Eastern Pacific Trading Limited v International Primary Products (NZ) Limited [2014] NZHC 3225 (15 December 2014)

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BETWEEN	EASTERN PACIFIC TRADING LIMITED Plaintiff
AND	INTERNATIONAL PRIMARY PRODUCTS (NZ) LIMITED First Defendant ADONIS LIMITED Second Defendant

Hearing:	7-10 July 2014
Counsel:	A J Bush for Plaintiff K J Catran for Second Defendant First Defendant abides decision of the Court
_Judgment:	_{15 December 2014}

This judgment was delivered by me on 15 December 2014 at 4.00 pm, pursuant to r 11.5 of the High Court Rules.

EASTERN PACIFIC TRADING LIMITED v INTERNATIONAL PRIMARY PRODUCTS (NZ) LIMITED [2014] NZHC 3225 [15 December 2014]

[1] The plaintiff, Eastern Pacific Trading Limited (EPT), claims against the first defendant in the sum of $79,695.66 on an invoice dated 8 August 2012 for logs sold to it by the plaintiff. The money has been paid into Court by the first defendant, International Primary Products (NZ) Limited, which has adopted a neutral stance in relation to the claim and simply abides the decision of the Court.

[2] The second defendant, Adonis Limited (Adonis), claims the same money, on the basis that the logs belonged to it and not to the plaintiff and/or that the plaintiff was required to account to it for the money.

[3] EPT further claims against Adonis in the sum of $275,383.77 for wasted expenditure or reliance damages. The claimed expenditure is said to have been lost directly by EPT through the setting up of a business to perform a contract it entered into with Adonis. The expenses claimed are for out of pocket expenses, which EPT says cannot be mitigated or recouped by efforts to re-establish itself in the market, because all of its shareholder funds have been spent and its financial credibility in the log trade has been destroyed. The damages claimed are for the purpose of replicating the position EPT would have been in, had the contract been fulfilled.

[4] EPT was incorporated on 5 December 2011 for the purpose of exporting logs from New Zealand to India.

[6] Around August 2011, Suresh Krishnan, the New Zealand representative of the Mayar Group, approached a business consultant of his acquaintance, Mr Roy, to enquire about the procurement of radiata pine logs from New Zealand for export to India. Discussions then followed in relation to pricing, supply and grades of logs. Subsequent enquiries were made to source an exporter with experience in log and

timber exporting. In December 2011, an acquaintance of Mr Roy’s, Mr Kumar Pramod, introduced Messrs Roy and Krishnan to Mr Michael Worth. Mr Worth had some prior experience in the exporting of logs in containers and in exporting sawn lumber. His experience was not, however, current.

[7] As a result of the approach from Messrs Roy, Pramod and Krishnan, Mr Worth contacted a logging company, Supply and Trade Timber Managers Limited, operated by Lance McNicholas, about the possible supply of logs. Mr McNicholas apparently agreed to supply the proposed venture with the logs required. In consequence, on 5 December 2011, EPT was incorporated; the directors being Mr Roy’s wife and Mr Worth, with the share capital divided equally between them. Mr Roy’s company was to facilitate the contract with Mayar India and he was to act as management consultant. An agreement was also reached with Mr Pramod to find local forests and buy stumpage rights. A lease of premises of approximately

10,000 square metres was under negotiation with Carter Holt Harvey Limited. These premises were to be used as a depot to store the procured logs pending shipment.

[8] In the last week of January 2012, Mr Ashit Sud and Mr Ajay Deepak, both directors of Adonis, came to New Zealand to discuss the possible supply of logs by EPT to Mayar. Ashit Sud is the son of Ajit Kumar Sud, the chairman of the Mayar Group of companies. The meeting was held at Mount Maunganui. Negotiations and discussions are said to have taken place over several days. During these discussions, Messrs Deepak and Sud offered an advance payment of $1 million to enable EPT to establish itself. Mr Deepak said this offer was made as an advance for procuring logs only, not for establishment of EPT or its operating costs. In any event, Mr Worth refused the offer. Mr Worth said he advised such payment would not be necessary, provided payment for the logs was made to EPT within 3-5 days of receipt of invoices, so that the suppliers could be paid promptly. Mr Worth said he emphasised that the credibility of EPT would depend upon such prompt payment to suppliers. The logs to be supplied would be the cheaper cuts which would be best suited to the Indian market and would come from the top end of the tree. These cuts contain more weight according to the Japanese Agricultural Services Standard (JAS) and suffer less evaporation during transport.

[9] Mr Worth said that during the discussions and negotiations he was frank about EPT’s potential weaknesses, which were a lack of recent experience in the log industry, and because there were no current binding contracts in place for the supply of logs, although it was anticipated supply would be available from Mr McNicholas’ company and also from Motutere Forest Managers Limited (MFM), which had also agreed to supply logs for the venture. Mr Jeffrey Martin, the manager of MFM, was in attendance at the January meetings. Part of the requirement of the Mayar Group was that EPT should be independent of any competing involvement in the industry and would work exclusively for the Mayar Group; and the contract with Mayar would be its sole source of income. Mr Worth said it was explained at the meeting, by Mayar’s representatives, that Mayar’s strategy was to create a new operation and an entity devoid of all other trading connections.

[10] In summary, at the time of these negotiations and discussions, by late January there were no binding contracts with any supplier for the supply of logs to meet the shipments contemplated, although Mr Worth was anticipating these would be available from Mr McNicholas’ company and from MFM. The lease of premises for storage still had to be finalised, although Mr Worth believed the Carter Holt property would be available, but EPT could not sign a contract until the deal with Mayar was finalised. EPT would also have to procure plant and vehicles for the operation and hire staff to administer the contract and work in the yard.

[11] Mr Worth’s impressions about the substance of those January meetings is encapsulated in the following passages from his evidence:

I made it clear that I believed that the project would not be successful unless we were able to make payment to the log suppliers promptly. For this to happen Mayar Group would be billed fortnightly and make payment between 3-5 days of receipt of the invoice and the documents verifying the quantity and grade of the logs.

I also stipulated that Mayar Group would have to accept some Grade A logs because it would be difficult to dispose of all of these to third parties.

The representatives of Mayar India Limited and Kumar Pramod and I reached agreement and as a result a minute or Memorandum of Understanding dated 26 January 2012 was prepared by Mr Suresh Krishnan.

This document was developed out of what Mr Krishnan stated to be a mission statement for the venture. I do not have any notes of what was decided but as I recall the main points were:

The strategy was to appoint EPT as the company that would supply logs to the Mayar Group exclusively.

The Mayar Group was depending on Suresh Krishnan to make sure the supply took place.

[12] The provisional Memorandum of Understanding of 26 January 2012, referred to by Mr Worth in his evidence above, and said to have been developed by Mr Krishnan and circulated to the parties during the meeting, and relied on by EPT as evidence of its understanding of the arrangements between the parties, is reproduced in full below:

Based on the agreement on price and Log Grades the first probable Shipment confirmed by supplier by end May 2012. It has been agreed upon based on the following points of reference:

• Supplier, Eastern Pacific Trading Limited, 344 Kaipaki Road, Cambridge, NZ. Contact person: Mr. Mike Worth

• Buyer, Mayar India, 10th Floor, DIF Square, Dif City, Phase II, NH8 Gurgaon-122022, Haryana. Contact: Mr. Ashit Sud

SL	Grade	Percent	Price NZ$ (FOB)	Comments
1	A	25	138	Grade A has a relatively low percent in the mix
2	K	20	129	Therefore seller has to organize other local buyer for the balance logs contributing inevitable delay.
3	KI	28	124
4	KIS	27	111

This payment is to be made based on scaled and measured logs sitting at the storage endorsed by the marshalling company. A payment will be remitted immediately after copy of the invoice has been faxed.

Total quantity for logging and shipment is currently being established at 180,000 cbm. This agreement shall continue until an agreement in respect of a business relationship/strategic alliance/joint venture between Disclosing Party and Recipient are entered into, or Disclosing Party and Recipient agree that Disclosing Party’s and Recipient’s obligations under this agreement shall cease. The agreement shall be governed by and construed in accordance with generally accepted international laws and Laws of New Zealand.

[13] The document was, however, never executed, and Adonis’ position is that this was because it did not in fact reflect the real arrangement between the parties. The essential difference appears to be that EPT wanted to be assured of eventual shipments of 180,000 cbm, while Adonis regarded the performance by EPT of its obligations in respect of the first shipment to be an essential prerequisite to further trading.

[14] Acting on its view, in early February 2012, EPT drafted a contract with Mayar which it forwarded to Mr Krishnan. The contract provided for EPT to supply Mayar with 180,000 cbm of logs in lots of 30,000 with prices to be fixed for each shipment. Other terms were that logging would start in mid-February and proceed at

10,000 cbm every four weeks, with the first 30,000 shipment ready in mid-May. Payment would be on 500/1,000 cbm lot sizes on measured logs, with risk passing when the logs were on board the ship. EPT would meet its own expenses. The agreement would last for as long as EPT supplied logs, but terminate on one year’s notice or for breach.

[15] Mayar did not, however, sign the contract in this form. Mr Deepak said in evidence the contract as proposed did not accord with what had been agreed to at the meeting in late January.

2012 is set out in full below. The contract is dated 26 January 2012 but was not forwarded in penultimate form by Mr Krishnan to Mr Pramod until 6 February 2012. It was in fact signed early in March, and after some amendment of the draft it became the agreement in the form below. The parties to the contract are the parties in dispute in this litigation, not Mayar India Limited, but nothing turns on the absence of Mayar.

This CONTRACT is made and entered in to this day the 26th January, 2012, in Tauranga, New Zealand, by and between:

• Adonis Limited, a company, duly incorporated and registered in Hong Kong under the Company laws having its principal office at Lippo Centre, Tower II, 803, 89 Queensway, Admiralty, Hong Kong, hereinafter known as the FIRST PARTY.

• Eastern Pacific Trading Limited, a Company duly incorporated and registered in New Zealand under the New Zealand Company laws having its principal office at 344, Kaipaki Road, Cambridge, NZ. ... hereinafter known as the SECOND PARTY

A. The First Party is an importer, distributor and wholesaler of Logs and the company is financially sound, highly experienced and capable to resource, undertake and administer the services of importing and distributing and supplying logs across a broad expanse of projects.

B. The Second Party is a log and timber experienced company capable of sourcing and selling, highly experienced and capable to source, procure and look after delivery of quality log products from different sources in New Zealand at competitive market prices.

C. The expression First Party of the one part and Second Party of the other part, unless repugnant to the context shall mean and include their respective legal heirs, nominees, assigns, representatives, successors, administrators etc.

NOW THEREFORE in consideration of the mutual covenants, terms and conditions and understandings set forth in this Contract and other goods and valuable consideration (the receipt and adequacy of which are hereby mutually acknowledged), the parties with the intent to be legally bound, hereby agree as follows:

The parties agree that the initial scope of this CONTRACT shall be for the following:

1.1 The Second Party to look after the sourcing and supply to the First Party, good quality of New Zealand Pine Logs. The Second Party is to do all efforts to source and procure logs at best prices.

1.3 Ownership of all the materials on the premises of the Second Party shall remain at all times the property of the Second Party until not paid for.

Total quantity for logging and shipments is currently being established at 30,000 (+/- basis carrying capacity of ship/ equivalent to 1 ship load

The Second Party shall sell, deliver and transfer the following goods to the First Party on FOB basis Trimmed and Stowed on the vessel nominated by First Party;

(1) Quality of Logs: Export Quality New Zealand Radiata Pine logs with Grades as mentioned below in the table.

The Second Party agrees and undertakes that it shall not in any way compromise in the quality of the logs. The Second Party also agrees to indemnify and keep the First Party indemnified if the quality of the logs does not meet the expected standards of the First Party.

(5) Contractual Price term: FOB Trimmed and Stowed into vessel. (6) Port of Loading: Port of Tauranga

#	Grade	Percent	Price NZ$ per JAS cbm
1	A	25	138
2	K	20	129
3	KI	28	124
4	KIS	27	111

Pricing will be based on shiploads and will be agreed by both parties and shall be signed by each party. This signed document will be stipulated as a Sale Contract.

The second Party shall provide a complete list of materials, and shall update this on a regular basis, to assist the First Party.

5. AN ESTIMATED TIMELINE AS MUTUALLY AGREED BETWEEN BOTH THE PARTIES IS AS FOLLOWS:

The first Party is to make payment based on an invoice raised fortnightly. This payment is to be made based on scaled and measured logs sitting at the storage at 124, Hewletts RD, Mount Maunganui, New Zealand and endorsed by the independent and credible marshalling company. A payment will be remitted within 3-5 working days after copy of the invoice has been faxed along with a valid certificate from marshalling company certifying the quantity and quality of logs delivered. The receipt of funds has to be acknowledged by the Second Party to the First Party within 24 hours in writing.

(1) Each party shall be responsible for their own expenses incurred under this CONTRACT, including but not limited to legal fees, accounting, tax, and any other professional fees, all expenses relating to government and municipality regulations etc.

(a) During the terms of this contract, the Second Party agrees and undertakes that it shall obtain comprehensive insurance coverage, including third party coverage of all cargo while the same is in the yard of the Second Party.

$4 million shall be made available to the First Party and the validity of the same shall continue at all times.

(c) The First Party shall not be responsible for any loss occasioned by the Second Party on account of not obtaining comprehensive insurance coverage for all the stock while it is in the yard of the Second Party.

(3) The ownership of the goods is deemed as transferred to the First Party once the payment of the parcel/s is made to the Second Party;

However, it is clearly understood that the obligations and responsibilities of the Second Party under this contract shall not change at any point of time.

(4) It is agreed and understood between the parties to this contract that this contract is on FOB terms. All costs associated with the same shall be paid and borne by the Second Party.

(5) Insurance of all stock in-transit once made on board the vessel shall be the responsibility of the First Party.

(6) Both the parties are duly organized and validly existing under their respective laws and have been in continuous existence since incorporation.

(7) The parties have full power and authority to execute, deliver and perform its obligations under this Agreement and to carry out the transactions contemplated hereby.

(8) The parties have taken all necessary corporate and other sanctions under applicable laws and its constitutional documents to authorize the execution, delivery and performance of this Agreement.

(9) The obligations of both parties under this Agreement will be legally valid, binding and enforceable obligations against it in accordance with the terms hereof.

(10) The parties have no knowledge of any violation or default with respect to any order, writ, injunction or any decree of any court or any legally binding order of any Governmental Authority which may result in any material adverse effect or impairment of its ability to perform the parties’ obligations and duties under this Agreement.

(11) The parties have complied with all the applicable laws and have not been subject to any fines, penalties, injunctive relief or any other civil or criminal liabilities which in the aggregate have or may have material adverse effect on its financial condition or its ability to perform their obligations and duties under this Agreement.

A) Owing to the nature and understanding of business being conducted by both parties in this contract, it is mutually agreed that in case of failure of the Second Party to deliver contracted quantity to the First Party within the stipulated time, a penalty will be applicable. According to Point # 3.4 of this contract, the value has been mutually set at NZ $3,749,700. The penalty is mutually agreed to 30% of the total value of the contract which is the amount of NZ $ 1,124,910. This amount is payable by the Second Party to the First Party in case of any or all of the below happenings during the execution of this contract:

1. If the First Party brings its vessel for loading cargo at the estimated laycan as mentioned in Point # 6, and the cargo is not ready in any which way, partially or in full to load during the laycan.

2. If the quality of logs are not to the understanding of the First Party which will be identified by an independent agency at the cost of the First Party.

B) If for some reason, the total contracted quantity kept in the storage of the seller, cannot go on the board due to reasons beyond the control of the seller, the seller shall not be liable for the same and no penalty will be levied.

This contract shall be valid from date of signing of this contract to the loading date of the first vessel and may be extended at the discretion of the First Party on mutually agreed terms and conditions. This contract is in recognition of a larger agreement for procurement of 180,000 cbm under a MOU.

(a) In the event of any material breach, default, contravention, non-observance, non-performance of any of the terms of this Contract/Agreement.

(b) If either party goes into liquidation or dissolution or any assets of either party is placed in the hands of a Receiver, custodian or liquidators or if a notice is issued in a winding up petition in respect of either party.

Either Party shall not be held responsible for any consequences or liabilities under this contract if they are prevented in performing their obligations under the terms of this contract by reasons of laws or regulations actions by any legal body or authority, local or otherwise, not attributable to the Either Party, rights, insurrection, war, terrorist action, act of God and unforeseen circumstances beyond their control.

This agreement along with the annexures annexed hereto constitutes the entire agreement between the parties and revokes and supersedes all pervious discussions, correspondences and deeds between the parties, if any concerning the matters covered herein whether written, oral or implied. This agreement shall not be changed or modified except by written amendment duly agreed by the parties.

Failure of either party to enforce at any time or for any period of time the provisions hereof shall not be construed to be waiver of any provisions or of the right thereafter to enforce each and every provision hereof.

All notices, requests, demands or other communication required or permitted to be given under this License Agreement and the provisions contained herein shall be written in English and shall be deemed to be duly sent by registered post, postage prepaid or courier or email to the other parties at the address indicated below:

(i) In the case of the First Party, to: Attention: Mr. Ajay Deepak Director, Finance

The parties shall use their respective reasonable endeavours to settle any dispute whether during its subsistence or after its termination amicably.

(a) If a dispute is not resolved within sixty (60) days after written notice of a dispute by one party to the other party, the same shall be resolved through arbitration.

(b) This agreement shall be governed and interpreted in accordance with the rule of Hong Kong. In case of failure by the parties to reach amicable settlement such difference or dispute shall be finally settled through arbitration in accordance with the rules of United Nations Commission on National Trade Law (UNCITRAL). The venue of the arbitration shall be Hong Kong.

IN WITNESS WHEREOF, the parties here to have executed these presents at Tauranga, New Zealand on the day, month and year above written in the presence of the following witnesses.

[17] EPT had commenced making its arrangements for entering the log exporting business from, at the latest, February 2012. It incurred considerable expenditure in its efforts to be ready and to fulfil its side of the contract. This is said to be in anticipation of further contracts for supply of 180,000 cbm, as it envisaged the prospects to be. These contracts never eventuated. The initial contract was cancelled by Adonis before completion, in circumstances which are at the heart of this litigation.

[18] The contract required EPT to start logging operations on 20 February 2012. EPT was throughout reliant on its suppliers for the delivery of the logs which it intended to sell. A shipment size of 30,000 cbm +/- 5 per cent was to be ready for shipment by 1 May 2012. EPT encountered delivery difficulties from the beginning, and on 16 April it sent its first invoice, for 491 cbm, prompting Adonis to voice concern about delivery of the shipload on time and to ask for a delivery schedule. In response on 18 April EPT asked for a two-month extension. On 23 April there was an exchange of emails. In his brief of evidence Mr Pramod said that he had sent an

_Date	_{Quantity (JAS)}
₃₀^th_{April 12}	₁₀₀₀
₁₅^th_{May 12}	_5,800
₃₀^th_{May 12}	_5,800
₁₅^th_{June 12}	_7,800
30^thJune 12	7,800

[19] In oral evidence Mr Pramod said this was not correct. He said that the schedule had been sent by Mr Krishnan and he had told Mr Krishnan that EPT could not maintain that schedule. He accepted in cross-examination that in subsequent emails admittedly sent by him he had allowed Mr Deepak to believe that the schedule had come from him and therefore represented EPT’s accepted variation to the contract. Mr Worth in his evidence in chief regarded the correspondence as the granting of an extension by Adonis, as provided for in the contract. On the totality of the evidence I find that EPT by its conduct led Adonis to believe that it was accepting that it was bound by the varied schedule, and it is not now to be heard to the contrary.

[20] There followed a query from Adonis about grade mix; and the first invoice was paid on 26 April. On 3 May the second invoice was sent and after a query about quantity this was paid on Monday 7 May. Adonis asked EPT to ensure the next bill was for at least 6,800 or 6,000 cbm. A third invoice was sent on 1 June. On 6 June Mr Pramod sent a letter to Mr Deepak. This letter commenced: “As we have been told by Suresh [i.e. Adonis] to organise 15,000cbm by end of June. We are doing everything possible to achieve this volume”. It set out a schedule and continued:

“With regular payments we can procure 15 thousand Cbm latest by 7^thJuly (for

Partial shipment). We can make 15000 Cbm by 7^thof August for full shipment with your payment support”. The letter concluded: “We strongly need your support for this project. I am sure you will be able to consider us for the first shipment be it partial or Full”.

[21] On 7 June Adonis responded that it had agreed to 5,800 cbm by 15 May and a further 5,800 cbm by 30 May, but EPT had produced only 1,700 cbm, against the scheduled 11,600 cbm. Mr Pramod replied on the same day, describing supply difficulties and asking for prompt payment. He made no reference to the supply dates.

[22] This state of affairs prompted Adonis to send Mr Deepak, who gave evidence at the hearing, to New Zealand. The parties met on 12 June. This meeting did not allay Adonis’ concerns, and another meeting was held on 15 June. The outcome was that Adonis purported to cancel the contract for non-performance, both to date and in

terms of future obligations which were not going to be fulfilled. The logs procured by EPT to date, not yet having been loaded, were to be resold. The parties are agreed that EPT was to do the selling. Mr Worth for EPT said in evidence there was no arrangement for payment to Adonis about accounting for the proceeds of sale. Mr Deepak said his position was that if the logs it had paid for had to be sold at a discount Adonis would accept the reduced proceeds in settlement of the monies that Adonis had paid EPT for them. Mr Pramod confirmed in cross-examination that it was clear to all present that the contract was over.

[23] At this point I note that having seen and heard the witnesses representing both EPT and Adonis it is clear to me that both parties had been dealing honestly with each other during this sequence of events. The clear problem is that EPT promised more than it was ultimately able to fulfil, notwithstanding its best efforts; and that while Adonis was prepared to provide leeway for a time it became apparent to Adonis that EPT could not come sufficiently close to complying with its obligations.

[24] The crucial question is therefore whether Adonis was on 15 June entitled to cancel the contract. In closing submissions counsel for EPT attributed the failure of the contract to a number of factors. These factors and my findings and observations in relation to them are set out below:

I note the yard delay was not attributable to Adonis, and preparations for supply were well underway in February.

I do not find these factors assist EPT; the contract had no weather-related clause, and supply was clearly EPT’s responsibility.

(iii) “Economic duress” applied by Adonis to “materially alter the terms of the contract unilaterally, so that anticipated fortnightly payments for logs and resulting cash flow was not available”.

I approach this point by noting that the original contract required delivery of 30,000 cbm by 1 May, with some leeway. EPT made it clear at the time of sending the first invoice for a small quantity that it was not going to be able to comply with these obligations. I have found that the new schedule, with delivery by 30 June, was agreed to by EPT, albeit on the basis that invoices would be paid promptly. The first invoice was paid 10 days after delivery; the next, when the new schedule had been agreed, was paid four days after being submitted, which period included a weekend. Five days after the third invoice was submitted EPT asked for a further extension of over five weeks. The material alterations to the terms of the contract were in fact of assistance to EPT, giving more time to complete a contract which it could not otherwise fulfil; there was never any threat not to pay; payment was delayed on the first invoice pending negotiations and was made promptly on the second. While it is correct that EPT said it could not survive unless Adonis agreed to its extended schedules, this did not impose an obligation on Adonis to accept the non- performance. The duress, if any, could only have been the retention of 10 per cent until two days before berthing; this was not claimed to be the cause of the failure to deliver before the cancellation.

(iv) Refusal by Adonis to make payment after 5 May, so that EPT was left without funds to pay suppliers, who stopped providing logs.

In fact by 7 May Adonis had paid for all the logs by then supplied; there was one further invoice which in terms of the amended agreement it was not required to pay because of the small quantity supplied.

There was no notice; equally no witness suggested that, had Adonis given notice, EPT could have made arrangements to fulfil its obligations. In fact on 6 June EPT was clear it could not complete by 30 June, and asked for the extension to 7 August. That letter constituted clear repudiation of any previous timetable. Any reasonable bystander would believe on 15 June, knowing of the letter of 6 June, that there was

no prospect of fulfilment by the contractual date of 30 June.¹The meeting of 15

[25] Counsel for Adonis submitted that the contract had been varied so that the schedule set out in [18] above with the deduction of 10 per cent from invoices became incorporated in the contract as thereby amended. For the reasons I have already set out above, I accept this was the correct position; indeed Mr Worth for EPT accepted it in the course of his cross-examination.

[26] Mr Bush argued that Adonis could not cancel without making time of the essence and allowing reasonable time to fulfil. Mr Catran pointed to the original delivery date, to the time-based penalty clause, to Adonis’ invariable concern with timely performance and to EPT’s own actions in seeking time extensions, knowing they had to be agreed to be effective. It is clear there was never any open-ended concession from Adonis as to time limits. I can find no obligation on the facts or in law for Adonis to be compelled to this course.

[27] It follows that the plaintiff’s claim against the second defendant must fail.

The plaintiff and the second defendant vis-à-vis the money paid in by the first defendant.

[28] I turn now to the question of entitlement to the monies paid in by the first defendant and contested as between the plaintiff and the second defendant. This

_{money was for the purchase by the first defendant of logs, ownership of
which was}

¹Brooklands Motor Company Ltd (in rec) v. Bridge Wholesale Acceptance Corporation

said by various parties to be retained by the original suppliers or held by EPT or acquired by Adonis in terms of its contract.

[29] The claim by Adonis is relatively straightforward. It says that it paid for the logs invoiced under the first and second invoices; that ownership of these logs passed to it under its contract; that these logs were among those purchased by the first defendant and that it is therefore entitled to the money, being less than the amount it had paid out. In the circumstances of the sale it says there is a constructive trust in its favour; and EPT was a mercantile agent on its behalf.

[30] EPT denies property in the logs passed to Adonis; it denies any constructive trust in favour of Adonis; says that in re-selling the logs it was not Adonis’ mercantile agent; that there is no compliance with s 4 Contracts Privity Act 1982; and that it had no notice and accordingly s 27 Sale of Goods Act 1908 applies.

[31] Clause 7(3) of the contract reads: The ownership of the goods is deemed as transferred to [Adonis] once the payment of the parcel(s) is made to [EPT]. However it is clearly understood that the obligations and responsibilities of [EPT] under this contract shall not change at any point of time. The second sentence clearly refers to the seller’s obligations under a FOB contract, as this was. Mr Bush submitted that the contract was one for the sale of unascertained future goods by description. That submission does not take into account that, before payment, the logs to be sold were in the yard, identified and checked by the stevedore, and payment was not to be made until that process was complete. There is no suggestion that at the time of payment Adonis had any notice of lien claimed by an unpaid supplier. On that basis EPT clearly passed title on receipt of the payments.

[32] I am satisfied that EPT sold Adonis’ property and thus Adonis is clearly the rightful recipient of the money held. There is nothing that occurred at the meeting on 15 June to give any impression that Adonis was doing more than accepting a loss on resale, which it has done. Adonis was prompt to specify its claim when it encountered delay, and it is clear that EPT was less than open about what was being sold and in accounting for the proceeds.

[33] The plaintiff’s claim against Adonis in the sum of $275,383.77 by way of reliance damages or wasted expenditure is dismissed. Judgment is entered in favour of Adonis.

[34] The plaintiff’s claim for $79,695.66 paid into Court against the first defendant is dismissed. Judgment is entered in favour of the second defendant in that sum. The Court is directed to pay that sum out to Adonis.

[35] In the normal course of events an award of costs in favour of the successful party must follow. It was made clear to the Court that settlement discussions had taken place and were continuing during the course of the hearing. Unfortunately those discussions were not successful.

[36] There is no principled basis upon which to depart from the general principle that costs follow the event. On that basis, the defendant is entitled to 2B costs.

High Court of New Zealand Decisions

Eastern Pacific Trading Limited v International Primary Products (NZ) Limited [2014] NZHC 3225 (15 December 2014)