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Wolfgramm v Robertson [2006] TongaLawRp 34; [2006] Tonga LR 349 (11 November 2006)

IN THE SUPREME COURT OF TONGA

Wolfgramm anor

v

Robertson anors

Supreme Court, Nuku'alofa
Ford CJ
CV 265/2005

4, 5 May and 31 August 2006; 11 November 2006

Contract law – terms of contract – court interpreted contract

Essentially, the dispute giving rise to proceedings was a family dispute over payment of the purchase price for solar power equipment. The plaintiffs were husband and wife residing in Tonga. The second and third defendants took no part in the proceeding but the first defendant, who at all material times was residing in Queensland, Australia, was the plaintiff's son-in-law. He was married to their daughter, Brenda. He was treated as the sole defendant in the case. The plaintiffs operated a hydroponic farming business in Nualei and because they were increasingly concerned about the rising power charges they began to explore the possibility of acquiring a solar system unit to replace the electric motor that operated 24 hours a day pumping water into the hydroponic channel system. Mrs Wolfgramm contacted the defendant in March 2004 and arranged for the purchase of a solar power system. She then transferred to the defendant's bank account the sum of AUD$3,300 which she understood was the total purchase price of the solar equipment. Approximately 6 months later she again contacted the defendant inquiring about delivery of the equipment and the defendant told her that he and Brenda had decided to bring it with them to Tonga and install it themselves. The plaintiffs understood that the couple were moving to Tonga to live. The defendant claimed that the intention always was that he and his wife would spend several months in Tonga in assisting the plaintiffs to set up the solar equipment and with various building projects around their property but then the couple would travel to Rarotonga to live in a house owned by Mrs Wolfgramm. The defendant and his wife arrived in Tonga on Christmas Day 2004 and the solar equipment arrived on 16 February 2005 by which time the relationship between the parties had deteriorated. The defendant took legal action to prevent the solar equipment leaving the wharf. He claimed that the money paid by the plaintiffs had been a deposit only and he was not prepared to authorise the release of the equipment to the plaintiffs until they had paid him the balance of the total purchase price which he claimed was AUD$9,455.10. The plaintiff sought an order authorising the release to them of the solar equipment stored at the wharf. The defendant counterclaimed in respect of the sum of money which he contended was still owing. There was an issue over the exact nature and terms of the agreement between the parties.

Held:

1. It was not contended that the case fell within the legal presumption that, notwithstanding the presence of consideration, parties to a family agreement do not intend to create legal relations in the arrangements made between them.

2. The court adopted the prerequisites to the formation of a contract stated by the New Zealand Court of Appeal in Fletcher Challenge Energy Ltd v The Electricity Corporation of New Zealand Ltd [2002] 2 NZLR 433, para [53] in these terms:

"(a) An intention to be immediately bound (at the point where the bargain is said to have been agreed); and

(b) An agreement, express or found by implication, or the means of achieving an agreement (e.g. an arbitration clause) on every term which:

(i) was a legally essential to the formation of such a bargain; or

(ii) was regarded by the parties themselves as essential to their particular bargain . . .

Whether the parties intended to enter into a contract and whether they have succeeded in doing so are questions to be determined objectively. In considering whether the negotiating parties have actually formed a contract, it is permissible to look beyond the words of their "agreement" to the background circumstances from which it arose -- the matrix of facts. This can include statements the parties made orally or in writing in the course of their negotiations."

3. It was a fact of life that commercial parties, even when legally represented, would quite frequently contract in a manner that did not deal precisely with a problem that later emerged. The law's task was to give effect to freely accepted mutual obligations; it was therefore the courts' responsibility to identify and find means of giving practical and just effect to those obligations even if they had not been expressed meticulously -- see McMillen v Covic [2004] 2 NZLR 106.

4. It was not open to counsel to cross-examine the opposing party suggesting a certain state of facts which his own party's testimony failed to support or deny. Any such questions may be taken into account in evaluating the latter party's case.

5. The plaintiffs succeeded in their claim and the defendant failed in respect of his counterclaim. The plaintiffs were awarded costs along with reimbursement from the defendant for storage charges.

Cases considered:

Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty (1985) 2 NSWLR 309

Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] 2 NZLR 433

McMillen v Covic [2004] 2 NZLR 106

Prenn v Simmons [1971] 1WLR 1381

Verissimo v Walker [2006] 1 NZLR 760

Counsel for plaintiffs: Mr Niu
Counsel for defendants: Mr Garrett

Judgment

Introduction

[1] In this proceeding the plaintiffs seek an order authorizing the release to them of certain solar power equipment presently stored on the main wharf at Nuku'alofa. The first defendant, who is their son in law, claims that until such time as the plaintiffs reimburse him for the balance of the purchase price and the shipping costs, they are not entitled to have the equipment released. The first defendant has lodged a counterclaim in respect of the sum of money which he contends is still owing.

[2] The dispute over the solar power equipment arose in early 2005. The first defendant, who then lived in Brisbane, Australia, with his wife, the plaintiffs' daughter, had purchased the equipment and had arranged for its shipment to Tonga. The consignment arrived at the Port of Tonga on the vessel "Forum Samoa II" in early 2005. The second defendant is alleged to have been the shipping company responsible for handling the shipment of the goods and the third defendant is described as the agent of the second defendant in Tonga. As it turns out, neither the second nor the third defendant took any part in the proceedings. They were not involved in any way in the dispute. They were named as necessary parties, however, by the plaintiffs when they earlier successfully applied for an interim injunction restraining any of the defendants from removing the equipment out of Tonga pending the outcome of the present proceeding. For the purposes of this judgment, therefore, I propose to proceed on the basis that there is only one defendant, namely, Peter Robertson and I will refer to him either by his name or simply as "the defendant". The dispute, in essence, is over payment of the purchase price for the solar power equipment.

Background

[3] The plaintiffs are husband and wife. They are described in the pleadings as farmers residing at Nualei. They have five adult children. Up until the events giving rise to this litigation they carried on the business of growing tomatoes by hydroponic farming. The court was told that they were the only hydroponic farmers in the Kingdom. Their tomato shed was 85 feet long and held 500 plants. Sixty eight-year-old Fred Wolfgramm ("Fred") told the court that he had carried on hydroponic farming for some 10 years. He explained how the hydroponic system worked. The crops are grown in a series of plastic channels fed by water pumped into the channel system by a 1 hp electric motor which operates around the clock.

[4] Ana Wolfgramm ("Ana") was born in the Cook Islands but from the age of 14 she lived and worked in New Zealand coming to Tonga to settle in 1983. Ana has a dwelling house and some other property in the Cook Islands which figured in the evidence.

[5] The defendant married the Wolfgramm's daughter, Teresa Brenda, ("Brenda") in 2001. During the sequence of events surrounding this litigation, the Robertsons moved from Brisbane to the Cook Islands with an eventful stopover in Tonga. In the Cook Islands Peter has a position as National Internet Computer Coordinator at the Prime Minister's office.

[6] Mindful that this litigation is essentially a family dispute, the court took a brief adjournment before the hearing commenced to see if it was possible for the parties to negotiate some type of last-minute settlement. Unfortunately, despite counsels' best endeavours, settlement did not prove possible. It is an unfortunate fact of life, which I am keenly conscious of, that this judgment will not assist in any future reconciliation between the two families.

The plaintiffs' case

[7] Although the exact date was not pinpointed in evidence, it would appear that at least from 2003 the plaintiffs were becoming increasingly concerned about the rising power charges in Tonga and the effect that the electricity price rises were having on their hydroponic farming business. Arising out of these concerns the Wolfgramms began to explore the possibility of acquiring a solar system unit to replace the electric motor.

[8] Ana told the court that at one stage, identified subsequently as 29 December 2003, a German benefactor, who had a particular interest in hydroponic farming, gave them €2,500 towards the purchase of a solar power system. Ana said in evidence that she estimated that figure to convert to approximately AUD$5,000 or TOP$6,000. The money was given to Ana by cheque in Euro currency. She did not bank the cheque immediately but kept it at her home.

[9] It was probably around this same point in time that Ana began having discussions with the defendant in Brisbane about the possibility of acquiring a solar power system that would suit their needs. The evidence of how these discussions began and developed was rather vague but the discussions themselves took place in telephone calls between the parties. Fred, who is hard of hearing, took no part in these conversations but Ana would speak to Peter about the subject usually in the course of general telephone conversations with Brenda. At that stage, of course, the families were on good terms and communicating freely. There was reference to these conversations being "three-way" but the most reliable evidence was that, at times, Peter and Brenda would pass the receiver from one to the other.

[10] Ana said in evidence that one day, which was identified from documentary evidence as being 3 March 2004, Peter told her in the course of one of these telephone conversations that he had a friend who could get a solar power unit for a special price but she would have to send the money across to him straight away that same day otherwise she would not qualify for the special discounted price. Ana said that she could not recall the exact amount that Peter asked for but it was the amount that she ended up sending him on that same day. Peter gave her his bank account details to enable her to make the transfer. The Telegraphic Transfer Application form was later produced as an exhibit. It showed that the amount transferred by Mrs Wolfgramm was TOP$4,980.39 which was equivalent to AUD$3,300. The receiving bank appears to have then deducted a bank transfer charge because the net amount credited to Peter's account the following day, 4 March 2004, was AUD$3,281. In other words, the documentation shows that the amount Mrs Wolfgramm alleges that Peter told her she had to send across "straight away that same day" to purchase the solar power system at the special discounted price was AUD$3,300.

[11] Fred recalled Ana telling him about the telephone conversation and then driving her into town that same day to enable her to transfer the money. Ana took with her the Eurocheque. She banked the cheque at the ANZ Bank in Nuku'alofa and had the bank make the transfer in the sum of AUD$3,300 into Peter's account with the Westpac Banking Corporation in Brisbane.

[12] Ana told the court that she then heard nothing further from Peter until about six months later when she telephoned Brenda to see how they were. This was probably one of the three-way telephone conversations I have earlier described because she recalled that in the course of the conversation she asked if Peter had bought the solar power unit and she was told, " we've decided to bring it with us and install it ourselves when we come."

[13] Ana said that sometime earlier (most likely in 2002) Brenda and Peter had expressed an interest in coming to Tonga to live. Ana recalled suggesting to them at the time that if they really wanted to come to Tonga to live then they should first come and have a look around the place because they might not like Tonga. Following on from that conversation, Brenda and Peter travelled to Tonga for a week or two in 2002 and appeared to like what they saw. Ana said that later Peter was made redundant from his job and her understanding was that the couple then thought of retiring to Tonga.

[14] Brenda and Peter sold their property in Brisbane and arrived in Tonga on Christmas Day 2004. They stayed with Fred and Ana. It was not, however, a happy sojourn. The reasons for the feud that then developed between the two families were canvassed in some detail in the course of the trial but I see no purpose in recapitulating that part of the evidence. One of the issues, however, related to the building of a carport by Peter and Brenda on the Wolfgramm property which Fred, in particular, considered a totally substandard construction. Another issue, and probably the source of most of the bitterness, related to Ana's properties in the Cook Islands.

[15] Ana told the court that quite unexpectedly Brenda asked her one day during this same period about her properties in the Cook Islands and said to her that she and Peter were planning to live in Ana's house at Rarotonga and build a shop out the front of the house. They were also planning to build a restaurant on another hillside property owned by Ana. Ana said that she was very upset with Brenda for not having discussed her intentions in this regard with her previously. In any event, she did not approve of Brenda's proposals and she obviously made this very clear to her daughter and son-in-law.

[16] Evidence was then given about an incident in late January 2005 when Ana and Brenda had a heated argument by the roadside stall outside the Wolfgramm home at Nualei. Ana was selling tomatoes at the stall at the time. She said that during the course of that argument Brenda threw some e-mail correspondence at her and said, "this is a $14,000.00 gift from me to you." Brenda then told Ana what other members of the family thought of her before going back inside the house to pack up. She and Peter then ordered a taxi and left the property. Ana told the court that she did not see her daughter and son-in-law again until the opening day of this trial. Ana said that she found out later from others that Brenda and Peter had planned all along to go to the Cook Islands to live but they had not made that disclosure to her or Fred.

[17] Fred recalled the incident by the roadside stall. He said in evidence that he saw his daughter, "swinging her fists around." He stayed about 50 yards away and did not get involved in the argument but he saw his daughter give Ana some paper. He said that later in the day after Brenda and Peter had packed up and left the property, he and Ana looked at what was on the paper. It was an exchange of e-mail correspondence.

[18] At that stage the solar power system had still not arrived in Tonga but Ana noted that the three pages of e-mail correspondence Brenda had thrown at her was correspondence relating to the solar power system. The documentation showed the estimated date of arrival in Tonga as 16-18 February 2005. The documents also revealed that the consignment included some other items which, it was not disputed, belonged to Peter, namely, a chainsaw, toolbox and ride-on mower.

[19] It appears from the documentation that the solar power equipment eventually arrived in Tonga on 16 February 2005. The Wolfgramms were duly notified of its arrival sometime after the Robertsons had departed. Using the e-mail correspondence as authority, Fred and Ana then endeavoured to uplift the consignment from the wharf. They had meetings with Dateline Shipping. They paid the import charges and dues amounting to $2,521.89, the cargo clearance fee of $29.22, the quarantine entry fee of $8 and the port handling charges of $66.15. They were still unable to uplift the unit, however, because the defendant's Cook Islands solicitor had e-mailed the shippers accusing the Wolfgramms of making, "a false claim of ownership" to the solar equipment and he demanded that the goods be shipped from Nuku'alofa to Rarotonga on the next available vessel. It was at that point in time that the Wolfgramms successfully obtained an injunction from this court preventing the solar equipment from leaving the Kingdom. The unit still remains on the wharf.

[20] In essence, the plaintiffs' case is that as they had paid the defendant the exact amount of money he had asked for during the course of the telephone conversation on 3 March 2004 and as they had paid the other charges required to uplift the equipment from the wharf, the solar equipment in question rightly belongs to them. Ana said in evidence that at no stage during any of their telephone conversations did Peter or Brenda say anything about shipping costs. Ana was adamant that the only statement made to her in this regard was to the effect, "we will bring the equipment with us and install it ourselves."

The defendant's case

[21] The defendant does not deny receiving the AUD$3,281 on 4 March 2004 but he claims that the payment was a deposit only. In his statement of defence he pleads:

"5.1 In early 2004 the plaintiff's asked the first defendant to purchase solar equipment for them from Australia for the sum of AUS$9,455.10. The plaintiffs agreed to pay the first defendant for the cost of shipping the solar equipment from Australia to Tonga.

5.2 The plaintiffs and the first defendant agreed that the plaintiffs would pay the first defendant a deposit of AUS$3,281.00 with the balance payable to the first defendant upon arrival of the goods in Tonga.

5.3 On or about 4 March 2004 the plaintiffs deposited the sum of AUS$3,281.00 with the first defendant's Westpac Banking Corporation account in Australia, being the deposit for the solar equipment."

[22] The defendant further pleads:

"It was always agreed between the plaintiffs and the first defendant and his wife that they would spend several months in Tonga assisting the plaintiffs to set up the solar equipment and with various building projects around the property and that the first defendant and his wife would then travel to Rarotonga to live in the house owned by the plaintiff Ana Wolfgramm."

[23] The defendant told the court that it was Ana who initially raised with him the subject of solar power because electricity charges in Tonga had recently doubled. He said that they had four or five telephone discussions on the subject and he obtained some rough prices which all worked out at around AUD$10,000. The defendant said that he originally spoke to several different suppliers but he ended up dealing with just the one company, Sunshine Electrical. He explained how he looked at the feasibility of acquiring a unit which would power the hydroponic motor and household and still generate surplus power that could be channelled into the main grid at a profit. Upon enquiry, however, he found that such a system was not viable in Tonga.

[24] Rather surprisingly, the defendant was not asked any questions at all in his examination-in-chief about the specific telephone conversation on 3 March 2004 which formed such an important part of the plaintiffs' case. He did, however, produce his bank statement for the period in question which showed a credit entry in his account on 4 March 2004 of $3,281 being the amount transferred by Mrs Wolfgramm on 3 March. He said that the payment was a deposit on the solar equipment.

[25] The 3 March telephone conversation was explored in cross examination. In response to questions from Mr Niu, the defendant said that prior to that date Ana had told him to purchase the equipment if he thought that it was suitable to do the job she wanted it for. Mr Niu referred the defendant to paragraph 5.1 of his statement of defence which reads:

"In early 2004 the plaintiffs asked the first defendant to purchase solar equipment for them from Australia for the sum of AUS$9,455.10. The plaintiffs agreed to pay the first defendant for the cost of shipping the solar equipment from Australia to Tonga."

The cross-examination then continued:

"Q. Did she actually say that to you Mr Robertson? Did she actually say to you, I want you to buy the solar equipment for 300 $9,455.10?

A. She told us she wanted to purchase the equipment that we had bought if it would do the job.

Q. Sorry, say that again please I can't hear properly.

A. She told us to purchase the equipment if it was suitable to do the job they wanted it for which was running the house and the hydroponic.

Q. So what about the figure of $9,455? Did she say anything about that?

A. No, the very first conversation, sorry the second conversation we had, the first one was when they wanted us to look into purchasing the equipment. After some preliminary discussions with, as I said, seven different manufacturers we were trying to estimate the power usage, we were trying to estimate their average power usage and it came to, it was round about $10,000. This place that we first, Sunshine Electrical, with them they actually came back with a specification sheet and said that it would cost $9,455 that unit (sic).

Q. And you still have that quote with you?

A. If I have a look in our stuff back at the hotel I'd say we did. I would presume so, I'm not too sure.

Q. Sorry.

A. I don't know if I've still got it with me over here. I can have a look. I've still got the documents back at the hotel room. I brought copies of all the e-mails."

[26] The court then adjourned for the luncheon break and when the hearing resumed the defendant said that he had looked for the written quotation over the break but he had not been able to find it. Mr Niu then resumed his cross-examination:

" Q. When did you last see that quote?

A. Probably when we gave the price but I can't remember the 330 date I last saw it.

Q. You say "probably at the time you gave the price", you mean to Mrs Wolfgramm in March 2004?

A. Yes, it may have been later. As I said, I don't remember the last time I saw it.

Q. And it had a list of the equipment for that price?

A. Yes.

Q. And how long was that quote for?

A. That one was for 90 days which is the standard for most quotes in Australia.

Q. And that is, the price for the equipment would be $9,455 if paid within 90 days -- that right?

A. That's how long that price is valid for, yes.

Q. If accepted and paid within 90 days, that right?

A. Yes.

Q. And also that deposit of one third be made that day that you spoke to Mrs Wolfgramm?

A. No, we were still working out whether that was the correct equipment. As I said we spoke to her after that when we verified we would not get a grid link system and I'm still trying to ascertain the maximum power usage per day.

Q. So when you spoke to Mrs Wolfgramm on the 3rd of March 2004, that's the day the money was sent to you, when you spoke to her on that day you had not decided yet whether that equipment was the one the Wolfgramm's needed -- that right?

A. That's right, yes.

Q. But you told her that one third deposit -- Mrs Wolfgramm said that you wanted the deposit made. She said you wanted the money sent on that day?

A. No.

Q. You are saying you did not tell her that you wanted the money sent on that day?

A. Not immediately, no.

Q. You heard her say you told her you wanted the money paid to your account that day?

A. Yes, I heard that.

Q. And your counsel did not put it to her that she was wrong about that. Did you hear your counsel ask her that she was wrong about you wanting the money that day?

A. I didn't recall that Sir.

Q. No. Why didn't you tell your counsel, "I never said that"?

A. Because, I'm not disputing that deposit was paid."

[27] Mr Niu then closely questioned the defendant about other entries appearing in his bank account statement for the period around 4 March 2004. On 3 March there was a debit of $1.50 for an account balance inquiry. The defendant agreed that he would have made an enquiry about his account balance on that day but he said that he regularly made such enquiries. The defendant's bank statement showed that the balance of his account as at 3 March 2004 was $467.72. The transfer of the funds from Ana the following day bought the account balance up to $3,748.72. Mr Niu then questioned the defendant about a debit entry the next day, 5 March 2004, when the sum of $3,400 was paid out on a Citibank mortgage. The defendant acknowledged that the $3281.00 transferred into his account by Ana had been paid into his personal mortgage account with Citibank the following day but he explained that he had what is called an "offset mortgage account" under which any surplus funds would go towards the reduction of the mortgage on his home. Peter was asked how long the Wolfgramm money had stayed in his mortgage account and he answered until he had paid Sunshine Electrical for the solar equipment.

[28] Under further questioning from Mr Niu, the defendant said that he paid the Sunshine Electrical account totalling $9,455.10 in two instalments. First, there was a deposit. He said, "I think we gave them $3400 in July or August" but he was unable to produce a receipt confirming any such payment. The defendant was, however, able to produce a receipt which showed that as at the end of November 2005 he had paid Sunshine Electrical a total sum of $9,455.10 for the solar system.

[29] In his statement of defence, the defendant referred to the time when he and Brenda were staying with the Wolfgramms in Tonga and how during that period the relationship between the parties "soured". He was asked about the argument between Ana and Brenda by the roadside stall. He said that by that time the relationship was "pretty sour". He recalled overhearing the heated conversation on the roadside. He could hear the raised voices. He said he recalled Ana telling Brenda at one stage that she, "was not a proper or good island daughter." He said that he was intrigued by the cultural implications of that remark.

[30] Although he did not pinpoint the timing, the defendant said that at some stage during their stay in Tonga, Ana accused him of having stolen the deposit and having never purchased the solar equipment. Peter said that was why he went to an Internet cafe the same day and had printed out the e-mail correspondence referred to in paragraph [16] above. The date at the top of the e-mails show that they were printed out on 28 January 2004.

Adjournment

[31] At the conclusion of the defendant's evidence 5 May 2006, Mr Garrett successfully applied for an adjournment for the taking of Mrs Robertson's evidence. The hearing then resumed on the 31 August 2006. In the intervening period, Mr Garrett took the opportunity of approaching Sunshine Electrical Services in Brisbane to obtain confirmation from that firm of the defendant's dealings with them in connection with the purchase of the solar equipment. A helpful affidavit from the company's administration officer/accounts clerk, Karen Marks, was produced by consent. Ms Marks deposed that her first dealings with Mr Robertson were in mid-October 2004 when he contacted her by telephone to discuss his requirements. She said that he subsequently spoke to her on several occasions because, "he was trying to work out the configuration of a system that would best suit the people who the system was for and then to price that system."

[32] Ms Marks annexed to her affidavit a quotation she had given to Mr Robertson for the equipment. It is dated 6 December 2004 and is for a figure of AUD$9,455.10. She said that she e-mailed that quotation to Mr Robertson sometime in October 2004
but she does not explain why it is dated 6 December 2004. Ms Marks confirmed that Sunshine's records show that Mr Robertson eventually ordered the system from her company in November 2004 and he paid for it in two installments of $3000 and $6,455.10 on 19 November and 10 December 2004 respectively. The system was uplifted from Sunshine's premises by Chess Removals on 15 December 2004.

[33] Immediately prior to the resumption of the hearing on 31 August, I saw counsel in chambers. Mr Garrett said that his client had spoken to a male person at Sunshine Electrical before he spoke to Ms Marks. Mr Garrett was not able to obtain an affidavit from that other person but he had spoken to him by telephone and after discussion with both counsel, it was agreed that the court could take notice of the fact that Mr Robertson had spoken to that other person about three or four weeks before he approached Ms Marks which would mean that Mr Robertson's first contact with Sunshine Electrical was not until towards the end of September 2004. Whilst accepting that evidence, it does appear from Ms Mark's affidavit that all the conversations of any substance that the defendant had with the company took place between himself and Ms Marks.

Resumption of hearing

[34] In her evidence, Mrs Robertson told the court that she had two children and three grandchildren so, although she was not asked about it, her marriage to the defendant in 2001 was presumably her second relationship. She said that it was probably towards the end of 2003 that she and her husband decided to move to Rarotonga. She explained that her mother, the second plaintiff, had offered them her home in Rarotonga which was in a rundown state of repair. She said that they planned to visit Tonga for a short period of approximately 2 months en route to the Cook Islands. Mrs Robertson gave evidence about the various telephone conversations she had with her mother in relation to the acquisition of the solar equipment. She said that they were all " three-way conversations" in which her husband, Peter, also participated; sometimes she and Peter would pass the receiver back and forth between each other. She recollected that the telephone calls began early in 2004 and, as she put it, there was "a lot of toing and froing" over the most appropriate type of system.

[35] In examination in chief, Mrs Robertson was asked by Mr Garrett about the important conversation leading to the transfer of her mother's money into Peter's bank account:

" Q. Have a look at document D1 in the bundle in front of you there. You will see an entry on 4 March. My accounting knowledge is terrible but there is a sum of $3,281 there and it's got a reference F.C.Wolfgramm -- see that?

A. Yes.

Q. What is that entry? Tell the court what that entry is as far as you know?

A. Um, okay, that, that was the money that my mother sent over for the deposit on the solar system (sic) that we -- you know. At that stage we just given them estimates of several quotes which were between $9,000 and $10,000 and we also informed her that each company would want a third deposit and so that was a guestimate (interrupted)

Q. Just lets break that up because you covered important ground there, who told your mother that the estimate was $9,000 to $10,000?

A. Um, well Peter and I did. Well he actually spoke with her but we were on together on the same phone.

Q. So this was another of the three-way conversations?

A. Yes.

Q. And what was discussed by you and in your presence of the balance to be paid, about the balance, if any, to be paid?

A. Um, that was by telephone discussion again. Most of our, well, all of our correspondence was by telephone and we settled the Sunshine Electrical account. They were the best supplier. We told my mother by phone what the cost price was and she agreed to pay the balance and the freight costs upon arrival here in Tonga and she also agreed (indecipherable).

[36] The same topic was covered by Mr Niu in cross-examination:

" Q. Did you know or were you present when the conversation was made with Ana over the telephone as a result of which the sum of AUD$3,281 was remitted to Peter's account? Were you present during their conversation?

A. There was actually no conversation where that amount . . .

Q. Please, just listen. Were you present during that conversation with Ana on the telephone as a result of which conversation the sum of AUD $3,281 was sent?

A. Yes

Q. You were. Thank you. Who had called who?

A. I don't remember.

Q. Okay, Ana said, no I'm sorry. When your husband Peter gave evidence he had with him a written quote from Sunshine Electrical. Do you recall if Peter had a written quote from Sunshine Electrical at that time?

A. No, he didn't.

Q. Okay, when Peter said in his evidence that he had such a quote at the time that he talked with Ana about sending the money over, Peter's wrong then?

A. Well, I'm still quite not sure. I mean, you asked me why she sent the money over, was I present at their conversation. Yes, I was but during their conversation there was no written quote discussed from Sunshine Electrical. There was no written quote discussed at that actual conversation.

Q. I'm not saying that you discussed the quote with Ana or between the two of you. I'm just asking, was there a written quote from Sunshine Electrical present with you and Peter when you were discussing this with Ana -- discussing the price I mean for sending the money over?

A. No.

Q. There was no written quote?

A. There was no written quote at the time.

Q. Okay, so I put it to you that what Peter told the court that there was such a quote at that time, Peter's wrong?

A. I don't know what date you're talking about but, um!

Q. The 3rd of March 2004, that's the date.

A. No, there was no written quote on the 3rd of March.

Q. Thank you. Did you tell or did Peter tell Ana a sum of money which was the total cost of the solar equipment when you were talking -- you or Peter were talking to Ana on the 3rd of March 2004?

A. Um, he gave her an average of some estimates that we had obtained from several companies. It was an average of between $9,000 and $10,000.

Q. Okay, an average of $9,000 to $10,000. Is that what you say?

A. Yes.

Q. Okay, when Peter gave evidence I asked him what price he told Ana on the telephone and he said the price was $9,425.10 AUD?

A. That wasn't in March.

Q. That wasn't in March?

A. That wasn't in March.

Q. Okay, so Peter did not tell that figure to Ana in March?

A. That's right.

Q. Okay. So if Peter gave evidence and said that he did, that's not correct either.

A. That's right.

Submissions

[37] Mr Garrett made no specific submissions in relation to the 3 March telephone conversation. In fact, he did not refer to it. He did, however, make extensive submissions in relation to the e-mail correspondence referred to in paragraph [16] above and in relation to the status and significance of a second bill of lading which came to light at a late stage in the proceedings relating to the same subject matter. I did not find the evidence relating to either of these matters particularly helpful or conclusive one way or the other. For the record, however, I reject the suggestion by counsel of some improprietary on the part of the Wolfgramms in relation to that documentation.

[38] Mr Niu's submissions focused more on the crucial telephone call of 3 March 2004. I set out in full a particular passage from paragraph 17 of his submissions on another significant aspect of the case:

" At no time did the defendant inform the plaintiffs of the actual costs of the equipment he purchased for them, either before or after he had purchased it; he gave no account or receipt at all to the plaintiffs, or requested payment by the plaintiffs of the difference in the price of the equipment he purchased and the money which the plaintiffs had remitted to him.

And furthermore, the defendant gifted it, that is, the difference in the price and the money remitted by the plaintiffs, and the cost of freight of the equipment to Tonga, when his wife handed the e-mail to the second plaintiff and told her that it was a gift to her of $14,000. That gift was complete upon the handover of the e-mail received by the defendant which confirmed the shipment of the equipment, which document was all that was needed to effect a receipt by the plaintiffs of the equipment when it would arrived in Tonga."

The law

[39] Halsbury states, Vol 9 para 305:

"Unlike commercial agreements, in the case of family, domestic or social agreements there is a presumption, notwithstanding the presence of consideration, that the parties do not intend to create legal relations in the arrangements made between them."

The learned authors note, however, at para 308, that there are many cases:

"Where there is prima facie an intention to create legal relations, either because the agreement is clearly of a commercial character, or the circumstances otherwise show that was the likely intention of the parties."

It was not contended by either counsel that the present case fell within the presumption stated above and clearly it did not. Both parties accepted that the purchase of the solar equipment would create a legal relationship between them. The issue is whether that relationship was created on 3 March 2004 as the plaintiff contends.

[40] The prerequisites to the formation of a contract were stated by the New Zealand Court of Appeal in Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] 2 NZLR 433 at para [53] in these terms:

"(a) An intention to be immediately bound (at the point where the bargain is said to have been agreed); and

(b) An agreement, express or found by implication, or the means of achieving an agreement (e.g. an arbitration clause), on every term which:

(i) was legally essential to the formation of such a bargain; or

(ii) was regarded by the parties themselves as essential to their particular bargain . . .

Whether the parties intended to enter into a contract and whether they have succeeded in doing so are questions to be determined objectively. In considering whether the negotiating parties have actually formed a contract, it is permissible to look beyond the words of their "agreement" to the background circumstances from which it arose -- the matrix of facts. This can include statements the parties made orally or in writing in the course of their negotiations . . ."

[41] In a more recent case concerned with the formation of a contract, Verissimo v Walker [2006] 1 NZLR 760, Baragwanath J, delivering the judgment of the New Zealand Court of Appeal, adopted the statement of Mahoney J. in Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty (1985) 2 NSWLR 309 at p 326:

"The only question considered by the [trial judge] was whether there was a binding contract between the parties. In considering the question . . . it is of assistance to distinguish between three questions: did the parties arrive at a consensus?; (if they did) was it such a consensus as was capable of forming a binding contract?; and (if it was) did the parties intend that the consensus at which they arrived should constitute a binding contract?"

[42] The court went on in Verissimo to state, para [31]:

"It is convenient when discussing formation of a contract to speak of "intention". But it is trite that the subject of state of mind of the respective parties is immaterial. What matters is the message that was objectively conveyed by each to the other, discerned within what Lord Wilberforce famously called "the factual matrix": Prenn v Simmons [1971] 1WLR 1381. Both the words used and the factual matrix are important to the determination of what intention the court will infer from the parties' conduct or impute to them . . ."

[43] In McMillen v Covic [2004] 2 NZLR 106, Baragwanath J. referred to the 630 situation where not all of the contingencies of a contract had been dealt with at the time of the formation of the contract:

"It is a fact of life that commercial parties, even when legally represented, will quite frequently contract in a manner that does not deal precisely with a problem that later emerges . . . The law's task is to give effect to freely accepted mutual obligations; it is therefore the courts' responsibility to identify and find means of giving practical and just effect to those obligations even if they have not been expressed meticulously."

[44] The other point of principal relating to the formation of a contract relevant to the present case is subsequent conduct. In Fletcher Challenge at para [56] the New Zealand Court of Appeal said:

"It is . . . permissible when considering contract formation . . . to look at subsequent conduct of the parties towards one another, including what they have said to each other after the date of the alleged contract."

Discussion

[45] The case for the plaintiffs is relatively straightforward. They allege in essence that, on 3 March 2004 in a telephone conversation between Mrs Wolfgramm and the defendant, a legally binding agreement was reached whereby, in return for them transferring the sum of AUD$3,300 into his account that day, the defendant would purchase solar eqipment which was available to him through a friend at that special discounted price. For his part, the defendant denies the existence of any such agreement. The case fairly obviously, therefore, involves significant issues of credibility.

[46] Perhaps the starting point is the statement of claim. Paragraph 5 reads:

"In or about early 2004, the plaintiffs remitted to the first defendant in Brisbane, Australia a sum of about 2,500 Euros for the first defendant to purchase solar panels, batteries and fittings for them and the shipping thereof to them in Tonga."

Counsel's background research was inexcusably inadequate. Before drafting the pleadings, counsel for the plaintiff should have made the effort to obtain a copy of the Telegraphic Transfer Application form or other confirmation from the bank so as to be able to identify the exact date in "early 2004" and the exact amount that was remitted. Both parties proceeded on the basis that the money in question was transferred on 4 March 2004 which was the date it was credited to the defendant's bank account. It was not until a late stage in the trial that the Telegraphic Transfer Application form was produced as an exhibit and that showed the date of the transfer as being 3 March 2004 and the amount transferred as being T.$4,965.39 which equates to AUD$3,300.

[47] On 16 May 2005 the plaintiffs filed a reply to the defendant's defence and defence to the counterclaim. In paragraph 5.1 of that document they pleaded:

" . . . During a telephone conversation between the second plaintiff and the first defendant in early 2004 the first defendant informed her that she should send AUD$3,000.00 right away so that a man he knew could get the solar equipment from Japan before the new price would come into effect. The plaintiffs accordingly remitted AUD$3,281.00 to the first defendant which was to cover the total cost of the solar equipment. No mention was made of the payment of shipping."

[48] Again, the pleading indicates inadequate background research by counsel. The figures of AUD$3,000 and AUD$3,281 should have been reconciled in the pleading. The figure of AUD$3,000 should, in fact, have read AUD$3,300 and then it should have been made clear that the difference between the AUD$3,300 figure and AUD$3,281 represented the bank transfer charge. The defendant did not, however, seek particulars or seek to have any aspect of the plaintiffs' pleadings clarified through interrogatories.

[49] When it came to the hearing, Mrs Wolfgramm did not mention anything about purchasing the equipment from Japan but she was not asked any questions on that particular topic. She was adamant, however, that in the course of the telephone conversation on 3 March 2004 the defendant told her that he had a friend who could get the solar equipment for a special price if she sent the money across to the defendant's bank account straight away. Mrs Wolfgramm, quite frankly, admitted that she could not remember the exact amount that Peter had asked for but she said that she sent across whatever the amount was that he had requested. The documentation later produced showed the amount in question as AUD$3,300. When the receiving bank deducted its transfer charge from that sum the amount actually credited to the defendant's account the following day was AUD$3,281.

[50] The defendant's position in relation to this particular aspect of the case had been set out in paragraph 5 of his statement of defence which is quoted in full in para [21] above. In essence, he confirmed that the parties entered into an agreement in early 2004 (identified later as 3 March 2004) the terms of which were that the plaintiffs asked the defendant to purchase solar equipment for them in the sum of AUD$9,455.10 and the plaintiffs agreed to pay the shipping costs. The defendant also pleaded that the plaintiffs agreed to pay him a deposit of AUD$3,281 with the balance payable upon arrival of the goods in Tonga. The defendant acknowledged that the sum of AUD$3,281 was deposited into his bank account but he claims that the payment was simply a deposit for the solar system, not the purchase price.

[51] Against that background, evidence as to what was actually discussed in the course of the telephone conversation on 3 March 2004 becomes quite crucial in determining what, if anything, was agreed to and whether the parties in the course of that telephone conversation did, in fact, reach a consensus.

Discussion

[52] One of the problems the defendant faces is that Mrs Wolfgramm was not challenged in cross examination on any aspect of her evidence relating to that crucial telephone conversation on 3 March 2004 nor was any challenge made during cross-examination to the plaintiffs' pleadings in relation to that conversation. It is true that Mr Garrett put to the witness that the defendant had told her that the $3,281 was a one third deposit and it was also put to her that the defendant had not asked her to send the money across that day but Mrs Wolfgramm simply denied both of those propositions and she was not pressured any further on the subject of the telephone conversation. The cross-examination on these issues proceeded as follows:

"Q. You said that Peter told you that the money you sent, the $3,281, was the whole price didn't you?

A. Yes.

Q. That's all you needed?

A. Yes.

Q. I have no choice but to put it to you that Peter told you clearly that the $3,281 was a third deposit - that's true isn't it?

A. No, it's not true.

Q. Ana, I'm not a mathematician, which is why I'm a lawyer, but would you agree that the price they say they paid $9,455 - hold on, I haven't finished the question - bearing in mind the exchange rates between sending money from Tonga and Australian dollars, would you agree that $3,200 is about one third of $9,455?

A. I suppose it is.

Q. Alright, again Ana I have no choice but to put it to you that Peter never told you that you must send this money there and then and he was going to get a special price - he didn't say that did he?

A. Yes, he did say it because I took time to get all the way into town particularly to get into the bank to send that money to him on that day and the bank said to me I think we've got the wrong bank account and I sent it again and it went through.

Q. Yes, well no one is denying that that money was deposited but I'm putting to you that Peter made it quite clear that was a one third deposit only.

A. No sir.

Q. Alright.

A. He did not.

Q. Okay.

A. That amount he quoted of $9,000 or whatever it was, he said he didn't buy the equipment until later in the year so at that time he can't quote a price to me as the total price in March when the solar system (sic) didn't cost that much at that time. December or whenever he bought it, perhaps a price from the electrical company may have been at that price then.

Q. But you have no knowledge of what, if any, fluctuations in price there were between March and December do you?

A. No, but I know the price if he had bought it in March with the money I sent him then.

Q. Yes, assuming that that's the full price, that's correct. Now you said you heard nothing for six months after you sent that money?

A. That is right.

Q. Now, I put it to you that from that time, that is in March 2004, until they arrived in December 2004 you had frequent telephone conversations with Peter and (Brenda), that's correct isn't it?

A. Not frequent. Six months after I sent him the money that's the first conversation after I sent him that money.

Q. So your claim is that for six months from March to September you had no conversation at all?

A. No, from March for about six months. That's when I decided to ring up and ask did you receive the money? Did you buy the equipment and (Brenda) said: "we've decided to bring it with us when we come and install it ourselves." She did not say she bought it or had not bought it."

That was the full extent of the cross-examination of Mrs Wolfgramm on the evidence she had given the court on the crucial telephone conversation which, she maintained, led to her transferring the money into the defendant's bank account in Australia. It could hardly be described as a serious challenge to what, after all, constituted the essence of the plaintiffs' case.

[53] A further problem the defendant faces in relation to the cross-examination of Mrs Wolfgramm is that through his questioning, counsel was suggesting a certain state of facts which the defendant's evidence failed to support. Thus, it was implicit in counsel's line of questioning of Mrs Wolfgramm, set out in para [52] above that the defendant would be admitting asking for AUD$3,300 in the crucial telephone conversation (although he would be denying that she had to send the money that same day) but he would also be saying in evidence that he asked for the money as a deposit only, the sum being one third of the total price of $9,455.00. As can be seen, however, from the defendant's cross-examination, set out in para [26] above, he denied asking for any money to be sent over to him and Mrs Robertson, in the passage quoted in para [36] above, denied that the figure of $9,455 was even talked about in the telephone conversation.

[54] Cross on Evidence, 7th Australian edition (2004) states, para 17525:

"The conduct of cross-examination has to be carried out with particular care so far as it purports to reflect the client's instructions as to the events in issue, because, allowing for the possibilities of human error, a divergence between what a party says or does not say in evidence and the question asked by that party's counsel of the opposing witness may be taken into question in evaluation of that party's testimony or in evaluating that party's case.

The problem may arise in the following ways. First, counsel for a defendant may fail to cross-examine the opposing party's witnesses on a point on which the defendant calls evidence . . . Secondly, counsel for the defendant may cross-examine witnesses called by the opposing party to suggest a certain state of facts, but the defendants' testimony fails to support, or denies, the propositions for which the cross-examination contended."

[55] The defendant's pleadings and his counsel's line of questioning of Mrs Wolfgramm in cross-examination clearly suggested that the payment of AUD$3,300 was asked for in the telephone conversation on 3 March 2004 but as a deposit, not as the total purchase price. In evidence, however, both the defendant and his wife appeared to resile from that position statement and the thrust of what they told the court was that, in the course of the 3 March telephone conversation, no specific figures were mentioned and no money transfer was asked for.

[56] On the issue of credibility generally, I found both plaintiffs to be credible and reliable witnesses. It was apparent from Mrs Wolfgramm's demeanour in the witness box that she found the whole experience of being involved in family litigation quite distasteful but she had a simple tale to tell and what she told the court was unchallenged in cross-examination. Regretfully, I cannot say that I found the defendant a convincing witness and his story seemed to get more convoluted as the case progressed. An obvious question which remained unanswered by the defendant was how would Mrs Wolfgramm have known his bank account number to transfer the funds into unless he had given her the details in the telephone conversation on 3 March 2004 and he is unlikely to have provided that information unless he was requiring her to make a payment into his account. Furthermore, if the money was only a deposit, as the defendant contended in his pleadings, why was it syphoned off into his personal mortgage account for several months instead of being paid out to the firm supplying the equipment? Additionally, why was the defendant unable to produce the quotation he spoke about in evidence which he said he had with him at the time of the telephone conversation in March 2004 which apparently showed the requirement for a deposit. He told the court on 5 May 2006 that, during the lunch break that day, he had been unable to find the copy of the quotation he thought he had among his papers back at his hotel but there was then a gap of over three months before the hearing resumed in which he had full opportunity to approach the company he claimed supplied the quotation for another copy but none was forthcoming.

Conclusions

[57] I accept the plaintiffs' evidence in relation to the telephone conversation on 3 March 2004. I find that there was a consensus reached in that conversation as alleged by the plaintiffs. In terms of their agreement, in consideration of the plaintiffs transferring the funds asked for, the defendant was to supply a suitable solar power system acquired through a friend at that special discounted price. Nothing was discussed about payment of the shipping charges at that point in time but I accept what Mrs Wolfgramm told the court, namely, that when she later asked if the defendant had purchased the solar power unit, she was told that they were going to bring it with them and install it themselves when they arrived in Tonga. I am satisfied that at that point in time, well before the relationship soured, the defendant, as a goodwill gesture, was intending to meet the shipping costs of the solar system himself as he was with certain other items which he mentioned in evidence.

[58] Why the defendant did not purchase the discounted solar equipment he described to Mrs Wolfgramm in the 3 March telephone conversation is unclear. Perhaps, like the quotation he spoke about, it simply did not exist. I am satisfied, however, that at no subsequent point in time did the defendant ever go back to the plaintiffs and tell them that the equipment he had decided upon was going to cost AUD$9,455. I am equally satisfied that had he disclosed that price then the plaintiffs would most likely not have gone ahead with the purchase.

[59] In summary, therefore, the defendant offered to purchase the solar power equipment for the plaintiffs at a special discounted price of AUD$3,300. That offer was accepted by the plaintiffs and the money was paid. For reasons which remain unclear, the defendant either did not or could not (because it never existed) complete his part of the bargain but he, much later, purchased a more expensive unit without getting the plaintiffs approval to the new price or without even informing the plaintiffs subsequently of what he had done.

[60] Being as generous as I can to the defendant, I can only conclude that he acted as he did as a goodwill gesture towards the plaintiffs. The equipment was eventually purchased on the eve of the Robertsons departure for Tonga and at that stage the relationship between the two families was still close and the defendant, in the knowledge that he and his wife were going to be living with the plaintiffs, decided as a goodwill gesture that he would personally meet the additional costs of the new equipment as well as the transport charges. It was only after the relationship later soured that the defendant had second thoughts about the whole issue and then decided to seek recovery of the difference in the price quoted in the 3 March telephone call and the actual purchase price in November of that year. It was not open to the defendant to unilaterally change the terms of the agreement in this way.

[61] The plaintiffs succeed in their claim, therefore, and the defendant fails in respect of his counterclaim. In terms of the prayer for relief, an order is made authorizing the release to the plaintiffs of the solar equipment presently in the custody of the port authorities, subject to payment of any storage or other charges. The plaintiffs are entitled to costs to be agreed or taxed along with reimbursement from the defendant for any storage charges they might be required to pay to the port authorities in order to have the equipment released.