmilling (which had the licence).

• the obvious differentiation between the Hogatasina and Dakolae Sawmill people (Jack Solomone and Tito) which ALC personnel had to manage.

• the developing disturbance claim by the Hogatasina people impart caused by or attributable to their absence from the negotiated "heads of agreement" dated 18 February 1996.

The responsibility to manage the landowners and ensure the resource was available to ALC was by that "heads of agreement" dated 18 February 1996, with Dakolae Sawmill (Jack Solomon and Tito). Yet management and control of the logging of the resource remained with ALC (clause 16) coupled with "full discretion to carry on such logging as it sees fit". To log the resource, then, in terms that "Quarter's agreement with ALC was not contemplated in the earlier heads of agreement". Those terms contemplated selling Q 40,000 m3 of round logs, yet no warranty is given in the "heads of Agreement" by Dakolae Sawmill that Dakolae contains such a sizeable resource, or that the Dakolae Sawmill representing the landowning interest, can accommodate that enterprise.

For all these reasons, the defendants contention, there were no landowner problems in the context of these negotiations which could be categorised as misrepresentations cannot stand.

Why did it end so badly?

The defendants say "frustration" occurred without the default of either party. Certainly the plaintiff cannot play a part. Mr. Sullivan QC has chronicled the events leading to the "frustration", the defendants say, of the Agreement of the 21 February 1997. It chronicles the negotiations, meetings and recounts court proceedings brought by the warring factions over the Dakolae/Arovo boundary conflict, the very same issue which has been historically documented. For the evidence relied upon by the Defendants, given by Ora, Bara, Jack Solomon, Daddow, Mr. Beverley and as Mr. Sullivan QC says, "even to some extent, Green" all springs from that earlier dissociation of tribes and customary land areas between the Minakana and Girokana. For Vavae landowners Chief Dennie and Dr. Albert Solomon had been assured by Mr. Beverley (and I accept Dr. Albert Solomon's evidence on this for Mr. Beverley had no recollection) that his map was not a harvesting plan when discussions took place in June 1996, yet the limits on the boundaries of Dakolae land had been noticed and reserved by the Marovo Area Council. On the 17 February 1997 John Hiuare saw Mr. Beverley and Mr. Beverley recounted the conversation in a letter to Jack Solomon of that date. (114 vol 2 page 175) where the very right of Jack Solomon to speak for the Dakolae representatives was raised, yet Jack Solomon's response appears not to have been received by the 21 February when the agreement was signed. That may be explained by the fact of the issue of the Form 3 approval under the Forestry Act, where Dakolae Sawmill benefited but the licence did not reflect the constraints to the bounds description given by the Marovo Area Council. That Area Council material had been sent Mr. Beverley and Mr. Minchin. (7 vol 1 p 16) As well Donohoe's evidence of disputes in the area must surely have given Mr. Beverley reason to pause.

I find incipient flaws in the logging arrangements over Dakolae apparent when Allardyce was approached. The flaws should have been apparent to Mr. Beverley. Arovo land contained a contiguous resource he had earlier spoken about. The apportionment of obligations, by virtue of the executory Heads of Agreement with Jack Solomon and Galia Tito (116 vol 2) cannot affect the knowledge in Mr. Beverley, of the incipient flaws; or explain the failure to disclose a risk to the future logging of the coups abutting or encroaching upon Arovo land. (Green affidavit MG 3) (for by Easter 1998 more than half logged but only about 11,000 m3 of logs taken. (Martin - ex. 44)).

The absence of a proper survey map of Bennegay resource for Dakolae cannot be overcome.

Applying the facts to the law

Negligent misstatements

Both counsels refer to the principles in Shaddock -v- Parramatta City Council (1)4 and San Sebastian -v- The Minister (2)5. Mr. Sullivan QC's case, (assuming the court finds Mr. Beverley and/or Mr. Minchin made representation) was that they did so as volunteers. For, Mr. Sullivan says, there is absolutely no suggestion that Gibbs ever once asked about landowners. But the plaintiff's case is that Mr. Beverley and Mr. Minchin misrepresented the situation about landowners. It is disingenuous to suggest otherwise. I am quite satisfied, for the foregoing reasons that Gibbs was knowledgeable to an extent that landowner issues could become an impediment. Mr. Beverley on those various occasions and in the faxes touched on, was aware that Gibbs was cognisant of the need to enquire and made representations to allay any such fears that Gibbs may hold in regard to that issue.

The meeting at the CBA in September 1996 before independent persons clearly show that assertion that Gibbs never asked, to be a canard, for that very issue was of paramount importance at the meeting. So in that respect, it is sufficient (negligent misrepresentation) if the maker of the statement knows or ought to have known that the words are such as to engender in another reasonable reliance (San Sebastian p 355) and made in the presence of CBA bank officers overseeing security to facilitate a loan to Allardyce by other bankers for that specific purpose, "gearing up" at Dakolae and satisfies me that Mr. Beverley breached his duty of care not to mislead at that point in time. Again Mr. Minchin's act at the meeting of the 21st February 1997 by saying "you do not need to worry - there are no problems with landowners" (Gibbs para 21; xx at 16 August pm p.27 which I accept despite Mr. Minchin's equivocatory evidence) fall to be construed as corroboration of those continuing misrepresentations by Mr. Beverley, representations which even if voiced in ignorance by Mr. Minchin must with the background, be seen to be made indifferent at the least, as to their truth or otherwise. Even for allowing the passage of time and memories darkening recesses, Mr. Minchin's evidence of the meeting, its pleasantries (whilst Gibbs solicitor was attempted to check various agreements which it transpired still gave rise to discrepancies in clauses after the event) just cannot be accepted in the face of such other conflicting evidence leading to the actual signing. I accept Gibbs on that point.

Mr. Sullivan's assertion that the representations were if made, made by these two as volunteers cannot stand in the light of my findings on the evidence. The representations as to no landowner problems and the extent of the resource were made. They were made with the intention that the plaintiff rely upon them. For whatever can be said of the Agreement, its rationale was primarily to facilitate that gearing up to purchase machinery; no logging could be carried out by Allardyce until the machinery was available and no machinery would be made available until Quarter provide a guarantee of sorts to Allardyce's lender, in consideration for which Quarter was to be given the right to purchase the logs from the resource.

I'm further satisfied both Mr. Beverley and Mr. Minchin made those representations with the intention of inducing Quarter to act in reliance upon them. Whilst the representation given Gibbs about Allardyce's financial position has not been shown to be false in any material particular to the time of the Agreement, when I look at the combination and nature of these representations, the defendants assertion that it was only volunteering the information cannot stand for the risk to Quarter related to the commercial risk of logging this particular resource which was to be managed by Allardyce. The information by which Allardyce was to assess that risk was information known to Mr. Beverley and to an extent Mr. Minchin (for he had the "bundle of documents" sent by Mr. Beverley for Donohoe). The making of these representations then were to deliberately induce Gibbs (and consequently Quarter) into the Agreement. As I have found the representations in relation to "landowner problems" and the "extent of the resource" were untrue.

I'm satisfied the defendants knew or at the very latest (in Mr. Minchin's case) on the 21 February ought to have known Quarter relied upon the representations.

Were they under a relevant duty of care to Quarter when these representations were made?

This is not a case of "inferences and implications" to be drawn from the statements made by Mr. Beverley and Mr. Minchin, for they were express statements of factual matters, representations clearly made to the plaintiff. I am satisfied on the plaintiff's case that it relied upon it.

So when the plaintiff by its director Gibbs, has such a proximate relationship, giving rise to the Agreement, there can be no question about foreseeability, in the sense that the defendants could not have foreseen this plaintiff as one likely to suffer loss from the defendant's negligent misstatements.

Here there was no antecedent request for information by Gibbs rather information was proffered by Mr. Beverley with a view to interesting Gibbs in a proposition which grew to become the Agreement. The statements then, were directed to Gibbs and intended for him, they were not incidental in the sense that the statements were "in the market place" and Gibbs chose to take them up. So Mr. Beverley a person having a particular interest in Gibbs affirmative response ("no Gibbs, no money"), can be seen to have an expectation the plaintiff will commit financially (by bearing a financial risk) on the basis of the representations that Mr. Beverley and Mr. Minchin have made. For it were those inducements of matters (which a person in Gibb's position and matters known to Mr. Beverley), touching on the very issues relevant to the success or otherwise of the enterprise (exhibit 46 - Customary Law paper) which the plaintiff says attaches a duty of care on the makers, so as to ground liability for negligence. On the strength of the authorities collected in San Sebastian's case (2) I am satisfied the three conditions espoused by Barwick CJ in M.L.C. -v- Evatt (4)6 have been made out. But it is not, in a logging matter of this type, the "especial competence" in the sense of a professional calling (for Mr. Beverley was especially ready to disavow any particular competence in survey or legal work) but rather the "capacity or opportunity for judgment" through Mr. Beverley and Mr. Minchin's many years in the industry here and in Papua New Guinea, which Gibbs trusted.

Secondly it is reasonable to accept Gibb's assertion he relied upon the representations for it would be dissociative logic to accept the defendant's argument Gibbs had sufficient knowledge and experience to make up his own mind.

(1) Caltex Oil (Australia) Pty Ltd -v- The Dredge "Willemstad" (1976) 136 CLR 529
(2) San Sebastian Pty Ltd -v- The Minister (1986) 162 CLR 340
(3) ibid 372
(4) MLC -v- Evatt (1968) 122 CLR at 571

Certainly he had knowledge and experience that problems may likely arise in the logging industry here but he was seeking to enter into an agreement which had both parties subject to the same vicissitudes and consequently knew the questions to ask but did not have the connection with the land (through the resource representatives) or the process so familiar to Mr. Beverley. Thirdly, it was foreseeable that the plaintiff would suffer loss if the representations should be incorrect for money at risk under the Agreement depended upon primarily, continued logging at the resource until the risk to the plaintiff was negated, and continued logging was directly related to the extent of the resource and "land owner problems" if any.

The direct correlation between the plaintiff's trade finance facility and its right to purchase the forest resource evidenced by the agreement of the 21 February 1997, distinguishes this case from that of Sebastian Properties Proprietary Ltd v. The Minister [(1986) 162 CLR 340].

There the HC found that a Town Planning Scheme, intended as a guide, was not enough to support the existence of a duty of care on the part of the planning authority. Here, the representation were known to be relied upon and were made with that intention. That is plain when Mr. Minchin volunteers the assurance at the meeting when the contract was signed. The duty of care existed and was breached.

The plaintiff's case goes beyond negligent misstatement

Deceit or fraudulent misrepresentation

This brings me to the "gearing up purpose" for the plaintiff says Allardyce needed Quarters trade finance to re-equip the company to produce logs for both Quarter and Itochu, a purpose which the plaintiff has also relied upon with the "landowner", "resource" and "financial position of Allardyce" misrepresentations as matters which give rise to the tortious liability of the defendants. (The plaintiff argues that the failure of Allardyce to provide log shipments extracted by the plant and equipment provided under the Agreement was a breach of contract).

I'm satisfied that Allardyce was indifferent to the purpose, to make logs available to Quarter from the use of the machinery obtained through the SLC facility, for Mr. Beverley must be presumed to have been aware (for the Itochu advance was a relatively recent transaction of quite some size) of the need to provide logs to Itochu under that arrangement, and chose to do so irrespective of the fact the machinery had been purchased through the SLC facility of Quarter. Mr. Minchin, at risk under his personal guarantee to Itochu, conceded that the Dakolae camp was capable of harvesting greater resources than envisaged by Quarter. In other words, the emphasis by both Mr. Beverley and Mr. Minchin was the harvest of resources and the regearing of Allardyce (for machinery of the company was committed else where, particularly Vella La Vella for Itochu's purposes) and the representation was negligently made. The late discovery of the Itochu documents in my view, go against the defendants case for notwithstanding Mr. John Beverley's argument about the asserted failure to ship by Quarter, Beverly had already approached Itochu for a price on the logs felled for Quarter and in fact made that first shipment to Itochu not to Quarter.

Mr. Beverley with the knowledge of Mr. Minchin, effectively deceived Mr. Ron Gibbs as to the "gearing up" purpose, for the availability of the Dakolae resource spread the risk facing Allardyce over its Vella La Vella arrangements with Itochu. It afforded Allardyce another resource from which to source logs for Itochu and Mr. Beverley availed himself of that alternative avenue.

Mr. Beverley deceived Mr. Ron Gibbs for Mr. John Beverley's position and his management responsibility in the Solomons would have given Mr. Beverley a greater insight into the risk profile of the company and its directors over the Itochu loan, insight denied Mr. Ron Gibbs. For it was clearly that insight which, after the event of the agreement, caused Mr. Beverley to approach Itochu and sell it the first shipment from Dakolae.

The deceit goes beyond the issue of the gearing purpose. Although at the relevant time the 21 February 1997, that purpose was to purchase plant and equipment to the use of Quarter by logging the Dakolae resource. In fact when the agreement was signed, unbeknowns to Mr. Ron Gibbs there was a particular agreement with Itochu which placed Allardyce under an obligation to provide logs also, not merely a buyer/seller relationship when logs were produced by Allardyce. Frankly with the proposed opening of a new resource at Dakolae, dependent upon its separate machinery to work the resource, Mr. Beverley's failure to allude to the proper construction of the relationship with Itochu (while obviously characteristic of Mr. Beverley) was deceitful for Itochu's arrangement faced the same risks (which later stopped operations) as Dakolae and which Mr. Beverley quite sensibly sought to spread by opening a new resource.

Mr. Beverley did not "ring fence" as it were, Itochu or Quarters operations, and I am satisfied at the relevant time, the idea of spreading risk of logging amongst disparate islands had credence, in Allardyce but the reasoning sprang from the Itochu loan to a material extent. Quarter was unaware of the extent or material parts of that agreement. Certainly the Westpac Bank representative who was called to give evidence by Allardyce was not familiar with nor seemed cognizant of the fact of the US$ 1 m loan early in 1996.

The plaintiff puts forward as evidence of the 1st defendant's deceit for that Mr. John Beverley's intention did not correspond with his expressed purposes for the plant and equipment; for that plant and equipment was used for purposes ulterior to that of the Agreement to furnish logs for Quarter's purchase. Mr. John Beverley's intention went beyond the purpose to put in place machinery and works to log for Quarter rather he was gearing up generally with a view to meeting a pre-existing obligation to another trade creditor, Itochu. Certainly that view is attractive for the fact of Itochu's trade finance agreement executed earlier in 1996 only came to light very late in the trial and provided for repayment within a 2 year period. For that agreement reflects Allardyce's obligations to sell Itochu round logs too. The fact that logs from the Dakolae concession were sold Itochu initially favours the plaintiff's case on this "purpose" aspect, except for this flaw.

The "purpose" was but one aspect of negotiations which resulted in the agreement with Quarter. The acts of the defendants in purchasing more machinery than the plaintiff says was reasonably necessary for the purposes of the agreement; (whether the circumstances of the sale to Itochu go to breach); are more properly matters for consideration on the breach of contract issue. For Mr. John Beverley's representations (exhibit 53 or Doc 103 or Gibbs XX - 15 Aug pm - 16, 17 on Gibbs affidavit; para 9) and Gibbs (affidavit para 17) echo what Sullivan relies on in Documents 134; 153. "Once your security (Commonwealth Bank to National Bank) is placed I will travel to Australia to place the orders for plant which we have identified. We propose to charter a Curtain Bros barge from Townsville direct to Vangunu Island. The new dozers will come through PNG."

I agree when we met in Sydney to the proposal to give Quarter Enterprises additional security (in additional to the contractual agreement to supply 40,000 m3). However I see problems and quite large costs associated with the "bill of sale" route. Also not all of the funds we borrow against the Commonwealth Banks standby l/c will be used for plant, a portion will go to start up costs of buildings, infrastructure etc."

Our Chief Justice considered "deceit" in a civil sense when giving judgment in Island Construction Management v. Air Transport.

The elements are that the false representation is made knowingly, or without belief in its truth or recklessly or carelessly as to whether it is true or false and damage results.

The non disclosure of the most material fact that the Itochu loan had been made in particular relating to Vella La Vella the need to adhere to a repayment regime associated with the resource, is deceptive for that it leaves unsaid the obligation to Itochu already facing Allardyce and the risk that, to meet that obligation, Allardyce may need to cast about to provide logs from another resource if Vella La Vella should become problematical.

Mr. Sullivan pointed to a number of case precedents dealing with the law on deceit.

In Akehielm v. De Mare (1959) 3 ALL ER 485 Lord Jenkins said (when speaking of the test for fraud) "the question is not whether the defendant honestly believed the representation to be true in the sense assigned to it by the court on an objective consideration of its truth or falsity, but whether he honestly believed the representation to be true in the sense in which he understood it, albeit erroneously when it was made" (p 503).

The sense in which Mr. Beverley understood the representation about the "gearing up" proposal with Quarters assistance may be encapsulated by Mr. Sullivans argument. The NBSI advance was used to purchase equipment and Mr. John Beverley's concession that the purchased plant was in excess of need necessary to produce 3000 q m 2; that he was willing and did argue with Quarter about the best price for logs in that first shipment and in fact sold the 1st shipment to Itochu despite having used the expression "I've cut my bridges" when referring to Itochu, leave me in no doubt that the plaintiff has satisfied me to the requisite degree, that Mr. Beverley did not honestly believe the gearing up proposal for Quarters purposes for that phraseology permitted of two meanings and whilst the plant may have been bought its purpose was not, in Mr. Beverley's mind exclusive for Quarter's benefit. As I say, in that period leading up to the date of the agreement, Allardyce was cognizant of the first in time trade agreement with Itochu where security was tied to directors' guarantees, not just reliance on the resource as was recited in the agreement with Quarter. That material difference, in my view also enables me to draw the inference that Mr. Beverley, at least, made the "gearing up" representation without belief in its truth, as events subsequently proved.

The fraud has been proved beyond reasonable doubt, a degree of probability appropriate in looking at culpability here.

If I am wrong, the lesser test, negligent misstatement, in terms of San Sebastian (San Sebastian Pty Ltd v. The Minister (1986) 162 CLR 340) has been satisfied for the same reasons. The majority of the court said at 357.

"The maker of a statement may come under a duty to take care through a combination of circumstances or in various ways, in the absence of a request by the recipient. The author though volunteering information or advice, may be known to possess, or profess to possess, skill and competence in the area which is the subject of the communication. He may warrant the correctness of what he says or assume responsibility for its correctness. He may invite the recipient to act on the basis of the information or advice".

It is clear that Mr. Ron Gibbs up to and at the time of the agreement relied upon Mr. Beverley and Mr. Minchins assurance about "landowner" issues. Mr. Ron Gibbs and consequently Quarter acted upon the express assurances in that regard.

Mr. Beverley cannot be said to be oblivious to the possibility that the incipient boundary problems of which he must presumed to have been aware may become sufficiently serious as the justice of the land court says to be "landowner problems" which could halt production. The wide tenor of Mr. Beverleys evidence asserted an understanding of logging in the Solomon suggests that understanding must recognize the history of logging disputes irrespective of any claim or not to a knowledge of custom. The differentiation can be made and it is dissociative logic to assert as Mr. Beverley has that he avoided trespassing on matters of custom as though that exempted him from responsibility to face the very possibility of conflict apparent in the bundle documents; the later warning by Dr. Albert Solomons and Chief John Dennie which warning went to the very issue apparent from the bundle and the land court decision. If he was oblivious, he was clearly negligent. Anyone with a grain of perception would appreciate the risk. He chose not to share his knowledge with Gibbs rather represented and continued to represent a risk free environment even unto the date of the Agreement.

So far as the representations about the financial position and the gearing up purpose was concerned, the failure to disclose the possible conflict between the 1st trade finance arrangement with Itochu clearly goes to credit and I find against both Mr. Beverley and Mr. Minchin on that issue as I have explained.

The case as to a civil conspiracy between Mr. Beverley and Mr. Minchin rests on whether or not I am satisfied that the purpose of the acts of both Mr. Beverley and Mr. Minchin leading to the agreement by Quarter was predominately to damage Quarter. (Cofter Haris Tweed Co. v. Veitch (1942) 1 ALL ER 142) I am not so satisfied. That claim must fail. For put another way, the self serving statements and silence on material circumstances appertaining to Allardyce's financial obligation to Itochu, for instance, whilst likely to advantage Allardyce were not, on balance made with the predominant purpose to injure Quarter. (Lonrho v. Shell Petroleum (1981) 2 ALL ER 456).

See also cl. 20 of the Agreement.

"Allardyce shall not (unless Quarter is in default under this agreement) sell any timber felled by it on Vangunu Island under its logging agreement with Dakolae to any other party unless and until Allardyce has supplied 40,000 cubic metres of round logs in accordance with this agreement save for any sawn timber required by Dakolae's timber licence to be sawn locally".

The flaw in the defendant's case is apparent when I consider the test espoused in Akerhielm's case7

".. the question is not whether the defendant honestly believed the representation to be true in the sense assigned to it by the court on an objective consideration of its truth or falsity, but whether he honestly believed the representation to be true in the sense in which he understood it, albeit erroneously when it was made." Per Jenkins LJ at 503

Mr. King spoke of Mr. John Beverley's manner whilst giving evidence, his "overweening pride". When one hears him giving his evidence one is left in do doubt of his self assurance and domineering personality; a personality which may be gleaned to a lesser extent from a reading of the transcript where especially in cross examination, his pedantic answers are apparent. But that merely calls for special care in this court not to be distracted from the material parts of his evidence. As I have said, the passage of time coupled with his attitude in court where he tended to conclude rather than recollect, really requires contiguous written material to strengthen Mr. John Beverley's oral testimony. That said, a reasonable person could not, having heard Mr. Beverley, possibly hold that Mr. Beverley did not understand the representations to bear the meaning claimed by him although that begs the question whether he honestly believed them, in that sense, to be true. (Akerhielm's case at 503). He distanced himself from their truth or otherwise (and to that extent was indifferent) for he was at great pains to point to his surveyor, Bennegay as a competent surveyor (thus absolving himself from responsibility) and pleading his ignorance on matters of custom, and pointing to Jack Solomon. His attitude by divesting responsibility to those around him whilst understandable in the man does not satisfy me on balance, that he honestly believed his representations to be true in the sense in which he understood them for he was motivated by the main chance to open a new resource.

Cases on the issue of fraud

In Krakowski v. Eurolynne Properties Ltd. (1995) 183 CLR 563 (an appeal from the judgment of the Full Court of the Supreme Court of Victoria) the HC of Australia was asked to consider issues of pre-contractual representations regarding tenancy of a property subsequently bought by a purchaser who suffered loss as a consequence. The majority, Brennan Deane, Gandron and McHugh JJ (Toohey J concurring with the result) addressed arguments about fraud, misrepresentation and deceit in the context of misleading or deceptive conduct:

"In the Full Court, however, their Honours saw the case differently. They treated the case not as one of concealment of a fact that Eurolynx or Mallesons were under a duty to disclose, but as a case of positive misrepresentation. Their Honours cited what Higinbotham CJ said in Curwen v Yan Yean Land Co. Ltd (19):

"concealment of a fact may cause the true representation of another fact to be misleading, and may thus become a substantive misrepresentation... A true representation, coupled with concealment, thus became a positive misrepresentation calculated to deceive".
(Page 574-575 HC of A 1995 Krakowsi v Eurolynx Properties Ltd)-

In Tapp v Lee (20), Chambre J said:

"Fraud may consist as well in the suppression of what is true, as in the representation of what is false. If a man professing to answer a question, select those facts only which are likely to give a credit to the person of whom he speaks, and keep back the rest, he is a more artful knave than he who tells a direct falsehood". (Page 578-579-580)

"In order to succeed in fraud, a representee must prove, inter alia, that the representor had no honest belief in the truth of the representation in the sense in which the representor intended it to be understood. In Akerhielm v De Mare (30) the Privy Council said:

"The question is not whether the defendant in any given case honestly believed the representation to be true in the sense assigned to it by the court on an objective consideration or its truth or falsity, but whether he honestly believed the representation to be true in the sense in which he understood it albeit erroneously when it was made. This general proposition is no doubt subject to limitations. For instance, the meaning placed by the defendant on the representation made may be so far removed from the sense in which it would be understood by any reasonable person as to make it impossible to hold that the defendant honestly understood the representation to bear the meaning claimed by him and honestly believed it in that sense to be true... (For the general proposition that regard must be had to the sense in which a representation is understood by the person making it, see Derry v Peek (31); Angus v Clifford (3); Lees v Tod (33), which authorities must, in their Lordships' view, be preferred to Arnison v Smith (34) so far as inconsistent with them.)"

Equally, a representation may be made fraudulently without evil motive. Lord Herschell in Derry v Peek (37) said:

"if fraud be proved, the motive of the person guilty of it is immaterial. It matters not that there was no intention to cheat or injure the person to whom the statement was made".

Page 724-The Weekly Law Reports, May 29, 1981

My Lords, it is beyond question that there are many cases in the books where terms, the breach of which do not deprive the innocent party of substantially the whole of the benefit which he was intended to receive from the contract, were nonetheless held to be conditions any breach of which entitled the innocent party to rescind. Perhaps the most famous is Bowes v. Shand, 2 App. Cas 455. Reuter v. Sala (1879) 4 C.P.D. 239 is another such case. Both these cases were decided before the Sale of Goods Act 1893 was enacted. But that Act only codified the relevant common law. I think Mr. Buckley was entitled to say that these two, and other similar cases, largely turned upon the fact that the breach complained of was part of the description of the goods in question and that would therefore today be a statutory condition under section 13 of the Sale of Goods Act. But there are many other cases, modern and less modern, where terms in contracts for the sale of goods have been held to be conditions any breach of which will give rise to a right to rescind. Though section 10 (1) of the Sale of Goods Act 1893 provides that, unless a different intention appears, terms as to the time of payment are not deemed to be of the essence of a contract of sale, there are many cases, notably those in connection with the opening of bankers credits and the payment against documents, where the relevant obligations have been held to be a condition a breach of which will entitle the innocent party to rescind. No useful purpose will be served by listing all those cases cited in argument on either side.

My Lords, I find nothing in the judgment of Diplock L.J. in the Hongkong Fir case [1962] 2 Q.B. 26 which suggests any departure from the basic and long standing rules for determining whether a particular term in a contract is or is not a condition and there is much in the judgment of Sellers L.J. with which Upjohn L.J. expressly agreed, to show that those rules are still good law and should be maintained. They are enshrined in the oft quoted judgment of Bowen L. in Bentsen v. Taylor, Sons and Co. [1893] 2 Q.B. 274, 281:

"There is no way of deciding that question except by looking at the contract in the light of the surrounding circumstances, and then making up one's mind whether the intention of the parties, as gathered from the instrument itself, will best be carried out by treating the promise as a warranty sounding only in damages, or as a condition precedent by the failure to perform which the other party is relieved of his liability."

The trial judge O'Brien J had originally dismissed the plaintiffs actions alleging deceit and conduct in contraventions of S. 52 of the Trade Practice Act 1974 (Cth). The Victorian Appeal Court allowed the appeal in part on the ground that the defendant had engaged in misleading conduct in terms of S. 52 of the Trade Practices Act 1974, and upheld the trial judges finding that there had been no fraud. The Appeal Court decided the case not on the basis of the non disclosure of a material fact, but on the basis there had been positive but not fraudulent, misrepresentation.

After reviewing the evidence and authorities, the High Court found fraud on the respondent Eurolynne's part and made orders for a new trial limited to particular matters. The H.C. reasoned, on the facts found by the trial judge, that fraud had been committed. This case does represent the law and it proper development, in the Solomon Islands.

The Full Court saw the case differently from the Appeal Court of Victoria. The High Court treated the case not as one of concealment of a fact that Eurolynx or Mallesons were under a duty to disclose, but as a case of positive misrepresentation. Their Honours cited what Higinbotham CJ said in Curwen v Yan Yean Land Co. Ltd (19):

"concealment of a fact may cause the true representation of another fact to be misleading and may thus become a substantive misrepresentation....A true representation, coupled with concealment, thus became a positive misrepresentation calculated to deceive".

When I consider Higinbotham CJ's dictum (above), it becomes clear Beverly's assurances to Mr. Ron Gibbs masked the important agreement which ALC had contemplated and concluded by the "heads of agreement" immediately before the 21 February 1997. As I have said, the "heads of agreement" put ALC's position with landowners in an entirely different light to that envisaged by Mr. Ron Gibbs. So suppression of these arrangements which gave ALC discretion to carry on or not to carry on business, whatever the circumstances, arrangements which on their face divested responsibility for managing any landowner issues but which in, fact had ALC directing proceedings where it though opportune, goes to deceive in the context of the circumstances leading to the agreement of the 21 February 1997.

Again, the plaintiff has satisfied me, the evidence of the Land Council's deliberations (knowledge of which may be imputed to Beverly) coupled with the underlying recognition in the "heads of agreement" of the real possibility of disputation, entered into by ALC under hand of Beverly, go to make the representations of "no landowner disputes" untrue in the sense in which Beverly made them.

I am satisfied the two misrepresentations were made negligently and further satisfied beyond reasonable doubt they were made deceitfully for that there was concealment of the fact of the Heads of Agreement coupled with the positive assertion of "no landowner problem". Mr. Minchin's presence at the time of the agreement coupled with his complicity in the "no landholder problem" assertion also satisfies me of his culpability.

The Plaintiff's first cause of action

Allardyce's breach of contract; whereby the first log shipment was made available, not to Quarter but to Itochu.

The Contract Case

The plaintiff points to its "first cause of action" arising in terms of the breach by ALC of the contract to make available the 1st shipment of round logs within 6 months of the loan transaction between ALC and Q by failing to serve a confirming notice of shipment and further repudiated the contract. In respect of the actual first shipment of logs from Dakolae, in January 1998, in breach of the contract callused 20, ALC made the shipment to and sold it to, Itochu and not to Q.

The defendants say the conforming notice of shipment was in fact given Q for that a proper construction of it. 11 of the contract contemplates notice by more than one document.

For that the argument about price, the plaintiff says, could only follow an effective notice of availability of logs to ship, a prerequisite envisaged by the agreement for those steps to follow.

That prerequisite notice must, on the defendant's case, be those documents pleaded at paragraphs 26 and 27 of the amended further amended defence (the "defence") (which were documents 243, 256 and 257 in the agreed bundle).

4 September 1997
To: Quarter
Attn: Mr. Peter Gibbs
From: Allardyce HQ/JHH Mr. Beverley

Re First Log Shipment Ex Dakolae Camp, Vangunu Island

1. Following is the log yard scaled stock as at 03/09/97. Please note forecast will be revised 8/9/97 and faxed to you. Size classes (%) are actuals for your guidance.

2. We think we will have 4500 M3 ready for shipment around 30/9/97. This is the maximum volume we can handle from the loading port.

3. Please advise early next week:-

• your price idea
• your proposed log ship

Best regards

Mr. Beverley

18 September 1997

To: Mr. Ron Gibbs/Quarter Enterprises
From: John Mr. Beverly/Allardyce HQ

Re: Dakolae Camp - First Export Shipment - Abt 4500 M3

Dear Ron

1. I confirm now my hand written note on your fax dated 17 September 1997 stating that it is my wish to ship 4500 M3. As promised in my fax to you of the same day I now sent the revised forecast based on Steve Clark's assessment. Stock will not be a problem for shipment in the last week of October according to Steve.

2. Please advise shipment details and your FOB price as soon as possible for this first sale from Dakolae which should be completed within the next month.

Best regards

Mr. Beverley

P.S. VATORO CAMP – OFFER

Refer to my previous fax re "Sale Forecast to Buyers" - Ex Vatoro Camp. I have revised the forecast down from 4000 to 3000M3 due to heavy rain which has restricted production. If you are interested in buying this parcel in addition to your parcel in Dakolae, I could delay shipment to build the stock back-up to 4000M3. Let me know your position on this as soon as possible as I will have offers from Japan to consider over the next week.
JHHB

Doc 255 - Dakolae Camp Log Stock scaled Report - 17/09/97 (faxed) showing a total of 2,793.7 m3 of logs scaled of the 4,500m3 to be expected.

Doc 256 - Mr. John Beverley to Mr. Ron Gibbs dated 18 September 1997. (hereunder)

Re: Dakolae Camp - First Shipment - about 4500 m3.

1. I confirm my hand written note on your fax of 17 September stating that it is my wish to ship 4500 m3. As promised in my fax to you of the same day I now send the revised forecast based on Steve Clark's assessment. Stock will not be a problem for shipment in the last week of October according to Steve.

2. Please advise shipment details and your FOB price as soon as possible for this first sale from Dakolae which should be completed within the next month.

Doc 91 Fax of map of Dakolae Logging Camp, Vangunu Island from J. Beverly to Quarter Enterprises - dated 22 January 1997 - showing wharf on shore line at end of logging road adjacent to export log yard hand drawn.

The defendants point to the fact that Mr. Ron Gibbs, in his first affidavit, para 31, states "the loading of point designated by Allardyce was the wharf at Hogatasina Village, Dakolae". In fact, at the time of the latter fax of the 18 September there was no wharf at Hogatasina Village, Dakolae. (The wharf which was subsequently built, by its location, was a cause of concern in that particular ships were precluded from mooring against it because of the shelving nature of the sea bottom at the wharf).

Clauses 10 & 11 of the Contract provide-

"10. Allardyce shall use its best endeavours to-

(a) make the logs available for monthly shipments of approximately 455 m3 each (save etc) provided that Quarter shall accept any shipment of at least 2500 m3 and not exceeding 60000 m3;

(b) have the first shipment of logs ready for loading within 6 months from the date on which the standby LC is received by the lender;

(c) have subsequent shipments ready for loading at monthly intervals thereafter.

11. Allardyce shall give not less than one months prior written notice to of the availability of logs for shipment, specifying approximate volume, species, location of loading point and the date logs shall be available for export from the loading point:"

The relevant date or the last day within the 6 months, was the 2nd November 1997. The deadline was not met. The 1st defendant says it did what was necessary, blaming Q for the failure.

At docs 266, 267 Mr. Beverley had Mr. Ron Gibbs send on Q letterhead on the 30 September 1997 for Mr. John Beverley's purposes, a letter stating Q "will attempt to find a buyer for the parcel of 4500 m3 from your Dakolae Camp on Vangunu Island..."

Yet on the same day a fax was sent to Mr. Beverley at Honiara by authority of Neil (Green):

*"John,

Neil has asked me to relay this message

*"Re Dakolae Logging Area we have been stopped operating once again, despite assurances from Jack Solomon, that all the problems were sorted out. The important meetings with the other people most concerned were not held and no resolution of problem despite two trips by Leti/Jack. People were very strong on boundary,

Shipment at Log Pond, will be all that will be available from Dakolae - N.G.
Ends *"-Can you call N.G., on Radio on your return.

That was followed by an application in the Magistrates Court it seems, supported by an affidavit by Jack Solomon sworn on 10 October 1997. At paragraph 28 and 29 he said,

"28. My assessment is that the Respondents planned to interfere with our logging operations. At our meeting one of their members Gregson Simeon promised that if their demand is not heeded there would not be any operation.

29. At the present time our contractor is not allowed to go further into the licenced land and they threaten to close down unless they are allowed to log as agreed in the contract we signed with them"...

On the 13 October the Dakolae Camp Log Stock Scaled was prepared showing some 4,798.132m3 with a + variance of 298.132.

Yet there was obvious difficulty at the concession area.

A particular document or combination, by virtue of clauses 10, 11 of the agreement, may be satisfactory in form provided they address with necessary particularity, the matters required by those two clauses. The defendant relies, to a great extent on the plaintiffs express and implied acceptance of the sufficiency of the particulars in the notices and that on their face they pass muster for the plaintiff actually proceeded to act in terms of accepting their sufficiency, for it sought to engage a ship and attempted a price. In fact Mr. Sullivan pointed to Quarter's formal admission in Doc 298 as constituting acceptance of the notice of readiness to ship specified in Doc's 255, 256. (Exhibit 19).

That Doc 298 recites offered and accepted prices based on net fob to Allardyce by the Philipino buyer "if Quarter was to get US $32/m3 for carriage costs". Gibbs by that fax of the 15th October 1997 sought to speak to Mr. Beverley urgently.

I do not accept the defendant's assertion that fax can be seen as acceptance of the earlier defendant's faxes of scaled log stock reports as notice under the agreement. It is another document in the ongoing attempts to mutually agree price which is not the plaintiff's pleading going to notice required under cl.11. I should also say the answer to interrogatories should be seen not as conclusive on the point but rather as evidence going to the issue.

For this first cause, pleaded at paragraphs 7 to 9 of the "statement of claim" alleged that Allardyce was in breach of clause 10 of the Agreement, for it failed to provide the 1st shipment of logs to Quarter (cl 10) within 6 months of the loan advanced to Allardyce on the security of the standby letter of credit provided by the Commonwealth Bank of Australia at the behest of Quarter.

By way of defence Allardyce pleaded that cl 20 of the Agreement (restricting sale of felled logs to Quarter until the agreed volume had been supplied) is expressed not to operate where Quarter "is in default under this agreement". The plaintiff joined issue. In fact the first shipment, the plaintiff says was made available to Itochu, and thus can be seen to repudiate the contract.

The default of Quarter was argued in court. The companies failure to bring a ship to Dakolae and load 45000 m3 of round logs at an FOB price of USD 129.62 per m3 was the obligation which Quarter failed to meet.

The plaintiff alleges the defendant's failure to serve a cl 11 notice (of availability of logs) within time and by that failure, a breach of contract.

Document 257 (from the plaintiff's bundle numbered 239) is the Dakolae Camp log stock sheet of the 18 September, 1997 which particularised species and M3 per species to make up the 4500 M3 target and the log stock sheet. Doc. 257 then showed some 3039.059 M3 of particular log species and a variance of 1,443-625.

In the plaintiff's answers to interrogatories 6 & 7, the plaintiff was faced, by 6, with the double negative thus:

"Q6 - Is it not true that the plaintiff did not at any time after receipt of (the fax of 18 September and the log stock sheet of the same day), accept the shipment of 4,500 m3 proposed in annex 2?"

He answered "not true"

By his answer to the following interrogatory, I presume the plaintiff to mean that he did accept the said shipment by written acceptance on the 15 October 1997, for he was asked,

"Q7 - If the answer to interrogatory No. 6 is in the negative, then –

(a) state the date on which the plaintiff accepted the said shipment;

(b) state whether such acceptance was oral or in writing;

(c) if the acceptance was oral"

The plaintiff answered: -

7 (a) 15 October
(b) In writing
(c) Not applicable

It is unfair, Mr. Sullivan argued, to now suggest, as the plaintiff does, that the documents comprised in 243 and 255/256 (the faxes reproduced) do not constitute a "notice" in terms of cl. 11. I accept that written notice of which cl. 11 speaks may be found in more than one document, provided they are sufficiently contemporaneous to leave no doubt they should be read together, for certainly following doc 243, the later faxes, documents 255, 256 do, in my view, go partway to satisfy the provisions of the clause. If there was a challenge to Mr. John Beverley's evidence about sending both 255 and 256, I am satisfied, on a reading of both in the form documented; they were sent as Mr. Beverley says.

The defendants say that in terms of the Agreement a valid notice by the seller was sent on the 18 September and subsequently for the faxes addressed the material points in cl. 11. The issue about the "loading point" is a bagatelle. This is not a case of nominating a port in the Gulf of Mexico.

The plaintiff argues the form of notice of the 18 September was deficient in that the location of the loading point and the date particular logs will be available for export from the loading point was not spelt out in the fax of the 18 September or subsequently.

I am satisfied any shipper in the log trade conversant with the practice about the Solomon Islands understands to ship from a "sufferance wharf" roughly constructed to afford access to the log site. There was never any doubt that the parties contemplated shipping from "Dakolae" as I say, the point is not that argued in Bunge's case where it talks of "one Gulf port" Lord Roskill's comments in Bunge's case (1) at 729, the inability to nominate "one gulf port" does not have resonance in this case where the parties contemplated shipping from "Dakolae". Again, the loading need be completed by the end of October so that Mr. Kings argument on that point, the absence of a specific date when the seller will be ready to "put freight on board", in the circumstances appertaining here, between men conversant with the trade and the vagaries of weather, tides and labour, a warning that the ship need have completed its loading by the end of October, is reference to a loading wharf for none was in existence at the 18 September when the first scaled log report was sent. By its notice to Allardyce of the 15 October, Quarter may be seen to have given notice in terms of cl. 12, notwithstanding the equivocation about the "shipping rate".

(1) Bunge Corp -v- Tradex (1981) 1WLR 711

That rate was a matter entirely for the buyer, Quarter, since the sellers obligation was to "put freight on board" the buyer's ship. The issue was whether the sellers notice in terms of cl. 11 had been sent.

The peripheral issue about the price for the 1st shipment of logs

This aspect of the case is material for the defendant contends that Mr. John Beverley's actions in seeking "the best price" in the light of the plaintiff's price offer falling below what it contends to have been a "floor price", was available to it, and a course condoned by the plaintiff so that the plaintiff cannot now complain of the sale to Itochu, pleaded as a breach of the Agreement in paragraph 9 of the Statement of Claim.

I am satisfied however, since the Sales Agreement and separate loans agreement with ITOCHU was negotiated early 1996, the details would then, in September/October 1997 have been more likely apparent to Mr. Beverley, for he had been selling logs out of Vella La Vella to ITOCHU and it stands to reason the obligation in the Itochu agreement resting on Allardyce to sell logs to Itochu is a relevant matter in these proceedings for the plain fact was that ALC sold the 1st shipment of logs from Dakolae also to ITOCHU.

For in that sales agreement dated 22 January 1996, Article 1 (Products) recites that "the seller (ALC) agrees to grant Buyer (ITOCHU Hong Kong Ltd) the first priority to purchase all logs which will be extracted by Seller ("logs") during the terms of this agreement"

(Mr. Wilkie's guarantee to the loan Agreement of the same date - 22 January 1996 - given on that day also by deed was witnessed by Mr. Beverley.)

Mr. King argued;- "One can only presume that these directors of ALC knew what was meant by these agreements and deed for later ALC entered into another agreement with the plaintiff, but this time by reference to round logs felled and exported from Vangunu Island"

There was no geographical restriction on log sales to Itochu whether one looks to the sales agreement or the loan agreement although the tenor of Mr. John Beverley's evidence was such shipments would be sourced from Vella La Vella. The fact of, and terms of that earlier sales agreement with ITOCHU was not made known to Mr. Ron Gibbs it would seem although he was aware ALC sold to "the Japanese".

The price fell to be determined, the defendant says, under clause 13 for s. 8(2) of the Sale of Goods Act (1897 - U.K.) (obligation on buyer to pay a "reasonable price" when not determined in accordance with s. 8(1)) does not apply for the agreement made specific provision about price. The price in terms of, clause 13, Mr. Sullivan calculates to be a current indicative price published by the Commissioner (doc 293) a weighted average indicative price of USD$129.62. Allowing the 5% discount, the lowest price permitted under clause 13 was USD$123 per m3. Quarter (doc 298) offered USD 103 per m3. Therefore, Mr. Sullivan says, the defendant was under no obligation to accept USD 103 per m3. He also points to the fact that Quarter, in its answer to interrogatory 10 admitted that the price in respect of the first shipment was never agreed.

This is the flaw in the defendant's argument.

"S. 8(1) The price in a contract for sale may be fixed by the contract, or may be left to be fixed in a manner thereby agreed, or may be determined by the course of dealing between the parties.

(2) Where the price is not determined in accordance with the foregoing provisions the buyer must pay a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case."

It happened that about this time, the market for Solomon Islands round logs suffered a serious collapse. Mr. Beverley in doc 301, "Review and Directors Decisions" set out the company decisions about various logging resources, the management of particular resources, and the plans for particular people and gave reasons for the steps that the company proposed taking. This document included, at 569 an Industry/Market Situation.

1. Presently there is over 190,000 M3 of unsold round logs in Solomon Islands. SIFIA members account for 143,000 M3.

2. Allardyce's export price January - September 1997 was USD127.40

The current shipment MV Southern King is USD 113.00/M3

Indicative prices for the first Dakolae shipment are in the range USD103 - USD116. There is a demand for our logs based on their quality. It is unknown if that demand will continue in the current circumstances.

Other SIFIA companies are indicating an average of under USD$100.00 with mixed at USD$70.00. Most have not received contract offers. None have received offers for old logs (2 months +)

Several companies have or will suspend logging until the market demand increases.

Refer market reports attached.

3. SIFIA will not replace Erich Kes when he departs in November. The office will be managed by his present assistant. The new Chairman of SIFIA is Mr. Kipua Tohi of Somma Logging Company.

This report, dated 18 October 1997 followed Mr. John Beverley's 17 October fax to Mr. Peter Gibbs with 1st shipment offers. Those 1st shipment offers were 2, both in format prepared by Allardyce differentiating specie with 3 girth sizes/by percentage so that a weighted average USD/M3 could be applied to the particular species taking into account the actual sizes available from the Dakolae camp log stock scaled, it would seem. That presumption may not express the defendant's methodology when preparing its 1st  shipment offers, but for comparison purposes, Allardyce has used its one format. Itochu did not proceed with its offers it seems. The important point that appears from that 1st offer of Itochu was that, on Allardyce's calculations, the average overall price was USD$116.10, while the Quarter average was USD$102.88.

While Mr. Beverley has utilised the Itochu supposed 1st offer to effect in the Dakolae range of indicative prices in clause 2 of his letter to staff (doc 301) the fact remains that Mr. Beverley did not agree a price with Itochu on that indicative basis and was obliged to approach Quarter at its offices, in Sydney, for on the 23 October he indicated the sale to Itochu had fallen through, putting the logs again to Quarter. (See doc 306 - Gibbs to Mr. Beverley confirming Quarters' approach to its Philipino buyer that shipment ex Dakolae is again available). The parties accepted the price for log stock had materially fallen from the price envisaged by the agreements pricing mechanism and their actions reflected market realities.

Unfortunately, with the market as it was, and Quarter's earlier advise (reliant upon Mr. John Beverley's refusal to treat at the price offered by Quarter) to the Philipino that the shipment was not available; the Philipino took the opportunity to avoid any obligation to purchase.

The price in respect of the first shipment was not agreed, Mr. Sullivan says but in fact the evidence supports the plaintiffs case that Mr. Beverley was willing to agree a price in the circumstances then appertaining but chose not to on the ground that Quarter had not met indicative prices for logs which (Mr. Beverley says) had been offered by Itochu.

The Shipping Terms

On the 16 December 1997 Mr. Beverley wrote (doc 388 vol 4) to A.G. H. Nori, the Lawyer for Dakolae Landowner company, in these terms:

"As I indicated in previous communications to you and Mr. Kama business dictates that we recommence felling within the bounds of Dakolae licence area as from Monday 5 January 1998

The existing stock has now been sold and I shall be providing details of the contract to you ...

I am satisfied we have secured a market for export which in the current circumstances will ensure the best return to the Dakolae company.

Not to recommence normal business on 5 January would result in the complete closure and suspension of the operation at Dakolae. We have absorbed the holding costs and wages for over three months now without any income; a situation which can not continue".

I have ..
Did you ...
Yours truly,
JHH Mr. Beverley.

I'm satisfied that the reference to "existing stock now sold" can only relate to that stock sold to ITOCHU. This confirms my earlier summarise that the logs at the "log pond" were those sold to ITOCHU and that the scaled logs details of which the defendant company says in argument before me, comprise logs ready and available for shipment should not be seen to be details of logs ready to ship as envisaged by clause 11 of the Agreement. ITOCHU shipped 2000 m3 in January and this shipment can only relate to Mr. John Beverley's reference to Nori of "existing stock" sold.

Later on the 17 December 1997 Mr. Beverley wrote by fax to both Gibbs and Mr. Minchin (doc 392 vol 4); that document is interesting for a number of reasons. It curiously is addressed to a director of Allardyce by way of "drop copy" for the approach to Gibbs seeks to borrow money. It includes figures put together by Mr. Beverley, but suffice to say now that the figures, based on the 4,500 m3 per shipment envisaged under the contract with Quarter, were erroneous to the knowledge of Mr. Beverley at that time for ITOCHU did not take out of Dakolae logs in that amount of 4500 m3, rather it took less than half. The closure of the Vella La Vella operations was anticipated. The document stated in no uncertain terms that "based on your earlier advice and Devon's {Mr. Minchin} have cut my bridges with ITOCHU now". The circumstances related to Mr. John Beverley's earlier supposed sale of Dakolae logs for a higher price to ITOCHU, a sale which did not then eventuate but which "gazumped" as it were, Quarters' proposed purchased price. Mr. Minchin appears not to have taken steps to have Mr. Beverley explain why his guarantee appears to have been put at risk of exercise, by the quote above. For at that time Itochu's source of logs from Vella La Vella had been affected by landowner disputes. Allardyce went on and sold logs to ITOCHU from Dakolae.

Counsel appearing for the defendants, Mr Sullivan QC is clearly the "Sullivan" referred to in the document. "Sullivan has my power of attorney unlimited". The financial statement of Allardyce's Dakolae resource on which Mr. Beverley sought to rely to obtain further moneys from Quarter is then misleading in a material respect for at the time that it was sent Mr. Beverley was not then in a position to ship 4500 m3 of round logs per month.

To quote exhibit 50, {Stephen Clarks' letter to Mr. Beverley of the 15 November}

"We only await instructions from yourself as to when to start felling only because of the market situation. When this instruction is given log production will start and if any "interference" then Police will be called in but I don't think this will be necessary"

The reference to "interference" must relate to problems at Dakolae touched on by Neil Green in his message relayed to Mr. Beverley on the 30 September. That manage stated that;-

"we have been stopped operating once again, despite assurances from Jack Solomon that all the problems made sorted out.. The important meetings with the other people most concerned were not held and no resolution of problem despite two trips by Heti/Jack. People here very strong on boundary. Shipment at log pond will be all that will be available from Dakolae".

There was a reference "operations have continued here at Dakolae" followed the landowner meeting of the 31 October, as detailed in Stephen Clark's minute of 15 October, and the various memos covering. At some time before 30 September operations at Dakolae had been interrupted. That interruption may be presumed to have continued until the meeting of the 31 October, for the various memos covering that period reflect the non operational status. By fax Mr. Beverley suggested recommencing felling operations on Monday 5 January 1998 at Dakolae. That fax was sent to Mr Nori, the lawyer for Dakolae. Now reading documents of scaled logs coupled with the relayed message of Neil Greens dated 30 September 1997 suggests that logs at the "log pond" at that date totalled 3947 m3, scaled so that these logs, in reality, would have been the whole round logs available to ship from Dakolae unless further logs were roaded to the "log pond" after the landowner meeting of the 31 October. But any such logs would need to have been brought from the bush. To the date, then that Mr. Beverley "cut his bridges with Itochu", on or about 16 December, Beverly could be said to be in a position to ship at least 4,807.237 M3 of round logs from Dakolae if reliance is to be placed on the scaled logs documents (Doc 366, p. 713). But when the fact of the actual logs shipped to Itochu read with Mr. John Beverley's letter to Nori is considered, whether Allardyce was able to ship logs in accordance with the agreement in terms of 4500 M3 per cargo has not conclusively been settled. What the facts do go to show, however, is that landowner's problems played a part in the ability to deliver logs to the log pond as and when the logger would like.

The sale of logs then, went to Itochu on fresh terms later agreed so that the 1st shipment of logs from Dakolae went not to Quarter, but Itochu.

In these circumstances, Mr. Sullivan's assertions that Quarter was obliged to buy at USD$123 M3 cannot stand for Allardyce was treating with Itochu at USD$116 M3, as well as Quarter at a lower price. Despite the controversy over the recollections about "best price" and Mr. John Beverley's self serving assertions that Gibbs had agreed the logs may be sold to the highest bidder, the fact remains the logs, were put to Gibbs in circumstances where, on the material in the letter of explanation to his staff, Mr. Beverley had refuted his counsel's argument in court by his earlier actions in accepting the market reality for merchandise.

Mr. Beverley had quite erroneously treated the commercial inability to strike a price within the range envisaged by clause 13, as affording him the licence to hold out for the "best price". I am satisfied, where none of the three alternatives in S.8 (1) were referable (for the agreement was silent on the very circumstance of a precipitous fall in log prices and the seller's actions by treating at lower prices than envisaged by the agreement recognise this), that S.8 (2) is applicable and the defendant has not, in light of its own document and later actions in seeking Quarters concurrence, accepted Quarters "reasonable offer". Consequently Mr. Beverley repudiated the contract by refusing a "reasonable price". I am reinforced in that view by the express obligation, in the Agreement to sell to Quarter.

The shipping notices

Mr. John Beverley's evidence by his faxes on and following the 18 September suggests he sought notice of the vessel and its readiness to receive. This reflects the situation relied upon by Mr. King where he points to Bunge Corp v. Tradax Export SA (1981) 2 Lloyd's Rep 1 as authority for the proposition that a term embracing a time stipulation in these "fob" contracts may be treated as a condition.

In this case, "fob", the contract stipulates what Mr. King asserts to be that-

(a) the seller specify the goods and species of logs to be shipped.

The defendant asserts by notice of the 18 September and subsequent those logs are denominated–

(b) it must be presumed that the date of the 1st shipment will be before the 2nd November, the last day available with in the 6 months time frame provided for in the contract; but that the defendant has not nominated a date of readiness to ship.

Mr. Beverley's earlier reference to logs being ready for shipment before the end of October is clearly a reference to his recognition of the importance of the time frame.

(c) no shipping point is nominated although the defendant says an understood presumption (impliedly accepted by the buyer) is that the shipping point would be adjacent to Allardyce log yard about Hogatasina.

Mr Kings argument relies on Lord Wilberforce's judgment at 6 where (dealing with a 15 day notice to be given by the buyer of readiness to receive delivery) His Lordship said;-

"This relevant clause falls equally within these principles, and such authority as there is supports its status as a condition - see Bremer Handels-gesellschaft m.b.H. v J.H.Rayner &Co. Ltd. And Turnbull & Co. v Mundas Trading Co Ltd. In this present context it is clearly essential that both buyer and seller (who may change roles in the next series of contracts or even in the same chain of contracts) should know precisely what their obligations are, most especially because the ability of the seller to fulfil his obligation may well be totally dependent on punctual performance by the buyer".

In Gill & Dufus SA v Societe Pour L'exportation Des Sucres SA (1986) 1 Lloyd's Rep. 322 (CA) Master of the Rolls Sir John Donaldson at 17 (p 324) quoted Bunge at pp. 15 and 729G:- "in a mercantile contract when a terms has to be performed by one party as a condition precedent to the ability of the other party to perform another term, especially an essential term such as the nomination of a single loading port, the term as to time for the performance of the former obligation will in general fall to be treated as a condition". And went on to say;-

"For my part, like the learned Judge, I am most reluctant to reverse or differ from a trade tribunal. Nevertheless, the issue is one of construction and thus of law. The arbitrators' finding of fact is part of the contractual matrix and a very important part, but it is no more than that. There is no suggestion that the process of shipment under an f.o.b. contract for sugar or indeed contracts for the sale of sugar generally are in any relevant respect different from contracts for the sale of some other soft commodity. All that is said is that those engaged in the sugar trade find strict punctuality difficult, which may well be true of other trades not to mention other individuals, and that in practice they adopt a more relaxed attitude. This seems to me to be quite insufficient to displace the construction which would usually be placed upon a term involving interdependent obligations in relation to the time for loading, reinforced, as it is in the present case, by the use of the imperative words "at latest"".

Was clause. 11 of the agreement a condition the breach of which entitled the buyers to rescind the contract

For here there is no single notice, for that of the 18 September cannot, on its own stand as sufficient for the term of the contract must in my view be seen as a condition where strict compliance need be shown if a party wishes to gain the benefit of the contract. Here when things went awry, the principles in Gill & Dufus SA clearly support the buyer, Quarter, for no notice by the seller designating the actual loading point (rather than implied by the fact of the log yard by Hogatasina) or the date was given for sale of particular logs, rather a running series of scaled log stock reports; coupled with enquiries by Allardyce of the buyers log ship with a suggestion that the sellers agent, John Donohoe at Gizo would provide some idea of the loading facility. It is not clear when a sufferance loading dock was constructed but what is clear is that the dock was not in existence on the 18 September, ready to take the buyer's ship. Since problems could be envisaged because of the access difficulties to a sufferance wharf, this is a material consideration for a buyer with the responsibility to furnish the ship. Where the practice is one thing but the contract another, in this case I have no hesitation following the principles in Gill & Dufus SA and find that the seller has failed to give a proper notice in term of its agreement; that cl. 11 is a condition of the contract, with a time stipulation. Lord Wilberforce's acceptance (in Bunge's case at p 6) that "broadly speaking time will be considered of the essence in "mercantile" contracts"- satisfies me that such clauses should be so construed.

The flaw in the defence argument, then is that, having the obligation to serve a notice under cl. 11, (for that it failed for the reasons given) the defence cannot seek to rely on the plaintiff's failure to give notice of the expected "date for loading". To argue, as the defence seeks to do, about the plaintiffs failure to nominate a ship or date or price (all of which really are conditions subsequent) cannot rectify the failure to serve a proper notice required by cl. 11. A running series of scaled log stock reports, whilst helpful cannot substitute for a notice required by cl. 11. Whilst it is plain from hearing Mr. Beverley that when speaking of the course of trade, he did not expect Mr. King (and impliedly this court) to understand the practice in the Solomon Islands, whatever was "customary for a trader" (to use the phraseology of the earlier trade arbitration the subject of the appeal in Gill & Dufus) the plain fact is that the wording of cl. 11 clearly departed from that practice and required something beyond Mr. John Beverley's various faxes to suffice as "notice".

Frustration issue

The plaintiff has submitted the defendant made a precontract warranty or representation "to the effect that landowner problems would not prevent it making logs available to Quarter, then it also took the risk of such an eventuality arising".

I find that "landowner problems" in whatever multifarious forms, was a material matter for Mr. Ron Gibbs consideration leading to the signing of the contract. I am further satisfied Mr. John Beverley knew this. The background of both their experience in the logging industry in this region and the nature of the contract (Quarterly contracting to acquire a particular source of logs from a particular regional site) leaves me in no doubt that "no landowner problems" was an implied precontract warranty or representation on the facts which I have detailed and that warranty was expressed at the meeting by Mr. Minchin before the signing.

Mr. John Beverley had good reason to make these representations for as I have shown he, through experience sought to distance Allardyce Lumber Company (ALC) from the direct effect of "landowner problems" by contracting with Jack Solomons group who acted as the surrogate for ALC in disputes which arose in the logging of the resource by Allardyce. I'm satisfied the relationship with Jack Solomons group (funding particular litigation and to a large extent, directing that groups efforts in terms of the Heads of Agreement) was used by ALC to justify its assertions before me that the responsibility for managing landowner concerns and contingent landowner issues did not rest on ALC and consequently, ALC could not be said to be in a position to make such a warranty in that event. There may have been some merit in the defendant's case if I was not satisfied personal knowledge of the continuing possibility of problems was with Mr. John Beverley (for he must be presumed to have appraised himself fully about the issue when assessing the resource), as the Manager Director of ALC he cannot divest responsibility for enquiry and then have Quarter enter into a contract with ALC without reference to the fact of the terms of the Heads of Agreement (doc 116, vol 2) dated just days before the agreement with Quarter. For the Heads of Agreement between Jack Solomon, Galia Tito (called Dakolae) and Allardyce provided, at cl 7 that Dakolae was responsible to ensure Allardyce free and unfettered licence from the Dakolae customary landowners to enter and log the Dakolae resource while cl. 37(f) enabled Allardyce the right to claim breach of Dakolae's obligation under the agreement where notice to remedy breach remains unsatisfied after 21 days. I find that the Heads of Agreement was a material matter for it later was used by Mr. Beverley to base his claim to frustration of the contract with Quarter. As a material factor bearing on the landowner issue, Mr. Beverley had a duty to disclose. To contract with Quarter in these terms without opening upon the nature of that arrangement is misstating the situation at Dakolae by such omission.

It is dissembling to argue as the defendants sought to do, that the actual cause of the dispute which gave rise to the purported acceptance by ALC of the frustrating event was not one envisaged earlier on. But it was such an events, whether encroachment or boundary disputes which gave rise to risk of violence and which prevented Allardyce continuing to log. The fact that ALC was not directly responsible to get to the bottom of the problem (rather it was its surrogates' responsibility), does not obviate that knowledge of the possibility of dispute was open for all interested to see. The rumblings could be heard throughout for those with ears to listen.

The flaw, then in the defendants was the contract was entered into by ALC and took the risk that a frustrating event flowing from "landowner problems" might occur yet Allardyce had sensibly provided an "out" in those circumstances in the "Heads of Agreement" with the landowner representatives, Dakolae, but such "out" was not reflected or form part of the agreement with Quarter. The frustrating event, Dakolae's failure to facilitate access to the block, can be linked to those "landowner problems" earlier discussed.

For without a reservation in the agreement with Quarter (that landowner issues may arise in the course of the contract), where a warranty negativing their existence is found in discussions leading to the agreement and was acted upon by Mr. Ron Gibbs on Quarters part, the defendant Company is precluded from relying on the frustrating acts since its argument cannot relieve its from liability on its warranty. (See reasoning of Barton J. at 432 in Ockerby & Co. Ltd v- Walton (1918) 25 CLR 431).

"Had there been no such warranty the defendants might have successfully argued that their promise to appoint the plaintiff must have been understood by the parties as being conditional on the defendants themselves being appointed Government agents, but that argument will not relieve them from liability on heir warranty."

In this case I have found a warranty by Allardyce of no landowner problems, so that it would as Mr. King says be unfair now to allow the defendant to claim "frustration" on a matter which may be directly attributed to landowner problems especially when the defendant has had redress under the "Heads of Agreement" with Dakolae.

The plaintiff also points to the principles set out in Goff and Jones-Law of Restitution 6th Ed., that sale of goods contracts rarely if ever be frustrated; it is submitted this is always true where there is a sale of goods by description as here because goods of the contract description are available on a market elsewhere to satisfy the contract and the seller simply has to buy in.

This law is applicable here, for the market for round logs in the Solomon Islands was shown to be deep and this was a sale of goods by description. For these reasons and because it would be inequitable to allow the defendant to escape its liability under the agreement when it had specifically provided for itself an "out" in terms of the Heads of Agreement with Dakolae signed but days before the agreement with Quarter, I find that the defendant's purported termination of the agreement by letter of the 1st February 1999 is without legal foundation and must fail. (see comments of Lord Hanworth MR at 282 of Walton Harvey Ltd v Walker & Homfrays Ltd (1931) 1 Ch 274 where he said;-"The parties must, if they desire to be safeguarded against subsequent contingencies provide for them in their agreement")

On the evidence, it is clear, even if the plaintiff is to be fixed with notice, (documents 165, 166), then the defendant company repudiated the contract by treating with ITOCHU in the manner in which it did, so as to obviate any real opportunity by Q to fix a purchase after Mr. Beverley had implied acceptance of ITOCHU's better offer; having no wharf in situ; (while facing disruption at the resource site which raised a real doubt over the possibility of shipment by the end of October since no wharf had been constructed).

The defendants contention that it has sent notices in terms of cl. 11 before the 2 November, then is not supported by the evidence.

The construction to be placed on Clauses 10, 11 in terms of the documents relied upon by the defendant company as affording notice

Those documents have been set out above. The factual matrix of events leading up to the 2 November 1997 have been touched on. In Bunge's case (Bunge Corp v Tradax S.A. (H.L. (E)) (1981)2 ALL ER 513 at Lord Roskill at 553 (whose judgment was adopted by the other Law Lords) said-

"To my mind the most important single factor of counsel's submission for the respondents is that until the requirement of the 15 consecutive days' notice was fulfilled the respondents could not nominate the 'one Gulf' as the loading port, which under the instant contract it was their sole right to do. I agree with counsel that in a mercantile contract when a term has to be performed by one party as a condition precedent to the ability of the other party to perform another term, especially an essential term such as the nomination of a single loading port, the term as to time for the performance of the former obligation will in general fall to be treated as a condition. Until the 15 consecutive days' notice had been given, the respondents could not know for certain which loading port they should nominate so as to ensure that the contract goods would be available for loading on the ship's arrival at that port before the end of the shipment period"

This contract which is before me deals with goods described as "round logs" and in form, falls to be decided in accordance with settled law. Here, where the risk to the buyer under the trade finance provisions of the contract, is of such a consequence eg clause 8 (b) - in the event that ALC defaults in its obligations under the ALC Facility, the Lender may immediately negotiate the stand by LC and pay the proceeds in reduction of ALC's outstanding liability to the Lender under the ALC facility - (for Q provided the standby LC to facilitate the loan to ALC by the National Bank of Solomon Islands) it is incumbent on the seller, ALC to "have the first shipment of logs ready for loading within 6 months from the date on which the standby LC is received by the Lender" (the last day 2 November 1997). - clause 10 (b) of the contract-

That clause is therefore a condition of the contract and any breach will given rise to a right to rescind. For to allow management, as it were, of the contract to rest on the seller, ALC (the Borrower) so as to place the buyer at risk of having its "stand-by Letter of Credit" negotiated by the Lender to ALC (the Borrower) though ALC's breach, calls for strict interpretation of the terms of the contract drafted by ALC, when the seller controls the risk to the buyer in this fashion. It is axiomatic, then that breach of clauses 10, 11 will be a breach of conditions of the contract. I adopt that reasoning of Bowen LJ, used by Lord Roskill at 725,

"Parties to commercial transactions should be entitled to know their rights at once and should not, when possible, be required to wait on events before those rights can be determined. Of course, in many cases of alleged frustration or of alleged repudiatory delay it may be necessary to await events on the happening or non-happening of which rights may well crystallize. But your Lordship's House has recently reiterated in a series of cases arising from the withdrawal of ships on time charter for non-payment of hire the need for certainty where punctual payment of hire is required and has held that the right to rescind automatically follows a breach of any such condition.

My Lords, I find nothing in the judgment of Diplock LJ in the Hong Kong Fir case which suggests any departure from the basic and long-standing rules for determining whether a particular term in a contract is or is not a condition and here is much in the judgment of Sellers LJ, with which Upjohn LJ expressly agreed, to show that those rules are still good law and should be maintained. They are enshrined in the oft-quoted judgment of Bowen LJ in Bentsen v Taylor, Sons & Co (No. 2) [1893] 2QB 274 at 281:

There is no way of deciding that question except by looking at the contract in the light of the surrounding circumstances, and then making up one's mind whether the intention of the parties, as gathered from the instrument itself, will best be carried out by treating the promise as a warranty sounding only in damages, or as a condition precedent by the failure to perform which the other party is relieved of his liability."

In the circumstances, then where the seller has retained to itself control of the process leading to the 1st shipment of logs from Dakolae by the 2 November, I am not satisfied either that the defendant company had the 1st shipment of logs ready for loading or that the documentary notices are sufficient for the purposes of Clause 11. The documents 156 (with its scaled stock log report) does not in my view sufficiently identify the available logs for shipment, when one realises the logs in the log pond and those in the bush may both be included in the tally, no wharf was in existence and there was the very real probability of disruption preventing the transport of logs from the bush to the shipping point. (Any purported acceptance by the plaintiff does not in these proceedings prevent the plaintiff relying now, on a strict interpretation of these provisions when the agreement set out a series of steps leading to a completed sale of logs).

For while the buyer, Q was grappling with the ever shortening time constraint, ALC never satisfied me on the evidence, it was in a position to load nominated available logs, rather it continued to furnish scaled log reports which included logs felled in the bush. So the mischief which happened to the buyer, Q through the Lending Bank's call upon Q's standby LC, came to pass through the breach of these conditions of the agreement.

Since the buyer carried on with the contract, at the time, its claim for breach then of these conditions will sound in damages for repudiation by the defendant company.

The effect of the drawn-down of the Standby Letter of Credit in November 1997 by the National Bank of Solomon Islands upon default by the Borrower, ALC.

The plaintiff alleges the directors of the defendant company "conspired together to cause harm to Q by misstating the effect of the transaction involving the drawn down of the SLC in November 1997 in contravention of the Companies Act S. 141 for the purpose of misappropriating Q's money in March 1998".

The relevance of credit to the deceit and conspiracy claims

Mr. John Sullivan, in his summing up, was careful to point to particular parts of the various witness testimony, to support the defendants argument denying deceit and conspiracy claims. He contrasted the presentation in the witness box, of Mr. Ron Gibbs with that of Mr. Beverley as that of the "consummate salesman" and "one whose integrity is besmirched". Mr. Sullivan went on to address the plaintiff's criticism of the failure of Mr. Beverley to keep "proper records" (contrasted with Mr. Ron Gibbs file Notes) or to make discovery as deliberate concealment (the piecemeal discovery after commencement of trial), argument directed more to the plaintiffs' weaknesses than to any defendants failings.

The defendant Mr. John Beverley's attitude to discovery

That is clearly the fault in the defendant's case. Putting aside the issue of contemporary file notes for the moment, the conduct of the case satisfied me the defendants failed to discover relevant documents prior to the commencement of proceedings in accordance with Rules of Court. Having heard Mr. Beverley on this, I am satisfied he little understood his obligation to actively assist with the process when I look at Exhibit 59 (which sets out the documents not discovered at trials commencement) and realise that the ITOCHU documents came late from the custody of the defendants counsel, the existence of which documents Mr. Beverley had in cross-examination, denied, it is plain, as Mr. King says, that Mr. Beverley took that "most cavalier approach to the duties of the company on this matter" (of discovery).

Q. Mr. King	I have asked him to look at paragraph 5. Any account or books of account - other documents there referred to relating to the matters in question in these - in this suit other than the documents listed. Set forth in the schedule. How did you swear that affidavit without disclosing the audited accounts for the year 1996 Mr. Beverley.	
		
A. Mr. Beverly	I swore it on the basis that I believed what I said was true as I always do when I swear an affidavit.	
		
Q. Mr. King	Do you now accept that that was wrong.	
		
A. Mr. Beverly	No - not entirely.	
		
Q. Mr. King	So you will say that the audited accounts of 1996 of the First Defendant, Allardyce, are not relevant. Is that what you are saying.	
		
A. Mr. Beverley	No I am not saying that at all. I am saying...	
		
Q. Mr. King	Then they should have been discovered shouldn't they.	
		
A. Mr. Beverley	In the process of discovery I think I have made it quite clear - the matter was essentially a matter concerning Dakolae and as I said people were given access freely to all of the relevant information on Dakolae and that's why there was some financial information on Dakolae.	
		
Q. Mr. King	I suggest to you it concerns Allardyce Mr. Beverly not just Dakolae.	
		
A. Mr. Beverley	No - I mean the Dakolae project not the land - I am not talking about the land. And the 1996 accounts would probably not have been included in the filing cabinet or in the shed where the Dakolae land was.	
		
Q. Mr. King	So you say do you that...	
		
A. Mr. Beverley	So you say do you that it was up to Mr. Andrew Radclyffe and other persons acting on behalf of the Plaintiff to search out your offices at Ranadi to find the audited accounts and you didn't have to discover them - is that your evidence.	
		
Q. Mr. King	No I don't - I don't think it was up to them but the discovery process started many years ago - many years ago.	

Without being exhaustive, documents elicited by the searches of Mr. Hayes and Mrs. Deborah Bourke included the later audited accounts in which appeared the manner of write off of the Q.E. debt and from which, the reasons for such write off became apparent. They were material and were not originally disclosed, not as Mr. Beverley would have it because he was unaware of just what records of the company remained about the offices and camps of the company, but I am satisfied, because he was unmindful of his oath of discovery, since particular documents discovered late may be said to go against the defendants interest. Having been contradicted by his own document in the circumstances surrounding his answer, I find where there is an issue over the defendants duty to discover relevant documents, that his attitude in that answer encapsulates to a large extent, his appreciation of his duty to the court to make full disclosure. Having, at that time had no Itochu document put to him by the plaintiff his attitude was contemptuous towards the plaintiff's suggestion that underlying a loan of a million dollars US by Itochu these would be some document setting out the items of the loan. For clearly, once the financial statements of the relevant years were found by the plaintiff the loan appears as the principal source of funds for 1996 (apart from the share holder loans) and Mr. John Beverley's attitude ignores the obvious, that a company such as Itochu would reasonably be expected to keep proper records and part of that record would be documentation relating to loan accommodation afforded Allardyce.

The matter of the write-off of the CBA debt

In any event, one would suppose an auditor of Allardyce's book of account may expect a similar source document to satisfy itself as to the fact of the loan and how to deal with it in such accounts. Perhaps it had, but the manner in which the Itochu documents were discovered does cause the court to scrutinise the subsequent claim by Allardyce that it had the right to "write off" a debt to the Commonwealth Bank, for the basis of that "write off" relied to some extent, on the fact that invoices from the Commonwealth Bank were so entitled, and directed to Allardyce.

"By para. 14(E)(c) of the defence, Allardyce pleads that payments made in February, May and July 1998 (claimed by the plaintiff as partial repayments of the moneys made available pursuant to the standby LC) was received by CBA "because pursuant to cl. 17 of the agreement, cl. 16 thereof applied mutatis mutandis and CBA, having paid NBSI pursuant to the standby LC, was subrogated to NBSI's right there under and thus was entitled to receive one fourth of the proceeds of each commodity LC established under the agreement"".

Clearly these invoices suggest a liability and the Bank officer from the CBA, called to give evidence in Brisbane, admitted that suggestion was erroneous. Allardyce never had any liability to CBA and the invoices were to that extent wrongly entitled. I find that to be the case. On the evidence, it is also plain that Mr. Beverley sought and obtained statements in that fashion. Whether for convenience or for the very purpose to which they were later put (to illustrate an obligation to CBA) matters not, but the fact remains the invoices were used by Allardyce for its purpose when it purported to "write off" the debt consequent upon the frustrating event. The bank officers' evidence satisfies me its debt had been paid out by its customer and that the invoices in favour of Allardyce were raised at its customers request following Mr. John Beverley's approach to Ms. Bourke.

The plaintiff says the difference is false in fact and law. It is unreal to the knowledge of Mr. Beverley for he said to Doherty in 1996, "No Gibbs, no money" and it is false because Quarter through CBA its agent for this purpose paid off Allardyce's debts to its bank, NBSI. Mr. King argued that the defendants plea suggests that no buyer of goods who pays under a documentary letter of credit ever "pays" the seller for those goods (because his bank says the buyers bank) and if the seller fails to deliver, the buyer only has an action by subrogation in the banks name against the seller, an argument, which is commercial nonsense.

The lie to this argument can be found in cases the plaintiff referred to me.

They included Corgill Int. v. Antigua General (1996) 2 Lloyd's Rep 524 where dealing with the effect of a performance bond. Quoting Stanghton LJ in the Appeal (1998) 1 WLR 461 Mr. King argued that where a draw down occurred as in this case "subsequently there has to be an accounting between the parties". In Comdel Commodities v Siporex (1977) 1 Lloyd's Rep. 424, Potter LJ's judgment recognised an accounting between the parties "in the sense that their rights and obligations will finally be determined at some future date". Mr. King says that is what this case is about.

There is clearly presumption in both cl. 16 & 17 of the agreement of the continuing effect of the obligation to apply one fourth of the proceeds of each commodity LC to NBSI in reduction of Allardyce's liability under the Allardyce facility, and a commensurate reduction of the liability of Quarters bank under the standby letter of credit.

The clauses are silent should the standby either of credit be called down for the underlying premise is the manner by which the commodity LC's shall be applied to the reduction of Allardyce's liability under the facility. It is necessary, as Potter LJ says to finally determine the parties "rights and obligation at a future date" but such rights and obligations need take into consideration the acknowledgement by the defendant of its continuing liability by making payment in terms of the one fourth proceeds of the negotiated Commodity LC. It must be remembered that 3 payments corresponding to the log shipments were made upon negotiation of the Commodity LC.

The fact that the CBA made the payment under the standby letter of credit may be likened, Mr King says, to the payment under a performance bond by a financial institution in respect of contractual performance must be seen as a part payment by the vessel builder, the creditor under the contract i.e. "as if paid by Ocean Fast Marine" (per Giles JA para 149, Lumley General Insurance Ltd v Ocean fast Marine Pty Ltd (2001) NSWCA 479.

I agree with the analogy for the CBA arrangement was by its customer Quarter which bore the cost, and accounting for that cost is reflected in the financial statements of Allardyce to December 1997 as a debt due to Quarter.

Where Mr. Beverley has sought and obtained, through the office of Ms. Bourke, Quarters bookkeeper, debit statements directly from the CBA and used such statements to illustrate an obligation to the bank (when none existed), I reject any subrogation argument on the reasoning of Lumley's case. The call down gave rise to a debt shown in the 1997 accounts of Allardyce and the erroneous drawing of debit notes by the CBA does not affect that position. Clause 9 of the agreement specifically provides Quarter with a right of indemnity in the event of drawdown. That argument has been found in the plaintiff's favour, but irrespective, clauses 16 & 17 do not mean CBA has subrogated rights of NBSI pursuant to the standby LC for NBSI was not receiving the proceeds of the Commodity LC in reduction of this loan to Allardyce but in reduction of the debt simpliciter since NBSI had then no longer any lawful right to retain the one fourth of the Commodity LC proceeds for such retention clearly would be an overpayment of the loan. The apportionment of the Commodity LC proceeds, while reflecting the procedure contemplated by the two clauses, by itself, does not give rise to the implication Mr. Sullivan seeks me to find. That part of the defence must fail. The use of the CBA debit notices in this fashion, however, is evidence on which the plaintiff can rely on the unjust enrichment claim going as it does, to a claim for moneys had and received. The admissions of debt which the plaintiff points to are in the general ledger.

The payment of the travel moneys of US$640 in July 1999 by Allardyce is also acknowledgement of the debt.

Sol-Law's correspondence about the 2nd ranking floating charge can only relate to a debt, or "loan and interest".

I accepted Ms. Bourke's allocation of the credit to Allardyce on the 13 August in the accounts of Quarter. No issue as to the time barred debts arise in the circumstances.

The Itochu debt documentation non-disclosure

A person shown by his evidence to be as pedantic and methodical as Mr. Beverley would certainly have minded the budgetary imperatives imposed by the ITOCHU agreements. (For breach of the agreement later resulted in the calling up of the personal guarantee). Yet this agreement was not disclosed before or during trial to the plaintiff through discovery until the later call made by Mr. King. The documents were in the defendant counsels office and as I have said material in these proceedings.

The telling point so far as Mr. John Beverley's credit is concerned was his outburst in cross-examination by Mr. King, (while he was seeking to elicit the fact of such contract documentation) before the disclosure of the documents that the advance was done on a gentleman's agreement by a company such as ITOCHU. One would have to think that Itochu would have accounting principles and procedures equally exacting as here, for instance so that an advance of US$ 1 million dollars surely would call for some written documentation, by ITOCHU, whatever Mr. Beverley may think. For it is that thinking, revealed by the out-burst in court which also illustrated what may be called the "fundamental attribution error"; he has attributed to ITOCHU a cavalier approach to accounting for others money which has been the plaintiff's case against these defendants. This loan of ITOCHU dependent on documentation was called up under a personal guarantee given by Mr. Minchin, a personal guarantee obviously tied to the terms of the underlying ITOCHU/Allardyce documentation. As Managing Director Mr. Beverley must have known of the risks and eventual payment by Mr. Minchin under the guarantee. The guarantee was not given on the strength of a handshake. Yet Mr. Beverley chose to dissemble about the documentation before me. On the 13 September 2005 in the latter part of this trial, the affidavit of Mr. Beverley was sworn wherein he annexes the particular Itochu documents and other relevant material appertaining to the loan.

At paragraph 13 he says;-

"In relation to discovery, I say that, based on the pleadings at the time, I did not in any way understand that the trade finance arrangements with Itochu were even remotely relevant to Quarter's claim. For that reason, no special effort has been made to preserve documents relating to those arrangements. That they might be considered at all relevant, was made clear to me only during cross-examination and after my evidence today, when I was permitted to discuss the issue with Sol-Law. Prior to this, the only dealings with Itochu, which I understood to be relevant on the pleadings were those relating to the shipment from Dakolae covering the period September 1997 to January 1998 and the shipment from Ovau in early 2000. To the best of my knowledge, Allardyce has discovered all relevant documents in its possession that have been located."

His credit was fatally affected, by this cross-examination once the Itochu documents appeared from his custody, having come from his counsel's chambers.

Q. Mr. King	Does that refresh your recollection and remind you that in the balance in the year ending December 1999 Itochu was repaid.	
		
A. Mr. Beverley	Yes - yes.	
		
Q. Mr. King	So this is the position - you obtained trade finance from Itochu in 1996 in excess of three million dollars and you repaid it in 1999. Is that correct.	
		
A. Mr. Beverley	Yes it appears so.	
		
Q. Mr. King	So do you agree with me therefore that the shipments made during the period 1997 and 1998.	
		
A. Mr. Beverley	Yes.	
		
Q. Mr. King	...to Itochu were subject to or referable to that trade finance.	
		
A. Mr. Beverley	No - I can't agree with that.	
		
Q. Mr. King	Well where is the contract Mr. Beverley.	
		
A. Mr. Beverley	There may not be one.	
		
Q. Mr. King	You say...	
		
A. Mr. Beverley	It might - it might Mr. King be difficult to believe but I assure you that in this country and in Papua New Guinea and in some parts of the world such deals are struck on the shake of a hand.	
		
Q. Mr. King	Well what do you say - well you have already told us about the deal.	
		
A. Mr. Beverley	No I haven't - because it's only just coming back to me. I have not told you about any deal.	
		
Q. Mr. King	Well tell us what the deal was.	
		
A. Mr. Beverley	I would imagine if it's consistent with - previous episodes - I would imagine it went along the lines something like this. We probably wanted to develop Geva camp or Vatoro camp or at that stage we were very hopeful about Reresare camp - and if you are in close contact with a company like that based in Hong Kong where your shareholders are in Hong Kong - it's inevitable that twenty five years - thirty years - that a relationship will develop where funds would be available. This is not a very large amount of money to a trading company that is listed number three in Japan. This is petty cash to them.	
		
Q. Mr. King	Yes but three million dollars is a large amount of money to Allardyce Mr. Beverley I suggest to you.	
		
A. Mr. Beverley	Three million Solomon dollars.	
		
Q. Mr. King	That's right.	
		
A. Mr. Beverley	Well they paid it off.	
		
Q. Mr. King	Now Mr. Beverley - where the terms of this trade finance a bit like a red letter - red clause letter of credit.	
		
A. Mr. Beverley	There have been red clause LCs from them but I don't believe this was one.	
		
Q. Mr. King	Well was it more like a standby letter of credit.	
		
A. Mr. Beverley	No - no - definitely not - they have never entered into that arrangement - ever - never.	
		
Q. Mr. King	Well so...	
		
A. Mr. Beverley	They probably sent a telegraphic transfer to the bank.	
		
Q. Mr. King	So the trade finance was I suggest to you was that they would provide you as an advance against future log sales and shipments the sum of three million dollars - and as each shipment was made you would repay the funds.	
		
A. Mr. Beverley	Not necessarily.	
		
Q. Mr. King	Well what other...
It might have been a term - it might have been a balloon payment -- it might be - repay this loan in no less than five years - it might have been that - I have heard of those.	
		
Q. Mr. King	Well - ...	
		
A. Mr. Beverley	Haven't you.	
		
Q. Mr. King	Well I am asking you Mr. Beverly...	
		
A. Mr. Beverley	You smiled at that - you smiled at that which invited the question.	
		
Q. Mr. King	What is your best recollection of the deal between Allardyce and Itochu in 1996 bearing in mind you can't produce one record to prove it.	
		
A. Mr. Beverley	The recollection is that they provided funds to Allardyce Lumber Company - I would have to go back and have a look again - its delaying the process but - are you absolutely sure it was just 1996 - it wasn't the end of 1995.	
		
Q. Mr. King	And do you see there that you state to Itochu - naturally our operation on Vella La Vella will continue as planned - see that.	
		
A. Mr. Beverley	Yes I do.	
		
Q. Mr. King	Just thinking back now Mr. Beverley - is it possible that one term of the trade finance agreement that you had with Itochu was that they would advance you three million dollars in respect of log sales from Vella La Vella.	
		
A. Mr. Beverley	You mean exclusive rights or something like that.	
		
Q. Mr. King	That's one possibility.	
		
A. Mr. Beverley	No I don't believe it is. I don't believe that proposition is true	
		
Q. Mr. King	Well you have just be reading from the memo Mr. Beverley. I am taking you to Item 6 - you said the word naturally...	
		
A. Mr. Beverley	That's because I wouldn't sacrifice Vella La Vella for Dakolae and I think the documents elsewhere in my affidavit have made that absolutely clear.	
		
Q. Mr. King	And the reason you...	
		
A. Mr. Beverley	Vella La Vella was a big project going over ten - fifteen years.	
		
Q. Mr. King	And the reason you told Itochu you would naturally not sacrifice Vella La Vella was because you had a trade finance deal with Itochu to ship all the logs you produced there to that company - didn't you.	
		
A. Mr. Beverley	No I did not have a trade finance deal to ship all of the logs from Vella La Vella to that company. I sold frequently in the year1993 and 1994 and 1995 to Sumitomo Forest Company - an opposition trading house in Japan - no exclusive deal.	
		
Q. Mr. King	No - we are talking about the year after those years - 1996 and what I am suggesting to you...	
		
A. Mr. Beverley	Well - I tried to sell to Quarter Enterprises.	
		
Q. Mr. King	What I am suggesting to you is that in return for their three million dollars Allardyce undertook to provide logs to Itochu from Vella La Vella. Is that a fair position Mr. Beverley.	
		
A. Mr. Beverley	No it's unfair.	
		
Q. Mr. King	Where is the contract.	
		
A. Mr. Beverley	Didn't I explain to you before that it is entirely possible there is no contract.	
		
Q. Mr. King	Have you searched your records to see if you can find one.	
		
A. Mr. Beverley	Where would I search - under Dakolae or in the shed or under - no I've - I've searched in terms as best I can in terms of what I am required for this trial.	
		
Q. Mr. King	Yes.	
		
A. Mr. Beverley	As has become apparent to me today I have misunderstood this because I certainly didn't search the butcher shop file or the gas works file or the SEA file - I never dreamt that those documents would be significant in this trial.	
		
Q. Mr. King	Now Mr. Beverley - you acknowledge don't you that all logging ceased on Vella La Vella in the year 1997.	
		
A. Mr. Beverley	Towards the end of the year I think - or the last quarter - would that be a better description.	
		
Q. Mr. King	Well that's your best recollection is it.	
		
A. Mr. Beverley	Yes.	
		
Q. Mr. King	And the reason for that was landowner problems.	
		
A. Mr. Beverley	Yes.	
		
Q. Mr. King	And that continued to be the position through 1998.	
		
A. Mr. Beverley	Yes.	
		
Q. Mr. King	And into 1999.	
		
A. Mr. Beverley	Yes.	
		
Q. Mr. King	And in 1999 you repaid Itochu the balance of the three million dollars plus interest owing didn't you.	
		
A. Mr. Beverley	One of the shareholders repaid it.	
		
Q. Mr. King	Well I am asking did the company - I withdraw that- ...	
		
A. Mr. Beverley	It was a share transaction involved so I had to mention that to full - you know - full situation.	
		
Q. Mr. King	But would you agree with this much Mr. Beverley. That the debt owing by Allardyce to Itochu was repaid in 1999.	
		
A. Mr. Beverley	Yes.	
		
Q. Mr. King	And - now - was any suggestion at any stage put to Itochu that because of the continuing landowner problems on Vella La Vella the debt was not repayable to Itochu because the contract - the trade finance has been frustrated.	
		
A. Mr. Beverley	What trade finance.	
		
Q. Mr. King	The trade finance deal we have just talked about.	

(Day 18 - 30 August afternoons session pa 17)

The ITOCHU deal

Competing issues of credit.

The material on which the plaintiff has relied is principally that from the records of the defendants. So the credit of respectively Mr. Beverley and Mr. Ron Gibbs whom have been contrasted by Mr. Sullivan need be looked at with any supporting documentary material in mind. The material which undermines Mr. John Beverley's credit has been exhaustively elicited by Mr. King as the trial progressed. The material which undermined Mr. Ron Gibbs credit was that contemporaneous note where Gibbs included Mr. Wilkie as a participant in a meeting when he clearly wasn't there. That is somewhat inexplicable but as I have said, I do accept the practice of Gibbs to make file notes.

I have quoted extensively from the transcript for a number of reasons. The first is that it illustrates, to my mind, the dogmatic and patronising manner in which Mr. Beverley gave his answers in cross examination. As I have said earlier, I have been careful not to let that tone affect my view of the worth or other wise of his evidence for some years have passed since these events and anyone's memory is likely to suffer. His personality by itself, is not a determinant when weighing what he says against any documentary proofs, but having said that, I am entitled to have regard to his attitude when I consider the plaintiffs assertions of collusion and conspiracy. So where documentary evidence is available, it behoves me to look critically at the documents to see whether the tenor of the witnesses recollection is in accord with such documents and if so does it support a particular parties case. Having been so pedantic about the likelihood of a deal struck on the shake of a hand, and having intimated a close relationship with ITOCHU based in Hong Kong over 25/30 years, to later disclose the very documents which in effect he denied initially, does cause me to think upon the circumstances surrounding the discovery of the documents with some care.

The second point apparent from a reading of the answers given is that Mr. Beverley purports to have a close working relationship with ITOCHU, a relationship developed over 25/30 years. Such a relationship would, he suggests, facilitate an advance of funds. But I find in those circumstances, when there in fact was indebtedness to ITOCHU, no honesty in Mr. John Beverley's assertion in his memo to Gibbs and Mr. Minchin of the 17 December 1997, that he "cut his bridges with ITOCHU". (DOC 749). For as he says in his cross examination, above, logging ceased on Vella La Vella late in 1997 from which Itochu logs had been sourced earlier and the initial parcel of Dakolae logs were sold to Itochu some time in January 1998.

The third point may be implied from the tenor of his response where he speaks in the same breath of a close relationship with ITOCHU Hong Kong, and (Allardyce) shareholders in Hong Kong. For he was adamant those shareholder loans were unlikely to be called up (when talking about Allardyce's financial strength at the relevant time). Yet those proprietors of the shareholders seemed a mystery to him.

The fourth point is that which slipped out early on, when in answer to Mr. King's query about the relatively large size of the advance "to Allardyce", Mr. Beverley said "well, they paid it off". He later qualified it by saying "one of the share holders repaid it" for "a share transaction/was involved so I had to mention that to full -you know - full situation".

At the time, on day 16 of the case, Mr. Beverley was aware of the relevance of the ITOCHU advance (if for no other reason than the plaintiff's allegation that Allardyce was not in sound financial position and Itochu's advance was a relevant matter to that issue - obliged as it was to repay the ITOCHU advance) and was shown in cross examination to partly open on the circumstances of the final repayment of the advance, not from log sales from Vella La Vella but by way of repayment by "one of the shareholders". That was not so for payment was made by Devon Mr. Minchin following demand by ITOCHU by letter of demand by Deacons Graham and James, Lawyers dated 19 May 1999, a demand relying on the terms of a guarantee and indemnity signed on the 22 January 1996 and signed contemporaneously with the log sales agreement and loan agreement for USD 1 m by Allardyce and ITOCHU. Mr. Minchin of course denies being a shareholder of Allardyce but the point is that as late as May 1999, (not that long before these proceedings were instituted in 2000) Mr. Beverley would have had revisited the facts and circumstances surrounding the advance to Allardyce and the liability or otherwise of Mr. Minchin under his personal guarantee for as a consequence of payment, Allardyce issued further shares to a shareholder "Scripts Limited". Mr. Beverley was a director at the time when it was resolved to issue shares to the value of the payment by Mr. Minchin. I do not accept Mr. Beverley where at para 8 of his affidavit of the 13 September 2005, he says he "had little involvement in the ITOCHU settlement as ITOCHU's demand was focussed on the guarantors. I have no recollection of a demand being made on Allardyce and there is none in its possession. I also note there is none in Sol-Law file".

The demand by Deacons, Graham and James for US$558,310.73 on the 19 May 1999 related to the failure of Allardyce to pay ITOCHU. To speak of "little involvement" is to dissemble for Mr. Beverley was then the Managing Director of Allardyce the company principally liable to ITOCHU. Later by his affidavit of the 13th September 2005, he annexes the Deed of Acknowledgement and Indemnity by which Allardyce confirmed its obligations to the guarantors (Mr. Wilkie and Mr. Minchin) of the Itochu loan to meet any call by Itochu and that Deed was signed and executed by the company under Mr. John Beverley's signature.

It is this dissembling which affects his veracity on the issues surrounding the ITOCHU affair and indirectly other issues which I deal with. It is curious, however, that while the evidence by Mr. Beverley would suggest Mr. Minchin was "the shareholder who paid out the obligation" to ITOCHU, Mr. Minchin's guarantee and Indemnity recites the fact that the Guarantor, Mr. Minchin is "a Director of the Borrower (Allardyce) and is not financially or otherwise interested in the Borrower", yet Scripts Limited (of which Mr. Minchin was a director) was issued additional shares in late 1999, after ITOCHU had been paid out. (For a company where neither Mr. Beverley nor Mr. Minchin initially professed not to know who the underlying shareholding beneficiaries are in Allardyce, I find it also goes against Mr. Minchin's credit to effectively assign the benefit of a debt due him by Allardyce to Scripts Ltd and dilute the other shareholders shareholding in this fashion without apparent explanation. Mr. Beverley was a party to this share issue yet advances no explanation why Allardyce should advantage Scripts Ltd in this fashion. This is a most material point which weighs against Mr. Minchin's credit and Allardyce when I come to consider the issue of unjust enrichment.

The last point, apparent from these questions and answers, goes again to Mr. John Beverley's veracity. He asserted he "searched in terms as best I can, in terms of what I am required for; for this trial".

These ITOCHU associated documents came afterwards. Other documents listed in the exhibit 59 were not discovered by Allardyce or Beverly but found by the lawyer and book keeper for the plaintiff. To say, in the face of this (and Mr. John Beverley's comments about searching the butcher shop file or the gas works file-) as he does at para 12 of his affidavit of 13 September 2005, "I have been unable, despite diligent search, to locate the other documents, which I was asked to produce" raises clearly the issue of his understanding and indirectly, truthfulness. I do not accept he had made any proper searches or enquiries in terms of the duty to discover, although I am satisfied, having heard Mr. Sullivan's comments about his understanding of the continuing duty, that the blame for these failings must lie with Mr. Beverley. Mr. Beverley had a close working relationship with his advocate Mr. John Sullivan QC whose name is always coming up in the course of the business dealings between these parties, so that it is reasonable to suppose relevant material for discovery might also be in the lawyers' files. Mr. Beverley has taken, when I see his continual reference to "documents discovered" the absence of documents about ITOCHU as reason to dissemble about their existence for any man of business (or logging business), would expect such an advance to be recorded by agreement of some kind or other and when Mr. John Beverley's signature as witness to Mr. Minchin's Guarantee appears on the document executed on the same day as the loan and sales agreement his assertion of having no recollection of these latter two agreements only goes to throw light on his selective recollection.

The Itochu Agreement

The sales and loan agreement related to an advance of US$1 m recorded in the companies Financial Accounts to 31 December 1996. The Note 7 - Creditors and Borrowings - current speaks of unsecured trade finance loan by ITOCHU, of SI$2,484,609 and interest $59,780. (The balance sheet shows total "current liabilities" of SI$4,536,756 up from SI$2,230,435 the previous year). The loan advance by ITOCHU was not secured over assets of the company Allardyce (for Westpac held a 1st registered mortgage over the companies fixed term estate properties and a mortgage debenture over all the companies assets and uncalled capital) yet ITOCHU secured the loan by two personal guarantees given by Mr. Wilkie and Mr. Minchin. It was Mr. Minchin's guarantee which was called upon in 1999. At 31 December 1996 the unsecured trade finance loan of ITOCHU, current creditors and borrowings in fact exceeded the secured overdraft and fully drawn advance given by the Westpac Bank by a factor of approx 4.8. The Itochu loan was then and continued to be until it was called up in 1999, a most material part of the companies balance sheet. It was not something which the managing director, Mr. Beverley could easily overlook.

In his affidavit of the 13 September 2005 he says "I still have no recollection of the sales agreement or loan agreement being signed and I have no recollection of ever seeing these before yesterday."

With such ramifications for Mr. Minchin and Allardyce (not only the satisfaction of the debt to Itochu by Mr. Minchin's payment but the curious issue of new shares to Scripts Limited) I do not accept him. For while there were debit notices given Allardyce, the recourse following default by Allardyce was against Mr. Minchin under the guarantee. I have no doubt the manner in which this claim by ITOCHU would be met should have been discussed after Deacon's Notice and the terms of the loan and sales agreement with ITOCHU would have been material matters for consideration by all directors. For clearly, without explanation, Mr. Minchin's payment of the debt due followed by the new share issue to Scripts Ltd does raise a rebuttable presumption that Mr. Minchin had a beneficial interest in Scripts. That presumption must also follow Mr. John Beverley's answer in cross examination that the ITOCHU loan was repaid by a shareholder. Of course, such evidence is not proof of the fact for the later documents discovered rebut that (for the Guarantee recites the fact Mr. Minchin had no beneficial interest in Allardyce) but if that be so why has Allardyce benefited Scripts Ltd by a new share issue.

Having being satisfied of the need for caution when viewing Mr. John Beverley's oral evidence, the effective refutation of his earlier evidence about the terms of the ITOCHU loan leaves me in no doubt he can be an evasive witness. To say (because his signature was on the Guarantees as witness) that he recalls the Guarantees but not the ITOCHU loan or sales agreement is not believable when the loan formed such a large part of the company's balance sheet.

Allardyce and the NBSI Loan

On the 7 March 1997 Mr. Beverley wrote as Managing Director of Allardyce, a letter to Mr. Thomas D. Schoen Manager - Lending of the National Bank of Solomon Islands (NBSI) in these terms.

ALLARDYCE LUMBER COMPANY LIMITED

Mr. Thomas D. Schoen		
Manager - Lending	Your Reference:	
National Bank of Solomon Islands		
P O Box 37	Our Reference:	
Honiara		

Dear Mr. Schoen

I refer to our meeting yesterday in Mr. Murray's office and I now confirm matters that arose as follows:-

1. The agreement with Quarter Enterprises was executed on Friday 21 February 1997. We enclosed a copy for the Bank's records.

2. Mr. R.H. Gibbs, Managing Director of Quarter, advised us on the 27 February 1997 that the Commonwealth Bank had approved Quarter's request for the facility of a standby documentary credit of USD1.3 million to be established in favour of the National Bank of Solomon Islands as security for the proposed trade finance loan under discussion between Allardyce and the National Bank.

3. Allardyce will submit a formal application to the National Bank for a foreign currency (USD) term loan and seek the necessary approval from the Central Bank for the facility.

I now submit the loan application in terms of your advice and the understanding we reached at our meeting yesterday. A copy of our letter to the Central Bank seeking their borrowing approval is also attached.

Yours sincerely,

J.H.H. Mr. Beverley
Managing Director

That letter followed the agreement dated 21 February 1997 with Quarter and when that loan facility was arranged by Allardyce with the NBSI, Quarter had in place an irrevocable standby documentary letter of credit (the standby LC) in favour of NBSI for US $1.3 m. I have highlighted that part of the letter which is material when I consider the "write-off" of the CBA debt.

The Allardyce loan facility with NBSI required Allardyce to meet its obligations to NBSI and Allardyce failed to do so. On the 28 November 1997 NBSI called on its security, the "Standby LC" given by Quarters Bankers, the Commonwealth Bank of Australia.

Mr. Beverley at para 21 of his affidavit of the 29 July 2005 clearly acknowledges that its obligations are to its bankers and does not claim any contractual relationship with the overseas establishment bank, which "may in term call on its security in circumstances where its customer is out side arrangements. However in those circumstances Allardyce as the beneficiary of the letter of credit does not have any direct contractual relationship with the overseas party other than the purchase contract".

When he refers to "the overseas party other than the purchase contract" he must be seen to be referring to Quarter and its agreement of the 21 February 1997 with Allardyce. There is no assertion of any contractual obligation to the CBA.

The Law Reform (Frustrated Contracts) Act 1943

While denying frustration, the plaintiff claims to be entitled to recover money's paid under the agreement contract pursuant to section 1 of the Law Reform (Frustrated Contracts) Act 1943 (UK).

Mr. Sullivan says the operations of s. 1(2) of the Act was considered in B.P. Exploration Co. v. Hunt (No. 2) (1979) 1WLR 783 where claim made under s. 1(2) "is generally speaking simply an award for the repayment of money which has been paid to the defendant in pursuance of the (frustrated) contract, subject to an allowance in respect of expenses incurred by the defendant". (per Goff J at)

Mr. Sullivan then argued, if the Act is part of the law of the Solomon Islands, no moneys were paid by Quarter to Allardyce. So on a proper interpretation of s. 1(2), the Act does not operate to enable Quarter to recover moneys paid by CBA to Allardyce. On that point I have to say no moneys were paid by CBA to Allardyce.

He says in any event, the claim is statute barred, for the claims to benefit under the Act was not made by the plaintiff until more than 6 years had elapsed since there had been action on the Allardyce/Quarter account I have dealt with that and find for the plaintiff.

Further, if the court is against his arguments on those points, and finds for instance that Quarter can be "subrogated to the rights, if any, of CABA," equity will prevent Quarter succeedings for it would defeat the intent of clause 7 and 8 of the Agreement, (a reference to the obligation referred to in cl. 7 on Quarter to establish the stand by LC "by way of security for its obligations under this agreement").

Again, Mr. Sullivan argues that cl. 9 of the Agreement (a right of indemnity in Quarter against Allardyce) operates as a condition to which s. 2(3) applies to the exclusion of s. 1(2) for that the agreement effectively provided for the remedy which the Act was designed to provide and adopting Lord Goff's dictum, the provision in cl. 9 effectively ousts any need to look to s. 1(2) of the Act. (Goff J at 806). Mr Sullivan says Chief Justice Palmer applied the Act in the trial of Island Construction Management Ltd v. Air Transport Ltd cc 144/1996 but that the Court of Appeal when considering the decision, did not rule on the applicability of the Act in the Solomon Islands since it was not an appeal point. Nevertheless, I am satisfied I need not go into that issue. Frustration cannot be relied upon in the circumstances.

The Restitution Case

The plaintiff's case is pleaded in the alternative as a "money count" in these terms.

"40. The plaintiff claims the sum of US$1,098,434.72 of the $1,262,838.94 paid by the Commonwealth Bank to NBSI pursuant to the standby letter of credit negotiated by the bank in its favour on 29 November 1997 as moneys had and received, whereby the First Defendant is indebted to the plaintiff for the said sum".

As well the plaintiff pleaded further and alternatively that an implied term of the "agreement" was that the plaintiff would be repaid moneys negotiated by the NBSI upon default by the plaintiff in respect of the Allardyce Facility secured by the NBSI's standby letter of credit were the 40,000 m3 promised logs, not to be provided to Quarter.

To quote from Bullen and Leake 3rd ed. 44 (speaking of "money had and received") "this is the most comprehensive of all money counts. It is applicable wherever the defendant has received money which in justice and equity belongs to the plaintiff, under circumstances which render the receipt of it a receipt by the defendant to the use of the plaintiff".

The defendant argued, on a true construction of ch. 9 of the "agreement" that the standby letter of credit is no more nor less than a guarantee by CBA in favour of NBSI, whereby CBA undertakes to pay NBSI in the event of default by Allardyce in its obligations to NBSI. Mr. Sullivan argued that "a guarantee is the undertaking by a third party (the guarantor) to answer to one party (the creditor) for the obligations of another party (the debtor) in the event that the debtor defaults in performance of those obligations". He says, in the present case Allardyce is the debtor, NBSI the Creditor and CBA the Guarantor.

The plaintiff, on the other hand argues that the stand by letter of credit, on its proper construction is not a guarantee, in the sense argued by Mr. Sullivan. Mr. King says that the CBA did not agree to answer for the liability of Allardyce to NBSI but rather, as the terminology says, understood by "stand by letter of credit" to pay money to an agreed amount to NBSI upon presentation of "conforming documents" of demand by NBSI. CBA was not entitled to enquire whether the underlying facts (privy to the customer Allardyce and its bank NBSI) supporting the drawn-down were in place. The description Mr. King suggested as apt, is that of indemnity, where the surety, the CBA assumed the primary liability to NBSI, on certain conditions.

I must say I accept the plaintiffs argument for Mr. Sullivan's argument supposes that upon payment by Quarter to CBA, Quarter may in certain circumstances "be entitled to be subrogated in equity to CBA's right of indemnity against Allardyce". CBA in terms of its S/B letter of credit had no right of indemnity against Allardyce. CBA's rights when the S/B letter of credit was called upon, were wholly exercisable against Quarter, its customer under CBA's banker/customer arrangements it did not guarantee Allardyce's debt, it undertook to provide a letter of credit to further its customer, Quarters business interests, and the bank looked to its customer when the letter of credit was drawn upon. There is consequently, no need to enter further upon the defendants argument about the equitable doctrine of subrogation for the factual situation does not enable the defendant to categorise the S/B letter of credit as a contract of guarantee. CBA was never Allardyce's banker.

The plaintiff correctly in my view points to Quarters recourse under ch. 9 of the agreement should the S/B letter of credit be called upon. There is no recourse available to CBA in that "agreement" affecting Allardyce. CBA is not a party to the agreement nor did it sign any guarantee agreement with Allardyce.

Rather the clause acknowledges a right, by reason of the S/B letter of credit being negotiated by the lender (NBSI) in Quarters favour.

There was much argument over the extent of that right for that the recourse or indemnity, the defendant argued was restricted to recourse against proceeds of logs sold. The plaintiff claims an implied contract to repay should be inferred from the terms of the clause for that the clause 9 right of recovery is incomplete as it stands.

Hence the plaintiff claims "money had and received" by Allardyce to Quarters use, since much of the debt remains. The use of the phrase "in the first instance" clearly envisages other means of recourse. The plaintiff relies on the authority of Veay v. Latilla ((1937) ALL E.R. 759) to support its argument that the court may supply the implied term where the draftsman has omitted the obvious. In that case the court implied a contract to pay a quantum meruit (for the agreement was silent on the share or interest that the appellant was to receive for his work).

"It is clear on the evidence that the work was done by the appellant and accepted by the respondent on the basis that some remuneration was to be paid to the appellant by the respondent. There was thus an implied promise by the respondent to pay on a quantum meruit, that is to pay what the services were worth". (Lord Wright at 765)

In the case before me, the defendant Allardyce has paid some moneys through the supply of logs, off the debt created by the negotiation of the S/B letter of credit, and there is a debt remaining. The defendant's purported claim to frustration acknowledges the agreement which has both the obligation to sell logs and details the underlying manner for reduction of the debt by retention of a percentage of log sale moneys due Allardyce. To the date of purported frustration, the defendant had met its obligation to Quarter for the debt due by its log sales.

The claim for "money had and received" is available to the plaintiff in these circumstances, for there are no more logs available to the plaintiff from the Dakolae Resource. Quarter is entitled to the full amount of the drawn down remaining outstanding and interest.

The plaintiff while pointing to the Australian case of Pavey & Mathews Pty Ltd v. Paul (1987) 162 CLR 221, also relies on the judgment of Byrne J in Brenner v. First Artists Management Pty Ltd (1993) 2 VR 221 for that judgment acknowledges the place in Australian law of what may be termed "the law of unjust enrichment", or where the law "considers it unjust to accept the benefit without payment". For there is clearly "benefit" to the defendant unconnected with the ambiguity in the concept of "benefit" addressed by Goff J in BP Exploration Co. (Libya) Ltd v. Hunt (No. 2) (1979) 1 WLR 783, for here the "benefit" is the debt remaining. That debt was shown by the CBA statements requested by the defendant. Goff J's reasoning was applied in Update Constructions Pty Ltd v. Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251, 275 for Byrne J, referring to Hunts case said; "For present purposes these indicate that an obligation will not arise where there is a subsisting enforceable contract between the parties for the performance of the services in question".

So that where the debt is denied and the contract repudiated by the defendant, the plaintiff's right to claim the balance of the debt as "money had and received" arises. For the defendant argues, there is no enforceable contract between the parties beyond that right to indemnity through logs. I disagree for the reasons I have given but if there is no enforceable right in the plaintiff, then to quote Lord Mansfield. "If the defendant be under an obligation from the ties of natural justice, to refund, the law implies a debt, and gives this action, founded in the equity of the plaintiff's case, as it were upon a contract ('quasi ex contracta', as the Romans law expresses it)". (James Barr Ames and the Early Modern History of Unjust Enrichment - Andrew Kull Oxford Journal of Legal Studies, Vol 25, No. 2, p 297 quoting from Moses v. Macferlan 2 Bur. 1005, 1012, 97 Eng. Rep. 676 681 (K.B. 1760)), then the circumstances of this case, (characterized by the defendant's change of nomenclature from a balance owing to Quarter in its books of account to one no longer due (through frustration) to CBA under guarantee) falls into that of "unjust enrichment".

"The modern conception of unjust enrichment as a source of private obligation and as the basis of today's law of restitution is usually traced to the American Law Institute's Restatement of Restitution (1937). But the Restatement's most significant innovation - its unified treatment of law and equity presenting quasi contract and constructive trust as alternative responses to the problem of unjust enrichment - merely put the ALI imprimatur on discoveries announced some fifty years earlier by James Barr Ames of the Harvard Law School. Ames propositions about unjust enrichment had found steadily increasing acceptance in the intervening decades, and by the time the Restatement was drafted they represented American academic orthodoxy. The law of restitution has been notoriously slow in developing, but its modern era is approximately half a century older than is generally supposed".

Byrne J grapples with various cases involving the law of restitution and the principle of unjust enrichment and while those cases predominately deal with the circumstance where "services" are rendered Byrne J does agree with the analysis of Sheppard J in Sabemo's case (Sabemo P/L v. North Sydney M.C. (1977) 2 NSWR 876) where Sheppard J analysed English case law (in the United Kingdom, Australia & New Zealand) dealing with a claim said to arise quasi ex contractu. Sheppard J speaks of the law of restitution (at 897) in terms of unjust enrichment;

"A.  In 1976 Lord Denning wrote a review of a work, The Law of Restitution by Goff and Jones (1966). His Lordship said (83 L.Q.R. 277): "When I started in the law, no one had ever heard of Restitution. Some of us had heard of quasi-contract: but that was dismissed by Anson in twelve lines at the end of his book on Contract. Every practitioner knew, however, about the money counts. Money had and received, money paid, and quantum meruit. They were all based on a notional or imputed promise to repay. They had become ossified. The foremost judges of the time had declared that the law had been crystallised on the reported common law cases and we were not to go beyond them. Any attempt to introduce equity and good conscience was castigated as 'well-meaning sloppiness of thought'. Under this influence we had to go back to the third edition of Bullen and Leake or to Smith's Leading Cases and try to find a parallel case in the old books. That was all that could be done. There was no principle to go by: only precedent.

"The change came with the speeches of Lord Atkin in United Australia Ltd v. Barclays Bank Ltd. (57), and of Lord Wright in Fibrosa Spolka Akcyina v. Fairbairn Lawson Combe Barbour Ltd. (58). They swept away the fictitious promise which was the basis of the money counts, and restored the large generalization of Lord Mansfield who would allow the recovery of money which the defendant 'is obliged by the ties of natural justice and equity to refund'. At length judges began to perceive that, beneath all the old cases, there was concealed a broad principle that no person should be allowed unjustly to enrich himself at the expense of another. This is the principle of 'unjust enrichment', which has given rise to a new category in the law. Contract and Tort do not cover all causes of action. There is a third category which is conveniently called Restitution".

For Lord Mansfield's reasoning in Moses v. Macferlan, (whilst not finding favour at the time) has developed through American jurisprudence enunciated by Evans and of course the cases which more recently accept the principle of unjust enrichment and avoid the labyrinth of earlier English pleadings to fit within precedent. For as Byrne J said at 260, "the enquiry must in my view be principally directed to the position of the party to be charged, for the thread running through this area of law is the injustice of the enrichment of that party". With that view, I agree. Sheppard J says "It seems to me that the English authorities show that the significant change which has come about in the last forty years (it commenced no later than Craven - Ellis v. Canons Ltd) is that it is now recognised that then are cases where an implied obligation to pay will be imposed (a promise to pay implied) notwithstanding that the parties to a transaction, actual or proposed, did not intend, expressly or impliedly, that such an obligation is imposed by the law in the light of all the circumstances of the case".

That "obligation to pay" springs from the development in the law which acknowledges cases where recovery does not rely on quasi-contract in the sense developed by precedent, but rather the new branch of restitution concerning unjust enrichment. It is this development, most obvious in American jurisprudence following upon the Restatement of the Law of Restitution, which Sheppard J traces in England (at 898, Sabemo's case) and contrasts with a series of earlier Australian cases decided upon contractual principles where recovery was not allowed.

Sheppard J accepts the rationale of the English case law and it is the English cases which concern me for I am bound to follow that adopted law unless for good reason.

While William Lacey, Ltd v. Daris (1957) 2 ALL ER 712 was a quantum meruit type claim, the ratio in the judgment of Barry J at 717 expresses the principle of the general kind which colours restitution in the English decisions.

"In its early history (quantum meruit) was no doubt, a genuine action in contract, based on a real promise to pay, although that promise had not been expressed in words and the amount of the payment had not been agreed. Subsequent developments have however, considerably widened the scope of this form of action and in many cases the action is now founded on what is known as "quasi-contract", similar in some ways to the action for money had and received. In these quasi-contractual cases the court will look at the true facts and ascertain from them whether or not a promise to pay should be implied irrespective of the actual views or intentions of the parties at the time when the work was done or the services rendered".

Sheppard J names Jennings and Chapman Ltd v. Woodman, Mathews & Co. (1952) 2 TLR 409 and Brewer Street Investments Ltd v. Barclays Woollen Co. Ltd (1954) 1 QB 428, as the source of Barry J's judicial authority. In the Brewer Street case Denning LJ at 437 queried, "On whom in all the circumstances of the case, should the risk fall".

In this case, I'm satisfied it should fall on the defendant company. The circumstances which lead me to that conclusion are that the loan by Allardyce to purchase the logging machinery and equipment was paid out by the drawn down on the S/B letter of credit put in place by Quarter; the machinery remains the property of Allardyce; the logs produced by the machinery were in the first instance sold to Itochu in breach of the terms of the agreement with Quarter; the logs contracted for under the agreement were never delivered, whether from Dakolae or elsewhere; Allardyce's action in "writing off" the purported debt of CBA in its books of account had no basis in law or fact, and consequently Allardyce has had the benefit of Quarters money and is entitled to restitution.

I see no need to consider further argument about the effect of the Law Reform (Frustrated Contracts) Act 1943 (U.K.) for those arguments go to factual matters post facto the draw down.

While Quarter may have struggled on so to speak, in an endeavour to recoup its moneys from log purchases from Allardyce, having brought these proceedings claiming in the alternative "money had and received", I find the plaintiff's case made out.

Allardyce has retained its proportion of the sale value of the logs as well as the machinery and equipment, and chosen a course of action which, it claims, effectively precludes Quarters from recovery through log purchases. This must be contrasted with the agreement by Allardyce with Itochu, where the lender, Itochu had taken security to the knowledge and with the acquiescence of Allardyce directors vide personal guarantees, yet Allardyce had refused to provide security by way of bills of sale to Quarter. Quarter was not privy to that earlier agreement. There is in my view, "unjust enrichment" which calls for a verdict for the plaintiff on this issue as well.

Measure of damages

The plaintiff's reliance on the authority of Doyle v. Olby (1969) 2 QB 158 is well founded. It is both authoritative law in the United Kingdom and approved by the High Court of Australia. It is adopted law in the Solomon Islands.

There is no need to answer every argument raised by the defendants where they sought to show Quarter has suffered no loss for I am satisfied, that is not the case. Before dealing with the particular claims of the plaintiff, I wish to make reference to that ratio of Lord Denning (referred to by Mr. King) at 167 for it encapsulates the justification for extending the recovery beyond that at first instance which stands to be seen as the plaintiff's loss, in this case, the balance of moneys owing from the draw down of the S/B letter of credit.

"The defendant is bound to make reparation for all the actual damages directly flowing from the fraudulent inducement. The person who has been defrauded is entitled to say:

I would not have entered into this bargain at all but for your representation. Owing to your fraud, I have not only lost all the money I paid you, but what is more, I have been put to a large amount of extra expense as well and suffered this or that extra damages".

For that case too, arose on appeal from the trial judges finding that the defendants were guilty of fraud and conspiracy when misrepresenting the facts about a business purchased by the aggrieved appellant. While the defendants withdrew their appeal against the findings of fraud and conspiracy at the appeal, the Court of Appeal did set out the proper measure of damages for deceit as distinct from damages for breach of contract, and that was "all the damage directly flowing from the tortuous act of fraudulent inducement which was not rendered too remote by the plaintiff's own conduct, whether or not the defendants' could have foreseen such consequential loss".

As I have said, both Mr. Beverley and Mr. Minchin knew Allardyce faced real obligations under that companies agreement with Itochu, while Mr. Minchin was personally liable upon default. To bring Quarter to the table in February 1997, on those misrepresentations that I have found, was a deliberate wrong and induced Gibbs, and Quarter to act to their detriment. The fact that the market for logs collapsed soon after cannot be relied upon as excuse or some how to militate against the effect of the earlier misrepresentations. The damage was done and it was available to the plaintiff to complain if, in fact, it become apparent, that fraud had been committed and he had suffered loss as a consequence.

So far as the claim for interest in concerned, I propose to follow J & L Securities Pty Ltd v HTW Values (Brisbane) Pty Ltd (2002) 210 CLR 109 where the HC of Australia held that the financier was entitled to its loss of interest in respect of the amount lent for the period of the loan, for Quarter's loss stems not only from the failure to provide logs, but the cost to Quarter of having lost the use of its money.

I should also add that the plaintiff's apparent reluctance to fall back on any claim at law for some time cannot reflect on its entitlement to that proper measure of damages envisaged by Doyle v. Olby's case, for the Court of Appeal, in Downes v. Chappell (1997) 1 WLR 426 clearly places the whole responsibility for damage on the defendant in these circumstances.

"In a misrepresentation case, where the plaintiff would not have entered into the transaction, he is entitled to recover all the losses he has suffered, both capital and income, down to the date that he discovers that he has been mislead and he has an opportunity to avoid further loss". (Hobhouse LJ at 443)

In this case, Mr. Ron Gibbs eventually awoke to the fact he had been misled when the realization struck him after hearing Mr. Minchin that Allardyce no longer acknowledged any liability to repay or supply logs and he commenced proceedings.

The Plaintiff's schedule of Particulars of Loss is reproduced here since its various claims are clearly identified. So far as Item No. 5 is concerned, the appropriate end date is of course this date of judgment.

QUARTER ENTERPRISES -v- ALLARDYCE

PLAINTIFF'S SCHEDULE OF PARTICULARS OF LOSS AND DAMAGE

Para. No.	Description	Paid	Cost US$	Cost AU$	
1.	Wasted Expenses

a) Payments expended on or in relation to drawdown of LC				
	Security fees			169.00	
	Issuance fee paid 11/98			1,956.00	
	Bank Fees on advance ($16,000)			50.00	
	Bank fees on US$ account		645.36		
	b) Director's expense

Travel of RH Gibbs 1997/98

Time fixing lost shipments, contacting proposed purchasers
- 200 hours @ $50 per hour

Time wasted on shipping 25 hours at $50 per hour			

17,855.07

10,000.00

1,250.00	
	(c) FOB Shipments
Log shortage & barge hire
			3,808.64	
2.	Monies paid by or on behalf of the Plaintiff for or on behalf of the First Defendant as claimed in the Statement of Claim as amended.				
	28/11/1997 (para. 25 of S of C)		1,257,913.17		
	19/12/1997 (para. 28 of S of C)		4,925.77		
	Sub-total		1,262,838.94		
					
	LESS Received from shipments				
	13/02/1998 (para 35 S of C)	78,641.15			
	05/05/1998 (para 36 S of C)	76,668.50			
	23/07/1998 (para 37 of S of C)	9,104.57			
	13/09/1999 (travel expense)	664.40	1,097,770.32		
	Total	165,068.62	1,097,770.32		
					
3.	Interest on item 2				
	Interest on sum referred to in item 2 at the agreed rate of 10.5% as at 30/06/05 and continuing at $315.99 per day.		

1,240,804.60		
4.	Loss of Revenue

Southern King assign proceeds

US$191,385.42
-US$143,539.07
47,846.35		

47,846.35		
5.	Damages for delay in failing to provide logs - interest at 10.5% pa on item 4 from December 1998 and continuing at the rate of $128.21 per day.		

200,861.25		
	Totals		2,587,282.40	35088.71	

There shall be a verdict for the plaintiff against the 1st defendant for breach of contract, fraudulent misrepresentation (deceit) and unjust enrichment and judgment for damages in the sums set out in the above particulars of loss and damage and a verdict against the 2nd and 3rd defendant for fraudulent misrepresentation and judgment for damages in the sums set out earlier.

I decline to make such declaration in relation to the 2nd ranking floating charge over the 1st defendants assets for that the 1st defendants acts of breach of contract have given the plaintiff a judgment.

The parties shall prepare short minutes of orders to reflect these findings and orders. I give liberty to apply.
THE COURT

Endnote:

4 Shaddock v Parramatta CC (1981) 150) CLR 225
5 San Sebastian Pty Ltd v The Minister (1986) 162 CLR 340
6 MLC v Evatt (1968) 122 CLR 556 at 571
7 Akerhielm v De Mare (1959) 3 All ER 485