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Land Court of Tonga |
IN THE LAND COURT OF TONGA
VAVA’U REGISTRY
LA 5/05
BETWEEN:
1. KINETISYS Inc
2. DAVID WAYNE PARRISH trading as
WORLD WIDE PRODUCTIONS
Plaintiffs
AND:
1. MR MANUSIAVAO MAFI
2. MR SIONE MOTOKA MAFI
3. MR SIOSAIA TELENOTI MAFI
Defendants
HEARD AT NEIAFU BEFORE THE HON CHIEF JUSTICE WEBSTER and ASSESSOR UINISI TOFU ON 15, 16, 17, 18, 19, 22 & 23 MAY 2006
Counsel: Plaintiffs: Mr Niu
1st Defendant: Mr Vaipulu
2nd & 3rd Defendants: Mr Tu’utafaiva
Preliminary
This case, which began in 2005, arose from the building and operation of Mala Island Resort, Vava’u. It was built under an agreement between the 1st Plaintiff, Kinetisys Inc [Kinetisys], who provided the finance, and the 1st Defendant Mr Manusiavao [Manu] Mafi, whose family - his father the 2nd Defendant Mr Siosaia Telenoti Mafi and his eldest brother the 3rd Defendant Mr Sione Motoka Mafi - are the landholders of the Island. Subsequently the Resort ceased operation and was damaged by Cyclone Waka. The 2nd Plaintiff, Mr David Parrish, at the time of the hearing was managing the Resort and had provided further finance for its restoration.
In the Amended Statement of Claim on which this case went to trial, the prayers were for an immediate interim injunction to restrain the 1st Defendant Mr Manu Mafi from evicting the 2nd Plaintiff Mr Parrish from the Resort; for payments by the 1st Defendant Mr Manu Mafi of $800,000 US to the 1st Plaintiff Kinetisys and $135,000 US to the 2nd Plaintiff Mr Parrish; and for the 1st Defendant Mr Manu Mafi to forthwith lodge with the Ministry of Lands the applications for leases signed by the 2nd and 3rd Defendants in February 2000. The interim injunction had been granted in April 2005.
Evidence and submissions
The Plaintiffs led evidence over a whole week from Mr Thomas A Rush, President of the 1st Plaintiff Kinetisys (for over 2 days); Mr David W Parrish, 2nd Plaintiff (also for over 2 days); and Mrs Jeanette I Grant, who does Mr Parrish’s accounts (for ½ day).
The 1st Defendant Mr Manusiavao Mafi was not present during the hearing but lead evidence from Mr Bruno Toke, Officer-in-Charge for Vava’u of the Tonga Visitors Bureau; his wife Mrs Sapate Toke, Officer-in-Charge for Vava’u of the Ministry of Labour and Commerce; Mrs ‘Ana Finau Va’enuku, Talihau, sister of the 1st Defendant; and Mr Viliami M Va’enuku, her husband.
The 2nd Defendant Mr Sione Motoka Mafi gave evidence on his own behalf. The 3rd Defendant Mr Siosaia Telenoti Mafi did not give evidence or lead evidence.
The Plaintiffs also filed voluminous productions, mostly in support of their respective claims for reimbursement of outlays on Mala Island Resort; and the 1st Defendant filed productions.
Submissions by Counsel were held over until our return to Tongatapu, to enable Counsel to consult appropriate legal authorities due to the complex nature of this case. Written submissions were filed by 22 June and then a hearing on submissions was held in Nuku’alofa on 30 June 2006.
Counsel agreed before I left Tonga in September 2006 that I should not attempt to rush this decision, but should take time for full consideration of it.
Grounds of decision
Legal status of 1st Plaintiff
As a preliminary point, the 2nd and 3rd Defendants’ Statement of Defence in Para 1 denied paragraph 1 of the Amended Statement of Claim that the Plaintiffs are private companies duly incorporated and carrying on business in the State of California, United States of America. The 2nd and 3rd Defendants’ Counsel submitted that the 1st Plaintiff Kinetisys had not been proved to be that or a legal entity, as there was no evidence to prove the law of California, nor pleading to that effect in the Statement of Claim; that the Certificate of Incorporation and Articles of Incorporation (Productions P152-3) were not sufficient proof for that purpose; that the Court could not take judicial notice of the seals on those Californian documents under sections 35 and 36 of the Evidence Act; and that there was no evidence that Kinetisys was still a legal entity.
The 2nd Plaintiff, originally named as World Wide Productions, accepted during the hearing that it was not a company incorporated and carrying on business in California and amended the Statement of Claim to name Mr Parrish, trading as WorldWide Productions.
I have to say that I am not at all sure that it is necessary for a party to be proved to be a legal entity for it to raise an action, as was submitted for the 2nd and 3rd Defendants - no authority was cited for that - though from a plaintiff’s point of view it is important for him to be sure that he is suing a legal entity as defendant if he wishes to have prospects of recovering any monetary award. Any person, natural or artificial, may sue or be sued: see eg Halsbury Vol 37 para 215. In the Interpretation Act "person" is defined as including any body of persons corporate, or unincoporate - which would appear to cover the 1st Plaintiff even if it is not incorporated.
Although the 1st Plaintiff’s Articles of Incorporation were worded differently from what we are used to under Tongan and English law, I accepted them at face value for what they stated as evidence of incorporation of the 1st Plaintiff in California. I did not consider it necessary for the 1st Plaintiff to prove the law of California on this point, nor that I should have to take judicial notice of the seals on the documents. Despite being served with the Amended Statement of Claim around June 2005, the 2nd & 3rd Defendants only filed their Statement of Defence on 3 May 2006, just days before the start of the Vava’u circuit, so the 1st Plaintiff did not have proper notice that this point was contested, and hence insufficient time to obtain the originals from California.
Taking into account the presumption of legality, omnia praesumuntur rite et solemniter esse acta (all things are presumed to be done correctly and solemnly) I was satisfied on the balance of probabilities that there was sufficient proof that the 1st Plaintiff is duly incorporated in California. In any event it appears that nothing in the substantive case turns on the issue.
So as the 1st Plaintiff is a legal entity as an incorporated body in California, it is unnecessary for the purposes of its entitlement to raise an action in Tonga to go into the question further. Even if it had been an unincorporated body in California, it could still have formed a contract with the 1st Defendant.
Although the point was not taken for the 1st Defendant Mr Manu Mafi, in relation to him that view is reinforced by Productions P 149-150, the September 2001 Agreement between Kinetisys Inc and Mr Manu Mafi, indicating clearly that Mr Mafi was making the agreement with the incorporated company Kinetisys Inc and by those actions he himself accepted that the 1st Plaintiff is a legal entity.
In any event in relation to the 2nd and 3rd Defendants, as it turns out the Court is not making any order against them except to extend the injunction, and whether or not Kinetisys is incorporated they seem likely to be estopped from evicting the 1st Plaintiff or the business of Mala Island Resort [Mala Island Resort] from the Island, for the reasons given below.
I have to add, not for the first time, that I consider this point taken for the 2nd & 3rd Defendants to be a time-consuming point, which added little to their case.
Factual basis
As already mentioned, in the Amended Statement of Claim on which this case went to trial, the prayers were for an immediate interim injunction to restrain the 1st Defendant Mr Manu Mafi from evicting the 2nd Plaintiff Mr Parrish from the Resort; for payments by the 1st Defendant Mr Manu Mafi of US $800,000 to the 1st Plaintiff Kinetisys and US $135,000 to the 2nd Plaintiff Mr Parrish; and for the 1st Defendant Mr Manu Mafi to forthwith lodge with the Ministry of Lands the applications for leases signed by the 2nd and 3rd Defendants in February 2000. The interim injunction had been granted in April 2005.
However in the course of the trial and immediately after it, at the Court's instigation it was discovered that the lease applications had actually been lodged with the Governor's office in Vava’u, although the survey fees had apparently not been paid until 4 April 2001 (Productions P 159-160). From there the applications had been forwarded around that time (Productions P 157-158) to the Ministry of Lands in Nuku'alofa. But according to the Chief Land Valuer Mr Siope Lomu in his letter of 25 May 2006 (Production P 162), on 15 May 2001 he required production of the certificate of incorporation of the intended lessee, Mala Island Resort, and the applications were not granted by Cabinet. Mr Lomu was advised in 2003 by Mr Maka Filia that was because Cabinet required submission of that certificate of incorporation. There was no evidence that that information had been passed on to any of the parties in this case, nor indeed that they had found that out until the hearing. However Mr Fatongiatau [Tau] Mafi, another brother of Mr Manu Mafi and one of the signatories for Mala Island Resort on the application forms, had been advised of it by Mr Lomu in 2004. There was likewise no evidence that Mala Island Resort had ever been incorporated; and in 2004 Mr Tau Mafi had told Mr Lomu that Mala Island Resort was a "family company".
Apparently in consequence of that discovery and the other clear evidence that under the terms of the Agreement dated 4 September 2001 no payments were due until the Resort was making a profit, the Plaintiffs essentially dropped their prayers for payment of money and lodging of the lease applications and substituted (though not formally) a request for an order for specific performance, ie for fresh applications to be submitted to the Minister of Lands; and for continuation of the injunction. I considered the question of an order for specific performance because if, despite inadequate pleadings, an issue is clearly raised and is understood by the opposing party to be raised and then dealt with, it should not be excluded because of technicality of pleadings: Prasad v Morris Hedstrom (Tonga) Ltd (No 2) [1993] Tonga LR 69, 73 (CA).
It regrettably has to be said that in legal terms the construction of Mala Island Resort had a poor start. Mr Manu Mafi was a neighbour in California of Mr Tom Rush, the President of Kinetisys, and, on the basis of everybody trusting everybody else without any agreement in writing, the 1st Plaintiff Kinetisys started shipping materials out to Tonga from California in containers as early as November 1999, and the construction began when the containers arrived. Kinetisys also sent money to Tonga from November 1999 to December 2000 to Mr Ron Rush, brother of Mr Tom Rush, who was working on the construction of the Resort.
As mentioned, at that stage there was no written agreement between the partners in this venture, the 1st Plaintiff Kinetisys (or at times Mr Rush and Mr Baize as individuals) and the 1st Defendant Mr Manu Mafi, who did not own Mala Island where the Resort was to be built, although he had by then obtained verbal permission for the construction of the Resort there from the allotment holders, the 2nd Defendant his brother Mr Sione Mafi, and the 3rd Defendant his father Mr Telenoti Mafi, (their deeds of grant are Productions P 95 & 96).
It was only after construction was underway that Mr Manu Mafi told Mr Tom Rush and Mr Terry Baize of Kinetisys in January 2000 that Mala Island was not his and he was sent back to Tonga and New Zealand to obtain the signatures of Telenoti and Sione to lease application forms (Productions P 97 & 98). These were duly signed and lodged with the Governor's office in Vava’u around that time, although the survey fees were not paid until 4 April 2001. Mr Tom Rush accepted in evidence that he had seen these application forms around 2000, but I was unable to accept his evidence that he believed, as they were in Tongan, that they were the leases because Mr Manu Mafi had told him. The application forms are in Tongan and English and the first line reads "I have the honour to make application for the lease of certain property at ...", so it is simply not credible that Mr Rush thought they were actual leases.
The name of the applicant is stated in both forms as Mala Island Resort, the signatures of the applicant on both forms being those of Mr Manu Mafi and his brother Mr Tau Mafi.
Construction then proceeded during 2000, with containers of materials being sent by Kinetisys to Tonga on a regular basis up to around July 2000. As mentioned, Mr Ron Rush and another American, Mr Mike Skinner, assisted with the construction work.
As at 1 August 2000, a letter (which Mr Tom Rush said had been composed by Mr Baize) was sent by Mr Manu Mafi to Mr Ron Rush, brother of Mr Tom Rush, offering him employment as General Manager of the Resort, starting on 15 August 2000. It is important that that letter and others about the same matter were written in name of Mr Manu Mafi as "Manusiavao Mafi, Owner, Mala Island Resort" and signed by him. That contrasted with the previous signature of Mr Tau Mafi on the lease application forms and confirmed Mr Rush’s evidence that Mr Manu Mafi kept changing his mind on whether his brother Mr Tau Mafi was to be formally involved in the venture.
The offer to Mr Ron Rush (Production D/1) was:
MALA ISLAND RESORT
08/01/00
Ron Rush
3560 Gloria Avenue
Bullhead City, AZ 86442-8185
Dear Mr. Rush:
We are pleased to offer you a position as the General Manager of Mala Island Resort in Vava'u, Tonga Island. This position will have a starting Salary of $250.00 (Tongan) per week and will include lodging and approved expenses. Although we have some flexibility to work with you in scheduling a starting date, we would like to have you report to work by August 15, 2000.
If you decide to accept this position, we will begin immediately to coordinate the proper documents needed for you to work in this capacity. The details of that and other forms processing will be forwarded to you later.
We look forward to your decision to go to work with us because we believe your background and interests will make your association with us mutually rewarding.
Sincerely,
(sgd) Manusiavao Mafi, Owner
Mala Island Resort
The employment agreement for Mr Ron Rush at the Resort (Production D/3) was:
MALA ISLAND RESORT
08/01/00
Employment Agreement
Mala Island Resort, the Employer, and Ron Rush, the Employee, hereby enter into this employment agreement. This agreement is subject to the laws of the Kingdom of Tonga. The Employer and Employee agree to the following:
On August 15th, 2000, the Employee agrees to commence employment in the position of Mala Island Resort General Manager. The Employer will employ the Employee for an indefinite period of time.
The primary duties and responsibilities of the Employee include:
• Carry out directives and policies of Mala Island Resort.
The above list of responsibilities is not complete and may be altered at the Employer's discretion.
This employment may be terminated without cause on two weeks notice. Termination with cause may be occur without advance notice or with payment in place of notice. Only the Owner of Mala Island Resort has the authority to change these terms of employment.
The Employee's starting salary will be $250 (Tongan) per week and will include lodging and approved expenses. With the exception of increases in salary granted at the discretion of Mala Island Resort, the terms of this contract will be in effect unless amended in writing and signed by both Employer and Employee.
Employee Signature: (sgd) Ron Rush Date: Aug 15th 2000
Employer Signature: (sgd) Manusiavao Mafi Date:
Owner
A further letter to the Police about Mr Ron Rush (Production D/2) was:
MALA ISLAND RESORT
08/18/00
Kolo Amapangi [Koloamatangi]
Ministry of Police
Neiafu, Tonga Islands
Subject Mala Island Employment Agreement for Ron Rush
Mala Island Resort, the Employer, and Ron Rush, the Employee, hereby enter into this employment agreement. This agreement is subject to the laws of the Kingdom of Tonga. The Employer and Employee agree to the following:
On August 15th, 2000, the Employee agrees to commence employment in the position of Mala Island Resort General Manager. The Employer will employ the Employee for an indefinite period of time.
The primary duties and responsibilities of the Employee include:
• Carry out directives and policies of. Mala Island Resort.
The above list of responsibilities is not complete and may be altered at the Employer's discretion.
Ron Rush has been selected to work in this capacity based on his past work experience at the Mohave resort and his dedication to customer service. It was also important that him and his wife Terry Rush are people in good moral standing in the community with no criminal activity for either one.
This employment may be terminated without cause on two weeks notice. Termination with cause may be occur without advance notice or with payment in place of notice. Only the Owner of Mala Island Resort has the authority to change these terms of employment.
The Employee's starting salary will be $250 (Tongan) per week and will include lodging and approved expenses. With the exception of increases in salary granted at the discretion of Mala Island Resort, the terms of this contract will be in effect unless amended in writing and signed by both Employer and Employee.
Sincerely
(sgd) Manusiavao Mafi, Owner Date: 8-23-00
On 9 January 2001, Mr Tom Rush, Mr Terry Baize and Mr Manu Mafi had what they referred to as a corporate meeting, although inasmuch as the minute was a written and signed agreement it was specifically superseded by Para 11 of the September 2001 Agreement. For the record the minute of that meeting (Production P 156) is:
Mala Island Resort
Corporate Meeting minutes
January 9, 2001
Attendance: Terry Baize, Manu Mafi, Tom Rush
Corporate Notes
This is an update to the minutes previously sent from January 3, 2001.
Mala Island resort is a multi-million dollar resort. We are all very serious about this business and want to stress that this resort will be run like a business.
We also want to clarify the ownership of Mala Island Resort. Mala Island Resort is a privately owned business by Manu Mafi. The actual Island of Mala is owned by the Mafia family of Tonga and leased to Manu and Tau Mafi. Even though, the license only lists one individual - Manu Mafi, as the resort is controlled by three people (Manu Mafi, Terry Baize, and Tom Rush). All direction and policies for the resort will be generated from these people and implemented by Mala's management team. The percentages of ownership for the resort is as follows: Manu Mafi (60%), Terry Baize (20%) and Tom Rush (20%).
The main point for all persons involved is that Mala Island resort is a business controlled by three people - Manu Mafi, Terry Baize, and Tom Rush. Any decisions on the development of the resort, management changes or final decisions on any issues will only be made by these three individuals.
A lot of people have worked hard to get Mala where it is today. The resort is turning out really nice and everyone who has stayed or visited the island has said what a great place it is and how much they like to food and the service. This next year we will be having more guests and hopefully start to get a lot of the rooms filled. We really want everyone including the staff to have fun at Mala and make it a great place to visit or work at.
(sgd) T S Baize Manu Mafi Thomas A Rush
Although there was essentially no hard evidence about it, Mala Island Resort appears to have opened to the public sometime during 2001. An income statement for May 2001 showing an income of $2,800.00 (but expenses of $7,764.90) was produced by the 1st Defendant (Production D/4). Mrs Tom Rush paid a visit to it at that stage. It was of note and surprising that Mr Tom Rush himself had never visited Tonga nor Mala Island until this case was heard in 2006, some 7 years after the project was conceived and started.
The construction of the Resort had therefore been mainly completed and the Resort was already in operation by the time Mr Tom Rush, Mr Terry Baize and Mr Manu Mafi had a further meeting on 4 September 2001, at which they set out their agreement in writing, in a document (Production P 149-150), which on account of the paucity of legal documents throughout this case, is very important:
Mala Island Resort Agreement
This agreement is made between the following:
Manusiavao Mafi - 6127 Adenmoor, Lakewood, CA 90713
Kinetisys Inc - A California Corporation at 7372 Walnut Ave, Unit X Buena Park, CA 90620
The primary contacts for Kinetisys Inc are Thomas Rush and Terry Baize.
for the development and operation of a resort on the island Ngaunoho (Mala) situated in the Country of Tonga. The Resort will be called Mala Island Resort. The parties above hereby agree to the following TERMS and CONDITIONS:
1. Term: This agreement will be in force a term of 20 years, commencing November 1, 1999, and terminating on November 1, 2019, or sooner as provided herein. There shall be the option to renew this agreement for an additional term of 5 years commencing at the expiration of the initial term. All of the terms and conditions of this agreement shall apply during the renewal term. The option shall be exercised by written notice between the parties above not less than 30 days prior to the expiration of the initial term. If notice is not given in the manner provided herein within the time specified, this option shall expire.
2. Specific Duties of Individuals: Manusiavao Mafi and Kinetisys Inc all shall materially participate and manage the development and operation of Mala Island Resort on an equal control basis. All direction and policies for the resort will be generated from these people and implemented by Mala’s management team. The following specific actions shall be accomplished by the following:
a) Manusiavao Mafi - In addition to the duties in paragraph 2, shall secure the use of Mala island for the entire term of this agreement by signing a lease between Sione Motoka Mafi and Siosaia Telenoti Mafi. These leases shall be attached to this agreement. Shall make the necessary arrangements to open the Mala Island Resort business in Tonga as a privately owned business in his name and setup the necessary business documents and banking information.
b) Kinetisys Inc - In addition to the duties in paragraph 2, shall provide funding to develop the Mala Island Resort and act as the United States contact for Mala Island Resort. The total funding is estimated to be approximately $300,000 to $350,000.
3. Distribution of Profit: The distribution of profit for Mala Island resort shall be as follows:
Manusiavao Mafi (60% - includes the percentage profit going to the Mafi family) and Kinetisys Inc (40%). Profit shall be based on the profits made by Mala Island Resort minus operating expenses. The development cost over the budgeted $350,000 will be paid back first prior to profit sharing. This figure is $450,000.00.
4. Monies: Mala Island Resort shall maintain a bank account in Tonga for all business transactions and have the ability to process credit cards.
5. Distribution of Profit: Mala Island Resort shall make a yearly payment for entire term of the agreement to Manusiavao Mafi (60% - includes the percentage profit going to the Mafi family) and Kinetisys Inc (40%) once the development overrun amount of $450,00 has been first repaid. Profit payments will be based on the profits made by the resort on the island minus operating expenses. Manusiavao Mafi will coordinate the distribution to the Mafi family members (8 total) from his 60% entirely at his discretion.
6. Ownership of Mala Island Resort: Mala Island resort is a privately owned Tongan business by Manusiavao Mafi.
7. Mala Island: The actual Island of Mala is owned by the Mafi family of Tonga, specifically controlled by Sione Motoka Mafi, of Ngaunoho (Mala) and Siosaia Telenoti Mafi and leased to Manusiavao Mafi. Nothing in this agreement shall affect the ownership of the island of Mala. This agreement is for the development and operation of a resort on Mala Island only and has no provisions for the ownership of the Land. The island of Mala has been and will always be owned by the Mafi Family.
8. Assignments of Rights: Either party can assign their rights or sell their interests in the business as long as they give written notice to the other party. Also in the event of a party selling their interest nothing in the selling agreement shall affect the ownership of the actual island of Mala. The island of Mala has been and will always be owned by the Mafi family.
9. Ordinances and Statutes: Mala Islands resort shall comply with all statutes, ordinances and requirements of all local and national statues [sic] of the country of Tonga.
10. Heirs, Assignees, Successors: This agreement is binding upon and inures to the benefit of the heirs, assignees and successors in interest to the parties identified above.
11. Entire Agreement: The foregoing constitutes the entire agreement between the parties and may be modified only by a writing signed by both parties. The following Exhibits, if any, have been made a part of this agreement before the parties’ execution hereof.
Exhibit 1: Sione Motoka Mafi Property Ownership Document
Exhibit 2: Siosaia Telenoti Mafi Property Ownership Document
Signed this 4th day of September, 2001
By Manusiavao Mafi Thomas Rush Terry Baize
There was no acceptable evidence that the 1st Plaintiff had taken legal advice on that Agreement, although Mr Rush said in evidence that Mr Manu Mafi and his lawyer (not Mr Brooks Cope) had corrected the wording - though given the text of the document that sounded surprising.
It has to be noted that, despite Mr Tau Mafi’s signature on the lease applications and his mention in the January 2001 minute, by that time in September 2001 there is no mention of him in that Agreement.
That Agreement showed that the original plan for the project was that Kinetisys were going to put in US $300,000 - US $350,000, but that had proved to be a vast under-estimate, so that by the time of that Agreement there was a cost over-run of US $450,000 over the budgeted $350,000. I thus accepted that by June 2000 there was no more money to pay Mr Ron Rush and at that stage Mr Skinner returned to the US.
Although the Resort was said to have done $20,000 of business during September 2001, in October 2001 Mr Ron Rush returned to America with his wife and daughter because payment for his salary had stopped and there was no more money to pay him. While there was hearsay evidence from Mr Tom Rush that Mr and Mrs Ron Rush had been put off the Island forcibly, that was only hearsay, and in any event it seemed more likely that the real reason for Mr Ron Rush leaving was not that, but the lack of funds to pay him.
At that time Mr Manu Mafi had told Mr Tom Rush that he was going to operate the Resort with his own workers and Mr Manu Mafi asked for a year to show that he could do that. For Kinetisys, Mr Tom Rush and Mr Baize had agreed on that basis, so that became in effect a unanimous agreement. As Mr Rush said in evidence, the 4 September 2001 Agreement was the final agreement between the 1st Plaintiff and the 1st Defendant because Kinetisys got in a bargaining spot because it ran out of money, and that was what they accepted. The same no doubt applied to their acceptance of giving Mr Manu Mafi a year.
However on 31 December 2001 Cyclone Waka hit Vava'u and the Resort was extensively damaged. Although Mr Manu Mafi's sister ‘Ana and her husband Viliami Va’enuku may have done some work over some months to try to repair the Resort, if it had been operating up to then, that was to no avail as the Resort effectively ceased operating after Cyclone Waka.
At the same time Mr Manu Mafi had moved away from being a neighbour of Mr Tom Rush and they had lost contact, so it was almost a year before Kinetisys made any progress over Mala Island Resort. There was no evidence that during that time the Resort was operating, far less making any profit.
As mentioned, sometime during 2004 Mr Tau Mafi contacted Mr Siope Lomu, the Chief Land Valuer, to value the land and Mr Lomu told Mr Mafi about the requirement to have Mala Island Resort incorporated. Mr Mafi had told Mr Lomu that they had agreed to cancel the applications for leases; and had also told Mr Lomu that Mala Island Resort was "a family company".
About that time Mr Parrish, who had heard about Mala Island Resort and was interested in running it, had got in touch with Kinetisys, who put him in touch with Mr Manu Mafi, whom he contacted by phone. Mr Parrish came to Mala Island in May 2004 on a fact-finding trip and took a series of photographs showing the dilapidated state in which the Resort then was (Productions P 142-148). However, after making further inquiries Mr Parrish decided he wanted to come and renovate the Resort, at least partly due to his personal liking for Tonga and the Tongan lifestyle. Mr Parrish made the first draft of an agreement to be made between Mr Manu Mafi, Kinetisys and his own unincorporated company, World Wide Productions. The draft was revised by Mr Manu Mafi's then attorney, H Brooks Cope of Lakewood, California, and virtually finalised among these parties but it was never actually signed by any of the prospective parties, not even by Mr Parrish or Kinetisys.
This alleged draft agreement of 2004 (not signed by any of the parties) (Production P 99-101) was:
MALA ISLAND RESORT AGREEMENT TO OPERATE
This Agreement entered into on the 8 day of August 2004, is between:
• Manusiavao (Manu) Mafi
• Kinetisys, Inc, Tom Rush and Terry Baize as principals
1. Property Mala Island Resort, Neiafu, Vava’u, Kingdom of Tonga, hereinafter in this document referred to as "The Resort".
2. Intent The intent of this agreement is to get The Resort operational as soon as possible. The funds required are estimated to be $70,000 US for rebuilding, replacing lost or damaged items, cleaning, restocking and labor. See WWP PowerPoint Presentation for overview and budget attached as Exhibit A.
3. Agreement Subject to the terms and conditions of this Agreement, Manu Mafi and Kinetisys, Inc, hereby engages WorldWide Productions to perform the services set forth herein, and WorldWide Productions hereby accepts such engagement.
4. Duties Upon gaining full authorization as it relates to The Resort operations, WWP will manage the entire operation of The Resort, including rebuilding, restocking, marketing and daily operation. WWP will have full control over The Resort amenities, menus, activities, local negotiations, web page, reservations and pricing. WWP will submit status and accounting reports bi-monthly for the 1st three months and then monthly thereafter to the parties hereto. WWP will secure all local licenses and permits and will comply with local ordnances and laws.
5. Term of engagement Term of engagement shall commence upon execution of this Agreement and shall continue in full force and effect for a minimum of three years. The Agreement may only be extended thereafter by mutual agreement, unless terminated earlier by operation of and in accordance with this agreement.
6. Investment During the term of this agreement, WWP shall invest necessary funds to initiate the reopening of The Resort. These reopening funds will be reimbursed with The Resort revenues prior to profit sharing disbursements as stated below in Item 7 and in addition to Item 8, reinvested as needed to complete reopening repairs and restocking of inventory and fixtures and daily operations.
7. Profit Sharing The percentages for profit sharing will be as follows:
a) Manu Mafi 40%
b) Kinetisys 40%
c) WWP 20%
8. Compensation As full compensation for the services rendered pursuant to this Agreement, WWP shall be receive 20% or a minimum of $4,000 US paid monthly from The Resort revenues before other profit sharing disbursements. All other profit sharing disbursement shall begin once The Resort is fully operational and the investment funds stated in Item 6 have been reimbursed.
9. Expenses During the term of this Agreement, WWP shall be reimbursed for all reasonable out-of-pocket expenses incurred in connection with the relocation from the US to The Resort and performance of The Resort operations as stated herein.
10. Conflicts of interest The respective families of Manu Mafi or Kinetisys, Inc shall not be employees of The Resort. Each party will ensure their family's compliance with this agreement. Previous employees of Mala island Resort and or prospective employees from families in direct conflict with the Mafi family, will not be eligible for employment under this Agreement.
11. Sale of The Resort Should the parties hereto decide to sell the resort, WWP will act as marketing and selling agent for a 10% fee due and payable at the time of escrow funding. In addition, at the time of escrow funding, WWP and Kinetisys, Inc shall be reimbursed for all established outstanding expenses incurred in connection with The Resort.
12. Termination This Agreement may be terminated at any time with 6 months written notice to the parties hereto. Upon termination, WWP will be reimbursed for all established un-reimbursed and relocation expenses.
13. Successors and Assigns All of the provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, if any, successors, and assigns.
14. Headings Section headings are not to be considered a part of this Agreement and are not intended to be a full and accurate description of the contents hereof.
15. Notices Any and all notices, demands, or other communications required or desired to be given hereunder by any party shall be in writing and shall be validly given or made to another party if personally served, or if deposited in the United States mail or the Kingdom of Tonga mail, certified or registered, postage prepaid, return receipt requested. If such notice or demand is served personally, notice shall be deemed constructively made at the time of such personal service. Communication is to be given as follows:
To WorldWide Productions: WorldWide Productions
c/o Mala Island Resort
Neiafu, Vava'u
Kingdom of Tonga
Email: (To be determined)
To Manu Mafi: Manu Mafi
[street address]
[city, state, zip]
[email]
To Kinetisys, Inc: Kinetisys Inc
[street address]
[city, state, zip]
[email]
Any party hereto may change its address for purposes of this paragraph by written notice given in the manner provided above.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first written above. The parties hereto agree that facsimile signatures shall be as effective as if originals.
Mala Island
By: Manusiavao Mafi
Kinetisys, Inc
By: Tom Rush, Principal
By: Terry Baize, Principal
WorldWide Productions
By: David Parrish, Principal
By: Renee Hebert, Principal
Despite that document not being signed, Mr Parrish shipped his freight to Tonga and moved to Tonga, he said in evidence on the strength of the verbal agreement among the parties and what Mr Mafi’s attorney Mr Brooks Cope said, arriving at Mala Island on 23 September 2004. There was other evidence in relation to Mr Parrish shopping for items for his container and/or shipping his container before Mr Manu Mafi failed to sign the draft agreement, but that was all irrelevant to the outcome of this case, given that a verbal agreement cannot amend the September 2001 Agreement and that ultimately in this case Mr Parrish did not seek any repayment from the 1st Defendant.
When Mr Parrish went to Tonga he was given a letter by Kinetisys Inc dated 20 September 2004 (Production P 151):
World Wide Productions
630 Quintanna Road, #129
Morro Bay, CA 93442
Subject: Mala Island Resort Managers
Dear Dave and Renee
The purpose of this letter is to state that Kinetisys, Inc (Tom Rush & Terry Baize) the investment company for Mala Island Resort agrees to have World Wide Productions (WWP) operate Mala Island Resort.
The primary duties and responsibilities of WWP include:
• Carry out directives and policies of Kinetisys, Inc
• Setup and maintain Resort bank accounts with full access.
• Responsible for obtaining all necessary licenses in Kinetisys name.
• Live at the resort.
The above list of responsibilities is not complete and may be altered at Kinetisys discretion. WWP and their representatives are the only individuals authorized to act on the behalf of Kinetisys and Mala Island Resort. If Kinetisys finds that WWP is not acting on their behalf, then Kinetisys will withdraw authorization to operate Mala Island Resort.
Sincerely
(sgd) Tom Rush, President
Kinetisys, Inc.
That letter must have been intended as some kind of "comfort letter" for Mr Parrish, but it is clear from its terms that it was only given to him by one of the parties to the September 2001 Agreement, ie Kinetisys, and not by the other party, Mr Manu Mafi.
However, because of the terms of Clause 11 of the 4 September 2001 Agreement, neither that letter nor the draft agreement of 2004 (even if there had been an oral agreement) alter the terms of the 2001 Agreement, as any agreement in 2004 was not signed by both parties (ie Kinetisys and Mr Manu Mafi). I could not accept that any verbal agreement in 2004 did that, as Mr Parrish contended.
Although Mr Manu Mafi has subsequently denied that he agreed for Mr Parrish to come to Mala Island and renovate and re-start operating the Resort, on the evidence on the balance of probabilities I had no doubt that, although none of the parties signed the proposed agreement, Mr Manu Mafi tacitly consented to Mr Parrish coming and doing that.
The evidence as a whole showed that Mr Manu Mafi was very much the dominant member of the Mafi family and, despite the evidence to the contrary of ‘Ana and her husband Viliami, it is unthinkable that Mr Parrish would have been allowed to stay and work on Mala Island without the tacit concurrence of Mr Manu Mafi. The geographical situation of Mala Island is such that effectively the only normal access to it is by boat from the village of Talihau, which is only a short distance across the water from the Island. The Mafi family live at Talihau and it would have been impossible for Mr Parrish to come and go for any length of time without their knowing that he was living on the Island.
In addition, when Mr Parrish reopened the Resort in December 2004, for some weeks Mr Mafi’s sister ‘Ana and her family ran feasts on the Island for Mr Parrish, until relations became soured, as explained below.
In relation to the first prayer of the Plaintiffs, I granted an interlocutory injunction on 7 April 2005 in the following terms:
"IT IS ORDERED THAT:
And to the Defendant:
TAKE NOTICE that if you shall not comply with these orders or that you shall breach any of them you may beheld in Contempt of Court and be liable for committal therefor."
At that stage the only defendant was the 1st Defendant, Mr Manu Mafi.
Subsequently in October 2005 Ford J found that on 11 April 2005 the 1st Defendant had breached that injunction and in his absence committed him to prison for 1 year. That committal is still under appeal, but I do not understand that the finding that Mr Mafi was in breach of the injunction is being challenged. In this case I heard evidence from Mr Parrish about that incident, but in these circumstances it is not necessary nor appropriate to narrate it here.
Basis of decision in law
No issue was taken that this Court has jurisdiction in this case under the Land Act, as it concerned a claim for leases, despite the fact that it transpires that the leases in question have been refused by Cabinet.
Much of the evidence which the Court heard was in relation to the Plaintiffs’ prayers for the payment of money, which were not proceeded with, so that evidence is not related here.
The starting point in this decision is the Agreement of 4 September 2001 [the Agreement]. It is the ruling and decisive agreement in this case. Apart from the signed minute of January 2001, which was effectively stated to be superseded by Para 11 of the Agreement, the Agreement is the only document in the case signed by both Kinetisys and Mr Manu Mafi. The Agreement was stated to be the entire agreement between Kinetisys and Mr Manu Mafi, which could only be modified by a writing signed by both these parties. There was no such writing subsequent to the Agreement produced in evidence.
The draft agreement of August 2004 among Kinetisys, Mr Manu Mafi and Mr Parrish was not signed by any of those parties and so could not supersede the September 2001 Agreement, nor could any verbal agreement among those parties do so. Another curiosity of this case is that although Mr Parrish’s then partner Ms Hebert was named as a Principal of WorldWide productions in that draft, she subsequently left Tonga and is not a party to this case.
The evidence showed that Kinetisys had carried out its primary obligation in Para 2(b) of the Agreement by financing the construction of the Resort (as was recognised by the terms of Para 3). However, it has to be noted that under the Agreement Kinetisys only has rights to participate in the management of Mala Island Resort and to receive payments from any profits of Mala Island Resort, the latter being a situation which does not yet appear to have arisen.
The primary obligation on Mr Manu Mafi under Para 2(a) of the Agreement was to do 2 things, firstly to secure the use of Mala Island for the entire term of the Agreement, impliedly by lease (because it states that the leases shall be attached to the Agreement) by getting leases from his brother Mr Sione Mafi and his father Mr Telenoti Mafi, ie the 2nd and 3rd Defendants; and secondly to open the Mala Island Resort business as a privately owned business in his name.
The evidence showed that Mr Manu Mafi had in effect carried out the second part, as Mala Island Resort, which was stated in Para 6 of the Agreement to be a privately owned Tongan business by Mr Mafi, had been set up as a business in Tonga and a bank account had been opened in terms of Para 4. Although the business had not been incorporated, which had later caused the Government to refuse the applications for a leases, it was not stipulated in the Agreement that Mr Manu Mafi had to have it incorporated, so the fact that that was not done cannot by itself amount to a breach on his part.
In relation to the leases of Mala Island, as already mentioned, I regret that I was unable to accept the evidence of Mr Rush that he thought the application forms amounted to leases. Even a cursory glance at the English text shows that they were applications and not grants of lease. The Court eventually heard the full history of what had happened to these applications and why they had not been approved by the Government - and it does not reflect well on Counsel that this situation had not been discovered before the hearing and was only sought out at the instigation of the Court. The result was that Mr Manu Mafi failed to perform one of his principal obligations under the Agreement and so was in breach of it in that respect.
It appeared from the evidence of Mr Rush that the provision in the Agreement for Mala Island Resort to be a Tongan business owned only by Mr Manu Mafi was made in the mistaken belief that non-Tongans could not hold land or own a business in Tonga. While that misunderstanding was unfortunate, the prudent course for Kinetisys would have been to have taken legal advice on its position from a lawyer in Tonga - if it had done that, that kind of unhappy situation would have been avoided. There was no acceptable evidence that on the balance of probabilities that belief of the partners of Kinetisys arose from fraudulent misrepresentations by Mr Manu Mafi. Although Mr Parrish said that Mr Manu Mafi later said to him in April 2005 that he had planned it all that way, that was only hearsay. But on the other hand Mr Rush's evidence was that, at the time the September 2001 Agreement was made, Kinetisys had run out of money, as the budget for the construction of the Resort had been exceeded by over 100%, so that Kinetisys was in a bargaining spot with Mr Manu Mafi and Mr Rush said that the Agreement was what they accepted.
In respect of Mr Manu Mafi’s breach in failing to secure the use of Mala Island by lease, the Plaintiffs sought an order for specific performance by the 1st Defendant Mr Manu Mafi that fresh lease applications be submitted to the Minister of Lands. Precedents for such orders being made are the cases of O G Sanft & Sons v Tonga Tourist and Development Co Ltd [1981-88] Tonga LR 26 (PC) and Piukala v Fonohema [2002] TOCA 3 (CA).
In Sanft it was held that the Land Court had jurisdiction to apply principles of equity where they were not in conflict with the Constitution and the Land Act. It was also held that, under principles of equity, if an owner of land allows another person to expend money in the development of that land on the basis of a grant of an interest in that land by the owner, the owner will not be allowed later to say that the grant was invalid and that no good title was given to that person to undertake that work, and an appropriate remedy will be provided by the court for that person. The Privy Council stated:
"In respect of Tongan land, the Land Act is a complete code which, subject to the Constitution, rigidly controls by its express terms all titles and claims to any interest once they have been created in accordance with the provisions already referred to. With that exception there is no room for the application of any rule of equity - all claims and titles must be strictly dealt with under the Act. No estate right, title or interest can be created in accordance with the provisions of the Act.
......
The general proposition of law relied on in the Land Court is set out in Halsbury's Laws of England 4th Edition Vol 16 paragraph 1475 which reads:-
"1475. Purchase of and expenditure on another's property. The doctrine of acquiescence has been applied where a person interested in property, whether as owner or incumbrancer, has stood by while another has purchased what he supposed to be a good title to the property; thus the person so standing by cannot afterwards set up his title against the innocent purchaser or a person deriving title under him.
The court will also protect a person who takes possession of land or exercises an easement over it under an expectation, created or encouraged by the owner, that he is to have an interest in it, and, with the owner's knowledge and without objection by him, expends money on the land. The protection may take the form of requiring repayment of the money, or the refusal to the true owner of an order for possession, or of holding the person expending the money entitled to a charge or lien, or of finding a constructive trust. Similarly, where a person who mistakenly believes that he has an interest in land, being ignorant of his want of title, expends money on it in buildings or other improvements or otherwise dealing with it, and the true owner, knowing of the mistaken belief and the expenditure, raises no objection, equity will protect the person who makes the expenditure, as by confirming that person's supposed title, or by requiring that he be compensated for his outlay, or by giving him such a charge or lien."
In Inward v Baker [1965] EWCA Civ 4; [1965] 1 All ER 446 Lord Denning MR stated the law as follows at page 448:
".... It is quite plain from [the] authorities that, if the owner of land requests another, or indeed allows another, to expend money on the land under an expectation created or encouraged by the landlord that he will be able to remain there that raises an equity in the licensee such as to entitle him to stay. He has a licence coupled with an equity. Counsel for the plaintiffs urged before us that the licensee could not stay indefinitely. The principle only applied, he said, when there was an expectation of some precise legal term; but it seems to me, from [Plimmer v Wellington City (1884) 9 App Cas 699,713-4] in particular, that the equity arising from the expenditure on land does not fail
"merely on the ground that the interest to be secured has not been expressly indicated... the court must look at the circumstances in each case to decide in what way the equity can be satisfied."
So in this case, even though there is no binding contract to grant any particular interest to the licensee, nevertheless the court can look at the circumstances and see whether there is an equity arising out of the expenditure of money. All that is necessary is that the licensee should, at the request or with the encouragement of the landlord, have spent the money in the expectation of being allowed to stay there. If so, the court will not allow that expectation to be defeated where it would be inequitable so to do."
The relevant portion applicable to the present case of the judgment of Lord Kingsdown reads:-
"If a man, under a verbal agreement with a landlord for a certain interest in land, or, what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money upon the land, a Court of equity will compel the landlord to give effect to such promise or expectation. This was the principle of the decision in Gregory v Michell ([1811] EngR 580; 18 Ves 328), and, as I conceive, is open to no doubt."
In England the Privy Council in the case of Chalmers v Pardoe [1963] 3 All ER 552 in page 555 said:-
"There can be no doubt on the authorities that where an owner of land has invited or expressly encouraged another to expend money on part of his land on the faith of an assurance or promise that part of the land will be made over to the person so expending his money a court of equity will prima facie require the owner by appropriate conveyance to fulfil his obligation; and when, for example for reasons of title, no such conveyance can effectively be made, a court of equity may declare that the person who has expended the money is entitled to an equitable charge or lien for the amount so expended. That was in fact the order in the Unity Joint Stock Mutual Banking case ([1858] EngR 303; (1858) 25 Beav 72) though it appeared in that case that the land-owner had never actually engaged or promised to make over the appropriate land. The facts of the case were most unusual and as Romilly, MR, said (p 79):
"The court must look at the circumstances in each case to decide in what way the equity would be satisfied"."
In Dillwyn v Llewellyn [1861-73] All ER (Reprint) 384 cited in Inwards v Baker (Supra) Lord Westbury LC said at pages 387 and 388:
"The equity of the donee and the estate to be claimed by virtue of it depend on the transaction, that is, on the acts done, and not on the language of the memorandum, except as that shows the purpose and intent of the gift. The estate was given as the site of a dwelling-house to be erected by the son. The ownership of the dwelling house and the ownership of the estate must be considered as intended to be co-extensive and co-equal. No one builds a house for his own life only, and it is absurd to suppose that it was intended by either party that the house, at the death of the son, should become the property of the father. If, therefore, I am right in the conclusion of law that the subsequent expenditure by the son, with the approbation of the father, supplied a valuable consideration originally wanting, the memorandum signed by the father land son must be thenceforth regarded as an agreement for the soil, extending to the fee-simple of the land. In a contract for sale of an estate, no words of limitation are necessary to exclude the fee-simple; but further, upon the construction of .the memorandum itself, taken apart from the subsequent acts, I should be of opinion that it was the plain intention of the testator to vest in the son the absolute ownership of the estate.
The only inquiry, therefore, is whether the son's expenditure, on the faith of the memorandum, supplied a valuable consideration and created a binding obligation. On this I have no doubt, and it, therefore, follows that the intention to give the fee simple must be performed, and that the decree ought to declare the son the absolute owner of the estate comprised in the memorandum. I propose, therefore, to reverse the decree of the Master of the Rolls, and to declare that, by virtue of the original gift made by the testator, and of the subsequent expenditure by the plaintiff, with the approbation of the testator, and of the right an obligation resulting therefrom, the plaintiff is entitled to have a conveyance from the trustees of the testator's will, and the other parties interested under the same, of all their estate and interest under the testator's will in the estate of Henderefoilan, in the pleading mentioned; and, with this declaration, refer it to the judge in chambers to settle such conveyance accordingly."
In Piukala v Fonohema the Court of Appeal stated:
"[24] The question thus arises of the proper characterization of the claims made by the respondent in the Land Court. This characterisation is, in turn, to be ascertained upon an analysis of the nature of the claims made by the respondent in his Statement of Claim. In our opinion, an examination of the Statement of Claim indicates that, in terms of the relief then sought, as a matter of both form and substance, the following claims were made:
• A claim for specific performance of a contract to provide a letter of surrender.
• As an incident of this claim, an order in the nature of an order for accounts arising out of this contract.
• As a further incident of this claim, an order providing for restitution in the event that the requisite consents were not obtained.
[25] In our opinion, a claim of the first kind, that is, for specific performance of a conditional contract (as this was) to surrender an allotment, is clearly within the ordinary jurisdiction of the Land Court. Such a proceeding is plainly a claim or dispute or a question of title "affecting ... any interest in land ..." for the purposes of S.149(1)(b). The dispute centres on the respective interests of the parties in relation to the allotment, albeit subject to the operation of the several conditions mentioned.
....
[27] In addition to its ordinary jurisdiction the Land Court has, by necessary implication, an incidental or inherent jurisdiction, that is to say, jurisdiction to do all incidental things necessary to ensure the effective exercise of its ordinary jurisdiction.
[28] An aspect of the Land Court’s incidental or inherent jurisdiction may be seen in the provisions of S 149(1)(e) ..., conferring authority upon the Land Court to grant alternative, or consequential, relief by way of damages etc in, for instance, a claim in relation to title to an interest in land.
[29] But, in our view, S 149(1)(e) should not be seen as an exhaustive statement of the Land Court’s inherent or incidental jurisdiction. There may be other contexts in which it is necessary for the Land Court to exercise authority in order to render effective the exercise of its ordinary jurisdiction.
...
[31] An order for specific performance is an equitable remedy. Another form of equitable relief is an order for accounts, either as a free standing remedy, or as auxiliary relief granted in association with another remedy.
[32] As Fry on Specific Performance (6th Ed at 532) notes: "The form of a judgment for specific performance varies, of course, according to the particular circumstances of the case." Fry proceeds (at 533) to give, as an illustration, the Court’s practice, in an action for specific performance, of ordering that accounts be taken as between vendor and purchaser, by way of adjustment of the balance of the purchase price payable.
......
[45] In substance then, the appeal fails. We do, however, propose to vary the orders made by the primary Judge in a few procedural respects. In particular, we will make appropriate declaratory orders clarifying the obligations of the appellant to use his best endeavours to obtain the requisite consents with a view to satisfaction of the contractual conditions.
[46] The orders follow the form of orders made in like cases, for instance Kennedy v Vercoe [1960] HCA 64; [1960] 105 CLR 521 <http://www.austlii.edu.au/au/cases/cth/high_ct/105clr521.html> at 530-1. Otherwise, the appeal will be dismissed, with costs, as they should follow the event.
[47] Accordingly, we make the following orders:
1. Except for the order as to costs, vary the orders made by the Land Court by discharging those orders, and in lieu thereof, make orders as follows:
(a) Declare that the contract pleaded in par 4 of the Statement of Claim should be carried into execution and specifically performed.
(b) Declare that, to this end, the appellant was, and is, bound to do whatever may be reasonably required on the part of the appellant to enable the consents of the Cabinet and the Minister and the Appellant’s wife and heir to the surrender of the allotment, and its subsequent grant to the respondent; and order the appellant to do so.
...
(d) Declare that, in the event that the said consents are not given, and the said grant not made, the contract is not specifically enforceable, and the Land Court may then give such relief to the parties as may appear just."
An order for specific performance is an equitable order and in this case I consider that it is equitable to grant such an order, in favour of the 1st Plaintiff only. It was intended all along that the land on which the Resort was to be constructed was to be leased. Although parties seeking to rely on equity must come with clean hands, and Kinetisys was subsequently in breach of Para 2 of the Agreement (as Mr Rush accepted in evidence) when it purported unilaterally to appoint or approve the appointment of Mr Parrish, that was long after the failure of Mr Manu Mafi to obtain the leases. It would be quite inequitable to refuse such an order, taking into account all the investment put into the construction of the Resort on Mala Island by Kinetisys.
Despite the urgings of Counsel for the Plaintiffs, the Court cannot ignore the Agreement and do what it thinks best, as it has to apply the law on the facts before it. I made this clear repeatedly to all Counsel during and after the hearing, when I pointed out that a Court decision would be unlikely to give all parties, or perhaps any parties, a satisfactory outcome in the way that a negotiated settlement might be able to achieve. The Court can order specific performance, but only in terms of the September 2001 Agreement for Mr Manu Mafi to secure the lease of Mala Island to the business Mala Island Resort.
The order for specific performance will not apply to the 2nd and 3rd Defendants, who are not legally bound to grant the leases to Mala Island Resort as they were not parties to the Agreement of September 2001. The Court cannot order the 2nd and 3rd Defendants to grant leases, as they had no specific knowledge of the Agreement between Kinetisys and Mr Manu Mafi and were not involved in it, so they are under no contractual obligation to grant leases. However, despite Mr Sione Mafi’s evidence in Court, I very much doubt whether the 2nd and 3rd Defendants will wish to take such drastic action. It seems to me that in terms of family arrangements they are likely to be willing to sign new applications because Mr Manu Mafi has put himself under an obligation to do so (despite the evidence of Mr Sione Mafi that he did not now want to do so and had withdrawn his consent to the original lease and the evidence that Mr Tau Mafi had also told the Chief Lands Valuer that in respect of both applications). I believe the 2nd and 3rd Defendants are likely to agree because they will recognise that to do so will help Mr Manu Mafi to fulfil his obligations.
In Matavalea v Uata [1989] Tonga LR 101 (PC), the Privy Council stated in relation to estoppel, after citing section 103 (1) and (3) of the Evidence Act:
"Estoppel defined.
103. (1) If a person by his words or conduct wilfully endeavours to cause another to believe in a state of things which the first knows to be false, and if the second believes in that state of things and acts upon his belief, he who knowingly made the first statement is estopped from averring afterwards that such a state of things did not in fact exist.
......
(3) If a person, whatever his real meaning may be, so conducts himself that a reasonable man would take his conduct to mean a certain representation of facts, and that it was a true representation, and that the latter was intended to act upon it in a particular way, and he with such belief does act in that way to his damage, the first is estopped from denying that the facts were as represented."
We agree with Martin J that the circumstances were such that the Respondent was entitled to call in aid the provisions of s 103 against both Tevita had he sought possession and the Appellant who represented that if money was paid registration would follow.
The crucial issue in this case concerns the effect of estoppel. As was made clear in the Privy Council case of OG Sanft & Sons v Tonga Tourist and Development Co Ltd the Land Act is a complete code which, subject to the Constitution, rigidly controls by its express terms all titles and claims to any interest in Tongan land. There can be no question of equitable titles.
It follows ... that the respondent acquires no rights under the Land Act by virtue of the estoppel. We would go further and say that she acquires no rights in land of any description and neither do her heirs.
The only effect of the estoppel is to impose a personal restriction on the Appellant from obtaining an eviction order during her life tenancy."
I also have to point out that although the 2nd and 3rd Defendants are not estopped from refusing to grant leases, as estoppel is a shield only and can never be used as a sword, equally they are unlikely to be able to put the business of Mala Island Resort off the Island and evict any of Kinetisys, Mr Parrish, Mr Manu Mafi or Mala Island Resort from the Island, because to a greater or lesser extent they have knowingly allowed these parties to come onto Mala Island and build and use the Resort.
Because the 2nd and 3rd Defendants signed the lease applications, on the faith of which Kinetisys, Mr Manu Mafi and Mala Island Resort proceeded with expending money on the construction of the Resort, the 2nd and 3rd Defendants are estopped from withdrawing their respective consents to the applications or from objecting to an order for specific performance. Mr Sione Mafi accepted in evidence that in effect he knew very well that he had agreed to lease his allotment to Mr Manu Mafi for the purpose of a Resort being built, and he accepted that he did so because of his love for his younger brother, so he cannot now turn round and say that Mala Island Resort is to get off his allotment and he is estopped from doing so. In addition his evidence was that his father and his sister ‘Ana looked after the allotment in his absence, so as his agents they knew of the building and allowed it to continue. Although the Court did not hear any evidence from Mr Telenoti Mafi, his daughter ‘Ana effectively confirmed in evidence that he was in the same position. In addition his photograph on the Island appeared in various photographs in Productions P133-140, so he was well aware of the development of the Resort on the Island. But the situation might be different if Mr Manu Mafi and/or Mala Island Resort fail to pay the landholders some rent or recompense: in that case the 2nd and 3rd Defendants can return to the Court.
The 2nd and 3rd Defendants’ prayer for an order for the 1st Plaintiff to vacate Mala Island therefore fails and is dismissed.
In addition, the Resort buildings are legally separate from the land, following what was stated in Mangisi v Koloamatangi [1999] TOCA 9; CA:
"It is essential to keep in mind that the contract conferred no interest of any kind in land. It conferred on the appellant a licence to use the building. In Tonga, a building may be severed from the land on which it stands, so as not to constitute a fixture: Kolo v Bank of Tonga ( [1997] Tonga LR 181 (CA)). In that case, the Court of Appeal referred to an earlier decision of Ward CJ in Bank of Tonga v Kolo (also [1997] Tonga LR 181 (CA)) in which the Chief Justice stated that buildings in Tonga have been regarded as items of personal property rather than as forming part of the realty. The Court Appeal commented:
"Because of the Constitution of Tonga, and because of Tonga's traditions, the intricate law of fixtures and of accretions to land which applies elsewhere is not wholly appropriate to Tonga. Although all the implications have not yet been worked out, and their working out should be left to the process of development of the law of Tonga case by case, we think that the broad proposition stated by Ward CJ should be accepted. That means that it was open to Mr Kolo to pledge his house to the bank as an item separate from the land on which it stood."
For the same reason, it was open to the deceased to give an enforceable contractual licence to the appellant in respect of the building she constructed at her expense, by agreement with him, upon his land. True, it was to be his building, but subject to the terms of the contract. Neither the deceased, nor his widow claiming under him, could assert or accept entitlement to the severable structure built pursuant to the agreement and, while doing so, deny the appellant her rights under the same agreement.
There is no counter-claim, so the Court is not required to ascertain the precise limits of the appellant's rights; but at least they extend to a complete answer to the respondent's claim. The appeal must be allowed with costs; the judgment and orders below must be set aside; and in lieu thereof, it must be ordered that the proceeding brought by the respondent be dismissed with costs."
In Kolo v Bank of Tonga [1997] Tonga LR 181 (CA) it was stated:
"Buildings, as Ward CJ pointed out in the judgment to which reference has already been made, have been regarded as items of personal property rather than all forming part of the realty. Because of the Constitution of Tonga, and because of Tonga's traditions, the intricate law of fixtures and of accretions to land which applies elsewhere is not wholly appropriate to Tonga. Although all the implications have not yet been worked out, and their working out should be left to the process of development of the law of Tonga case by case, we think that the broad proposition stated by Ward CJ should be accepted."
In this situation where no leases have been formally granted by reason of the absence of Cabinet approval, the Resort buildings are thus separate from the land, so do not belong to the landholders automatically simply because there are no formal leases. But in fairness and equity Mala Island Resort should therefore pay the landholders, the 2nd and 3rd Defendants, for the use of the land, although no formal order is made as the 2nd & 3rd Defendants dropped their prayers for recompense. However, Mala Island Resort cannot be evicted because the landholders allowed the Resort to be built in its name, even although it was not a corporate entity. Again the situation might be different if Mala Island Resort fails to pay the landholders any rent or recompense.
I therefore found that the fact that the leases of Mala Island were not granted to the business of Mala Island Resort does not mean that the resort and its buildings become the property of the landholders, the 2nd and 3rd Defendants.
Although no formal application was made to amend the Statement of Claim for an order of specific performance, as already mentioned it followed the evidence which eventually emerged about the lease applications and I did not consider that there was any unfairness to the Defendants caused by it. In any event it was contained in the written submissions for the Plaintiffs filed with the Court on 22 June, so that the Defendants had several days to consider it before the hearing of oral submissions.
However in respect of the Plaintiffs’ request for an order that the lease applications should now be in the names of Mr Manu Mafi, Mr Thomas Rush and Mr Terry Baize, the Court cannot go beyond the provision in the Agreement of September 2001, which in any event was in name of Kinetisys, not Mr Tom Rush, nor Mr Terry Baize. Para 2 of the Agreement was written after the original lease applications had been signed, so there is no reason now to alter the name of the lessee. That should remain therefore as Mala Island Resort under the sole proprietorship of Mr Manu Mafi, who remains obliged under Para 2 of the Agreement to secure the use of Mala Island and to participate in the management of the Resort with Kinetisys, including all direction and policies. There was no evidence that that was not what was intended at the time the September 2001 Agreement was signed. As already mentioned, Kinetisys may have been misinformed about whether there was a necessity for the land and business to be Tongan-owned, but it could easily have obtained appropriate legal advice on that question.
It will be for the Cabinet or the Government to decide whether to insist on Mala Island Resort being incorporated before the leases are approved: and if they do so, then it will be up to Mr Manu Mafi to do whatever is reasonably required to have Mala Island Resort duly incorporated so that the leases can be approved; and, in the event that the consents are not given, and the grant not made, this Court may then give such relief to the parties as may appear just.
Turning to the 2nd Plaintiff, Mr Parrish, he is in a completely different position. He was not a party to the September 2001 Agreement and I cannot assume, as he appears to have done, that the unsigned purported agreement of 2004 accurately or completely represents the terms of a verbal agreement between himself, Kinetisys and Mr Manu Mafi. Apart from anything else, the terms of the purported agreement are markedly different from the terms of the letter by Kinetisys of September 2004, which refer to a very different role of managing the Resort, rather than developing it and investing considerable sums of money in it. That letter of September 2004 did not assign to him the interest of Kinetisys in terms of the September 2001 Agreement. Nor was it a unanimous written appointment by Kinetisys and Mr Manu Mafi, and it is in contrast to the letter composed by Mr Terry Baize and signed by Mr Manu Mafi on the appointment of Ron Rush.
Mr Parrish is effectively now not seeking any specific orders or findings at all in his favour, as the prayer for a monetary award is not being proceeded with, except in relation to the interlocutory injunction to restrain Mr Manu Mafi and his family from removing him from Mala Island. Mr Parrish has no valid written agreement of any kind to support his position. The letter from Kinetisys was only written on behalf of Kinetisys and cannot qualify as a valid appointment of him as manager of the Resort, given the terms of the September 2001 Agreement and of the earlier appointment of Mr Ron Rush. On the balance of probabilities I found that at some time before Mr Parrish left to come to Tonga there was an oral agreement among him, Kinetisys and Mr Manu Mafi that he should come to Tonga and restore the Resort and take over its management. But I also found on the balance of probabilities that Mr Parrish knew very well that Mr Manu Mafi had changed his mind at the last minute about allowing him to do that, as he had told Mr Tom Rush that that was the case, so that verbal agreement was therefore cancelled. Given that Mr Manu Mafi had withdrawn from the prior oral agreement, a fortiori I did not find it established that the draft represented the terms of the verbal agreement under which Mr Parrish subsequently came to Mala Island. In particular, that draft agreement provides for facsimile signatures to be as effective as if they were originals, so even although the parties were in different places they could each have signed and the agreement could have become binding on the strength of facsimile signatures. I thus could not accept the draft as showing the terms of either the oral agreement or an agreed basis on which Mr Parrish came to Mala Island. It would not be appropriate in these circumstances to grant specific performance on the terms of the draft.
If Mr Parrish wishes to take matters further he will have to raise a separate action.
I regret to add that I consider that Mr Parrish was even more unwise than Kinetisys in deciding to put money into the Resort without a proper written agreement and without any security.
But, as mentioned above, I also found that, despite his reservations, Mr Manu Mafi tacitly agreed to Mr Parrish coming to Mala Island and doing the restoration and taking over the management of the Resort. ‘Ana’s evidence that Manu had phoned her and said he did not approve of Mr Parrish coming to the Island, but without saying he was not to be allowed on to the Island, supported that. As already stated, the evidence as a whole showed that Mr Manu Mafi was the dominant member of the Mafi family and, despite the evidence to the contrary of ‘Ana and her husband Viliami, it is unthinkable that Mr Parrish would have been allowed to stay and work on Mala Island without the tacit concurrence of Mr Manu Mafi.
I therefore found that there was some kind of tacit agreement among Kinetisys, Mr Manu Mafi and Mr Parrish that he was to come to Mala Island, applying his own funds to restore the Resort and then to manage it. But beyond that there was insufficient evidence for the Court to find, even on the balance of probabilities, what the terms of that tacit agreement were.
Nor could I accept that the terms of the draft represented the agreement as implemented, because Mr Parrish accepted in evidence that one factor in persuading him to come to Tonga was his love for Tonga and the lifestyle and I had a clear impression from his evidence that once he had decided to come to Tonga he determined to press ahead even when Mr Manu Mafi failed to sign the agreement.
I found on the evidence that, although Mr Manu Mafi - who as the owner and proprietor of the business of Mala Island Resort had the right of hiring and firing, as demonstrated in the case of Mr Ron Rush’s appointment - tacitly agreed to Mr Parrish coming to Mala Island, he later became unwilling for Mr Parrish to stay there, firstly because he was unhappy about his sister ‘Ana getting money for the feasts on Mala Island she ran towards the end of 2004, and secondly and more importantly because after Mr Baize visited Tonga and Mala Island around that time to try to sort out the question of the leases, Mr Parrish tried to obtain leases direct from Mr Telenoti Mafi through his daughter ‘Ana. When Mr Manu Mafi heard about that he became angry and wanted Mr Parrish to leave. It is only the eviction of Mr Parrish, not Kinetisys, that Mr Manu Mafi has sought, as is made clear in his Statement of Defence.
The only bearing of the tacit agreement in this case is in relation to the continuation of the interlocutory injunction. I found that Mr Manu Mafi, as owner of the business of Mala Island Resort, allowed Mr Parrish to come to Mala Island and to carry on restoring and managing the Resort, until he did not wish him to do so any more. Mr Manu Mafi is therefore likely to be estopped from evicting Mr Parrish summarily from Mala Island and the Resort. But the position of Mr Parrish is different from the position of Kinetisys, he is in effect only a manager without any substantial interest in the land, so the Court has to take into account that it would not be reasonable to prohibit Mr Manu Mafi and/or Kinetisys from terminating the tacit agreement with Mr Parrish for just cause at some time in the future.
Given Mr Manu Mafi’s previous breach of the interlocutory injunction, it is entirely appropriate that the injunction is continued in favour of both Kinetisys and Mr Parrish and the 1st Defendant’s prayer against that is dismissed.
The 1st Defendant’s prayer for an order for the 2nd Plaintiff to vacate Mala Island also therefore fails and is dismissed. Following on from that, as the 2nd and 3rd Defendants are likely to be estopped from evicting the 1st Defendant and Mala Island Resort, their prayer for an order for the eviction of the 2nd Plaintiff therefore also fails and is dismissed.
The Court will therefore grant an order for specific performance in favour of Kinetisys for the 1st Defendant Mr Manu Mafi to obtain valid leases of Mala Island; and will continue the interlocutory injunction against the 1st Defendant Mr Manu Mafi until further notice. However it will be possible for the parties, in particular Mr Manu Mafi, to apply to the Court at any time for variation of the injunction and eviction of Mr Parrish for just cause if circumstances change.
If Mr Manu Mafi encounters difficulties in obtaining valid leases of Mala Island, he can return to the Court for further instructions.
As I mentioned earlier, I am aware that in dealing only with the prayers which the Plaintiffs eventually sought to have considered the Court is only dealing with a small part of the legal issues arising from the troubled circumstances of the development of Mala Island. I am also aware that these orders may, as I forecast all along, leave all parties dissatisfied. But before any further litigation is attempted I strongly recommend firstly that the parties and their Counsel discuss matters to see whether a way of continuing the operation of Mala Island Resort which would be beneficial to all parties can be found; and secondly that before any further actions are raised Counsel take time to consider carefully the legal issues involved and the extent to which they are supported by evidence.
Costs
In relation to costs, I do not believe that this was a normal case where all costs should automatically follow the event. As I have mentioned, I was particularly surprised that Counsel had not followed through the question of what had happened to the lease applications, which turned out to be ascertainable without too much difficulty. If the real position had been known, that might have shortened the hearing. Also a considerable proportion of the time at the hearing was taken up with detailed evidence about the expenditure by Kinetisys and Mr Parrish, but then the prayers for recovery of that expenditure were dropped when it came to submissions. As already stated, I do not think it would have been too difficult for Counsel or indeed the parties to work out in advance that no payments were due under the September 2001 Agreement until the Resort was making a profit, so that all that evidence turned out to be unnecessary.
But the cases of the 1st Defendant and the 2nd and 3rd Defendants (including the latter’s counterclaim for Mr Parrish to vacate Mala Island) did not succeed and were dismissed. Nor did Mr Parrish succeed in his case about his rights, except to a limited extent in relation to the continuation of the injunction.
I therefore consider that the hearing could have been completed in half the time, so I shall award the Plaintiffs only half their costs against the Defendants.
Orders
The Court therefore orders as follows:
(1) It declares that Para 2 a) of the Agreement dated 4 September 2001 between the 1st Plaintiff and the 1st Defendant should be carried into execution and specifically performed by the 1st Defendant;
(2) It declares that, to this end, the 1st Defendant was, and is, bound to do whatever may be reasonably required on the part of the 1st Defendant to secure the use of Mala Island for the entire term of that Agreement by obtaining valid leases from the landholders the 2nd Defendant Sione Motoka Mafi and the 3rd Defendant Siosaia Telenoti Mafi; including doing whatever may be reasonably required to obtain the consents of the Cabinet to the leases; and the Court orders the 1st Defendant to do so;
(3) It declares that, in the event that these leases are not obtained or these consents are not given, the Agreement is not specifically enforceable, and the Land Court may then give such relief to the 1st Plaintiff as may appear just;
(4) The injunction granted on 7 April 2005 is continued until further order of this Court, but the parties may apply to the Court at any time for variation of the injunction for just cause if circumstances change;
(5) No further orders are made at this stage on the other prayers of the Plaintiffs;
(6) The 1st Defendant’s case is dismissed.
(7) The 2nd and 3rd Defendants’ case and counterclaim is dismissed.
(8) The Plaintiffs are awarded half their costs (as agreed or taxed) against the Defendants jointly and severally.
3 January 2007
R M Webster
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URL: http://www.paclii.org/to/cases/TOLC/2007/1.html
