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Solomon Time v Olsson [2010] SBCA 6; CA-CAC 21 of 2010 (25 March 2010)

IN THE SOLOMON ISLANDS COURT OF APPEAL

JUDGMENT OF THE COURT
Solomon Time Limited v Olsson and Olsson

This is an appeal by the defendant Solomon Time Limited ("STL") against a judgment in the High Court given in favour of each of the claimants W F Olsson and G E Olsson. It is convenient to retain the nomenclature used in the High Court, by referring to the claimants Mr and Mrs Olsson as Fred and Gloria, and to the controlling shareholder and principal director of STL as Pamela. At relevant times during the period from 2004 to 2006 the only other director of STL was Rehab Kuper, who was employed by STL as its secretary. Since first arriving in Solomon Islands in 1982, Pamela has demonstrated a strong spirit of enterprise, involving herself in a variety of businesses, such as establishing a holiday resort and a real estate business as well as conducting a restaurant. At the time these events began, she owned the Konsela Market Building, next to the Honiara Main Market Building. From the upper floor of the former STL carried on a business of buying and selling alluvial gold, smelting and cleaning it, and training Solomon Islanders in locating and processing it for sale.

Pamela first met Fred and Gloria during a visit by her to Brisbane in 2004. Fred has university qualifications in minerals including assaying alluvial gold, as well as experience in New Guinea in buying and selling it. Like his wife Gloria, he is a teacher registered in Queensland. She has training and skills in office management and in mineral processing techniques. When the parties met each other in 2004, Pamela was looking for help with assaying a quantity of alluvial gold which she was having difficulty in appraising. Fred attended to that task for her and, after that, the parties kept in touch by email. Pamela told the other two of a plan she had formed to establish a gold business in the Shortland Islands to be conducted in conjunction with a trading post there, from which Fred and Gloria would be paid a share of profit in return for working in the business.

In August 2004, Pamela invited Fred and Gloria to come to Honiara, where they stayed with her. She explained to them the Solomon Government requirements they would need to satisfy in order to obtain work and residency permits in Solomon Islands. After considering various proposals Fred and Gloria said they were keen to start work in the Shortland Islands buying alluvial gold and conducting the trading store business planned there. In November 2005 Fred returned to Honiara this time without Gloria but with authority to conclude contracts on behalf of each of them. Draft contracts were typed up by Rehab at the STL office in Honiara. In doing so, Rehab was acting on instructions from Pamela, who told her to use for Fred and Gloria's contracts a template created when one Dani Chatfield had been engaged as a chef in a restaurant called P's PlacePlace that had recently been opened by the defendant.

The contracts in the form executed are each dated 10 November 2005, ex 10 for Fred and ex 11 for Gloria. Her contract was, with her authority, signed by Fred on her behalf, and both contracts have stamping notations dated 9 December. The contracts including ex 21 for Dani Chatfield are each headed EMPLOYMENT CONTRACT and contain a preamble that recites that the Employer STL wished to engage the services of Fred or, as the case may be, Gloria as alluvial gold education consultants subject to the terms contained in those documents and subject to obtaining government work permits. The engagements were each to last for two years [cl 2.1 and 3(a)], during which time the Employee was to provide his or her services as an alluvial gold education consultant "whilst acting as agent for the gold operations" of STL, managing those operations, purchasing required items, liaising with gold sellers, and providing suitable training for Solomon Islanders: see cl 2.2. The Employee was to be remunerated by salaries of SBD $20,000 per fortnight, with 4 weeks annual holiday, and suitable accommodation: cl 4 of the contract. Clause 6 contained a restraint provision precluding the Employee from working, whether as employee or as proprietor, in a similar position for a period of one year after the expiration of the current term of employment.

Having typed up the draft contract, which ultimately became exs 10 and 11, Rehab gave a copy or copies to Fred. He noticed the provision for a salary of only SBD 2,000 per fortnight. The amount evidently came straight from Dani Chatfield's contract ex 21 to work as a chef in the restaurant. On Fred's instructions to Rehab the amount in the draft was increased to $20,000 per fortnight. After telling Rehab that he (Fred) would take the matter up with Pamela, the contracts that became ex 10 was signed by Pamela without (she says) noticing the increase in salary amount from $2,000 to $20,000. Pamela said simply signed at the places in the document indicated by Rehab without knowing that the amount in cl 4(a) had been altered to increase it from SBD 2,000 to SBD 20,000. When Pamela signed the draft contract she erroneously thought (or so she said) that the salary remained at SBD 2,000. She says she did not read the documents before signing it.

If Fred had, without warning her, known of Pamela's mistake when she signed the draft contracts, he (and Gloria for whom he was acting) would have been precluded from enforcing either of them at a salary of SBD 20,000 rather than SBD 2,000. Trying to enforce the contracts at SBD 20,000 according to its literal terms would have amounted to fraud on the part of the claimants in seeking to take advantage of a mistake by STL of which, on this assumption, Fred was aware at the time of contracting. The underlying principle was stated and applied by Pennycuick J in A Roberts and Co Ltd v Leicestershire County Council [1961] Ch 555. There a builder tendered a price to build a school for the Council to be completed within a time specified in the contract. Unknown to him, when he came to sign the written contract the time for doing the work had been altered, and he signed without knowing of the alteration, which had the effect of reducing the value of the payments to be made to him. The Council not only knew of the alteration, but also that, if the builder had been aware of it, he would not have contracted to do the work at the figure quoted. In the result, the Council was not permitted to enforce the contract according to its literal terms without submitting its rectification. Decisions applying the same principle in Australia include Johnstone v Commerce Consolidated Pty Ltd [1976] VicRp 46; [1976] V R 463 and Majestic Homes Ltd v Wise [1978] Qd R 225.

In Roberts v Leics CC (above) Pennycuick J quoted from Snell on Equity a passage suggesting that, on one view, the principle might be based on a form of equitable estoppel; but that if it rested on fraud, dishonesty would have to be established: see Roberts v Leics CC [1961] Ch 555, 570-571. To establish dishonesty, the critical question here would be whether Fred knew, at the time when Pamela signed the contract (and so accepted the offer it contained), that she mistakenly believed it provided for a salary of SBD 2,000 per week instead of SBD 20,000. That would have amounted to dishonesty on Fred's part. As to that, his Lordship in his reasons for judgment in the case before us (para 25, appeal record, at 258) said:

"Rehab typed in the amendment but said she did not tell Pamela about it. Fred's evidence is that he told Rehab he would tell Pamela about the amendment. He then went to discuss it with Pamela in her office. The Court does not believe Fred unilaterally changed the level of his salary in his contract. He told Gloria about the amendment he made and the discussion which he made with Pamela about it. She told him to do the same with her [Gloria's] contract and authorized him to sign her [Gloria's] contract on her behalf. That is exactly what he did with Gloria's contract".

The appellant is therefore incorrect in para 6 of its notice of appeal in asserting that, having said he would tell Pamela about the alteration in the salary amount, Fred did not in fact do so. On the contrary, the learned trial judge deliberately refused to find that Fred had "unilaterally changed the level of his salary" in the contract. Without an affirmative finding that Fred had deliberately not told Pamela about the alteration in the salary amount but had simply kept quiet about it, neither fraud nor anything approaching dishonesty could be found against him. As Russell LJ said, speaking for the Court of Appeal in Riverlate Properties Ltd v Paul [1975] Ch 133, at 140:

"Basically it appears to us that [the conduct] must be such as to involve...a degree of sharp practice".

Given his Lordship's finding in this case, it is not possible to find that Fred was guilty of fraud or "sharp practice" in making the contracts with Pamela.

The other major ground of appeal is also covered by his Lordship's findings of fact in respect of the agreement reached between the claimants and the defendant. The latter advanced the proposition that there was never any contract between the parties in the terms of the signed agreements ex 10 and ex 11. The defendant claimed that, when the parties signed, those documents were not intended to be legally bound by them. On the contrary, the documents were, it was said, essentially a sham which the parties had created and used in order to mislead the Departments of Labor and of Immigration to induce them to issue the claimants with the necessary labor and residency permits.

The defendant did not quite go to the length of suggesting that there were no contracts at all between the parties. Instead, it alleged several different versions of the oral agreement which they alleged had been entered into. On behalf of the claimants Mr. Radclyffe helpfully attached to his written submissions on appeal a tabular analysis presented in parallel columns comparing three successive and differing versions of the same contracts alleged by the defendant in its successive defenses and counterclaims delivered between 23.1.2005 and 27.5.2009. The interval of time between the first and the last set of these pleadings should be noted.

Three years ago in 23.1.2005 the defendant alleged a relatively conventional employment contract or contracts for two years to manage part of the defendant's business in return for fortnightly payments to each of the claimants totalling SBD 2,000 each. That, however, was alleged also to be subject to a profit-sharing arrangement under which the claimants would receive a combined amount of AUD 6,000 per month. The next pleaded versions of the contract are dated 20.5.2009 and 27.5.2009. They allege a "joint venture engagement" of the claimants in return for remuneration of 40% of net profits of STL's gold-buying business in lieu of payment of a fortnightly salary. The second and third versions of the defendant's pleading (which were delivered only a week apart) resemble each other much more closely than they do the earliest version of 23.1.2005, which is closer both in form and time to the claimants' allegation of the pleaded arrangements between the parties. All matters considered, it is not at all surprising that his Lordship was persuaded to adopt the claimants' allegations and evidence about the terms of their agreement rather than one of the versions advanced by the defendant. There is no discernible reason on this appeal for displacing the findings made by the learned trial Judge.

His Lordship in his reasons gave detailed and careful attention both to the oral testimony of the witnesses and to the plethora of emails passing between the claimants and the defendant. His findings of fact are supported throughout by footnote references to identified passages in those emails and his notes of evidence. In Allardyce Lumber Company Ltd v Quarter Enterprises Pty Ltd (Civil Appeal no 15/2007; delivered 15 March 2008) this Court had occasion to affirm the principles on which decisions based on findings of credibility at the trial will be revisited on appeal: see paras 39-40 of the reasons for judgment in that matter. Nothing resembling the circumstances encountered in that case are present or suggested in this. On the contrary, the present case simply falls into the common run of appeals in which an appellate court may review findings of fact including inferences drawn at trial; but will do so only if the trial judge is clearly shown to have been wrong. See Powell and Streatham Manor Nursing Home [1935] AC 243, and Warren and Coombes [1979] HCA 9; (1979) 142 CLR 531.

The real problem in the way of accepting Pamela's oral "joint venture" version of the agreement is that it does not accord with the facts or the probabilities of the case. She claimed that the oral agreement was negotiated in November at about the time she arrived back in Honiara after visiting the Shortland Islands. The date on the written contracts of employment is 18 November 2005. The date was questioned by Pamela but, as previously noticed, the stamping notation itself is dated 9 December 2008. It is unlikely that the parties would have negotiated the oral agreement only shortly before or immediately after the written contracts ex 10 and ex 11 were signed and placed before the relevant authorities. Why would they not simply have submitted details of the oral joint venture agreement of approximately the same date instead of concocting false contracts to communicate to the Ministry of Labour?

This point was specifically made by the learned trial judge in a passage at para 27(e) of his reasons (Appeal Book, at 261) that is worth quoting at length:

"First, it is hard to imagine how Pamela would have instructed Rehab to use Dani Chatfield's template to draw up contracts of employment for Fred and Gloria to be signed with the defendant, if it was true that serious discussions and negotiations were going on between Pamela and Fred in November 2005 on the employment of Fred and Gloria under an oral agreement. Second, it is equally difficult to understand how Pamela and Fred could have finalized and entered into an Oral Agreement after the visit to the Shortland Islands, when written contracts of employment have been signed. The actions taken by Fred, Rehab and Pamela in relation to the contracts showed that no oral agreement had been made between Fred and Pamela. The documents referred to in paragraphs 9 to 19 above merely contained information, discussions and plans about Project Paradise. There were no materials on how the project would be jointly developed and how the profits would be shared as it would cover profits from gold and the sale of goods. There are therefore insufficient facts before this Court to infer the existence of an Oral Agreement between the defendant and Fred and Gloria."

His Lordship went on to conclude that there was no oral contract of employment between the defendant and Fred and Gloria, but only the written contracts between them that were executed in November 2005 in Solomon Islands. Those contracts were binding on the defendant, and confirmed that the relationship between the defendant and the two claimants was one of employer and employee and not some ill-defined form of joint venture arrangement.

A few other points raised by the appellant may call for mention here. One is the reference at various points in the appeal record to "Project Paradise". This was the name for the original proposal suggested in August 2005 to establish a trading post in the Shortland Islands in conjunction with an alluvial gold business between Pamela and the claimants, which extended later discussion with Fred, about providing a kit home to enable Fred and Gloria to live at the site, and as well as the possibility of extending their gold buying operations to Bougainville across the border. They began discussing how they would divide up the joint profits of the business between them. In the end, Pamela evidently lost interest in carrying out the idea, and the Project Paradise proposal was dropped. Its quietus came with, or as a result of, the riots that took place in Honiara on 18 April 2006, when many shops were set on fire. The lower floor of the Konsela building was looted by rioters, and other nearby buildings were ransacked and burnt. At that time, Pamela was away in New Zealand. Fred and Gloria received no instructions from Pamela about what they were to do but were left by the defendant to fend for themselves. On 20 April, 2006, the Sydney Morning Herald reported their "daring escape" first by canoe before being air-lifted to Australia. When she heard of this Pamela condemned their departure as an "act of betrayal" of her or her assets in Honiara; but it was never a term of the claimants' duties under their contracts with STL that they should stay and physically defend the Konsela Market building or its contents against rioters. In July 2006 Pamela arranged for their work permit to be withdrawn, which meant that they could no longer re-enter the country to work or live except as visitors. This effectively put an end to their employment contracts with STL. Pamela had by then lost her enthusiasm for the Paradise Project proposal and had sold her interests in the gold business to another investor, a Mr. Clive Carroll. Some effort was made by him to settle the differences between the parties, and discussion elicited from him what may have been an offer of settlement on a 60/40 basis between the defendant and the claimants. This explains the presence, even at a late stage, of references to that percentage in communications and records of the parties. No settlement or new agreement eventuated, and on 17 October 2006 the writ in this action was issued.

The appellant complains that it was prejudiced in preparing and presenting this appeal by the absence of a transcript or of full and complete judge's notes of critical evidence at the trial. The parties had expected that there would be a transcript of evidence; but none was made or, if made, it was mislaid. It was submitted that a new trial ought to be ordered so as to cure this deficiency. But that does not represent the law in circumstances where a record of evidence is found to be missing or mislaid. The normal practice, said Salmon LJ, with whom Winn LJ agreed, in Thomson v Andrews [1968] 1 WLR 777, 780, is that: "save in the most exceptional circumstances, if this court is asked to look at something other than the shorthand note or the judge's note, it usually will look only at an agreed note of the evidence." No such agreed note exists here.

The legal position was explained in the Court of Appeal by Lord Greene MR, MacKinnon and Finlay LJJ agreeing, in the earlier case of Bradford Third Equitable Benefit Building Society v Borders [1939] 3 All ER 611, at 612:

"Of course, in an appeal raising issues of fact, it is for the appellant to satisfy this court that the decision of the court below was wrong, and, if the materials supplied to this court are insufficient to tenable it to act, the result will be that the appeal would be unsuccessful".

These two passages were followed and applied by the Full Court of the Supreme Court of Queensland on appeal in a comparable case of a missing part of the transcript of evidence at trial: see Savanoff v Re-Car Pty Limited [1983] 2 Qd R 219, at 223. In our opinion, the same approach should be adopted in this Court. The appeal is unsuccessful.

The claimants also sued for the return of some items of property of theirs that they claimed were left behind in the defendant's office. The defendant asserted that it had already returned those items, or at any rate that it did not have them in its possession. Judgment was given for the return of Fred and Gloria's possessions listed in ex 38 or their value; but on behalf of his clients the claimants, Mr. Radclyffe was content to accept on appeal that, if the defendant did not have those items, the matter ended there.

In our view the appeal should be dismissed with costs.

Sir Robin Auld
President of the Court of Appeal

McPherson JA
Member of the Court of Appeal

Williams JA
Member of the Court of Appeal