PacLII Home | Databases | WorldLII | Search | Feedback

Supreme Court of Tonga

You are here:  PacLII >> Databases >> Supreme Court of Tonga >> 2015 >> [2015] TOSC 6

Database Search | Name Search | Recent Decisions | Noteup | LawCite | Download | Help

Prasad v Leonard [2015] TOSC 6; CV75 of 2012 (27 February 2015)

IN THE SUPREME COURT OF TONGA
CIVIL JURISDICTION
NUKU'ALOFA REGISTRY
CV 75 of 2012


BETWEEN:


1. RUDRA PRASAD
2. MOAPA ENTERPRISES LIMITED
Plaintiffs


AND:


1. DEREK LEONARD
2. PACIFIC FORUM LINE (NZ) LIMITED
3. ECKINGTON LIMITED
Defendants


B. Goldsmith with Ms. P. Tupou for the second Plaintiff (Respondent)
P. Rzepecky with R. Stephenson for the Defendants (Applicants)


DECISION


[1] The first Plaintiff is the Managing Director of the second Plaintiff (the Company) which trades in Tonga as a grocery wholesaler and retailer. The Company was incorporated in Tonga in 2002 and it was re-registered in May 2010.


[2] The first Defendant was at all material times the General Manager of the second Defendant's business in Tonga which is a shipping company. He was also General Manager of the third Defendant which traded as Forum Shipping Agencies.


[3] A significant component of the Company's business is the import of frozen chickens from the United States. Some of the frozen meat was imported into Tonga in refrigerated containers carried on vessels operated by the second Defendant.


[4] In 2012 a dispute arose between the parties over demurrage charges and this led to several emails being sent by the first Defendant which the Plaintiffs say, in an amended Statement of Claim, were defamatory and resulted in loss and damage to them. A Defence has been filed in which defamation is denied and among other defences, the truth of the emails is asserted.


[5] This is an interlocutory application brought under the provisions of RSC O.8 r 8 (1) (b), (c) and (d) or alternatively in the inherent jurisdiction of the Court to strike out the second Plaintiff's claim. The Defendants say that the second Plaintiff has been trading illegally in Tonga, that its claims against the Defendants cannot be advanced without reliance on this illegal trading and that it is contrary to public policy to allow a claim so based to proceed.


[6] Both sides filed comprehensive and clear written submissions together with substantial other materials for which I am grateful.


[7] The Defendants' argument on the issue of illegality is set out in paragraphs 5 and 6 of the written submissions dated 26 November 2014. But simply it is said that:


(a) By virtue of section 2 of the Foreign Investment Act 2002 (the Act) a company incorporated in Tonga which is controlled by one or more non-Tongans is a "Foreign investor".


(b) According to undisputed evidence provided principally by the first and second Plaintiffs themselves the second Plaintiff is in fact controlled by one or more non-Tongans and is accordingly a "Foreign investor".


(c) "Foreign investors" are not allowed to engage in business activities reserved for Tongan investors (Foreign Investment Regulations 2006). By failing to disclose that the second Plaintiff was actually a "Foreign investor" the Plaintiffs procured the issuance of business licenses to the second Plaintiff authorizing it to engage in business activity reserved for Tongan investors (affidavit of Distaquaine Tu'ihalamaka).


(d) By trading under business licenses to which the second Plaintiff was not entitled offences have been committed contrary to section 19 of the Business Licenses Act 2007.


[8] The principal authorities relied on by the Defendants are Les Laboratories Servier and Anr. v. Apotex Inc. and Anr. [2014] UKSC 55 and Mackintosh v. Truth (New Zealand) Limited [1962] NZLR 137. It is submitted that application of these authorities to the facts before the Court should be as set out on paragraph 8.1 of the written submissions dated 26 November.


[9] Mr Goldsmith's written submissions are also dated 26 November. These submissions led to additional submissions being filed by Mr Rzepecky on the 27th .


[10] In paragraph 9 of his submissions Mr Goldsmith submitted that there was no basis in the inherent jurisdiction of the Court to entertain an application of this kind: either RSC O.8 r8 could avail the Defendants or they could not succeed.


[11] In paragraph 12 it is conceded that the relevant facts are not in dispute and, importantly, it is conceded that the second Plaintiff is a "Foreign investor". (paragraph 15).


[12] Notwithstanding this concession Mr Goldsmith submitted that the second Defendant is a Tongan investor since section 2 of the Act defines a "Tongan investor" to mean:


"a Tongan subject or body corporate incorporated in Tonga".


It is argued that the second Plaintiff is, as a matter of fact, incorporated in Tonga and therefore it is a Tongan investor.


[13] I do not accept this argument. In my view the clear intention of the Act is to differentiate between a Tongan and a non-Tongan investor. I do not accept that it is possible to be both at the same time. The definition of "Tongan investor" in the interpretation section 2 of the Act means no more than that a Tongan investor may be either


(a) a Tongan subject (ie a Tongan individual) or
(b) a company incorporated in Tonga a member of which who is not a Tongan subject does not control more than 25% of the company's voting shares.

[14] In paragraphs 23, 25 and 28 of his submissions Mr Goldsmith advanced several alternative arguments. First he suggested:


"... the second named plaintiff does not found any part of its claim upon the alleged contravention of section 3 not of course does it seek to benefit from the alleged criminal conduct. It merely seeks, compensation for the loss and damage suffered by it (as a direct and exclusive consequence of the defendants' tortious conduct)".


[15] With respect, I do not agree that Euro – Diam Ltd v Bathurst [1990] QB 1 is authority for the proposition that the claim must be founded on illegality, in this case a breach of section 3. In my view the correct position, as explained in Mackintosh v Truth (above) is that losses caused to an activity shown to be illegal are not recoverable.


[16] In paragraph 25 Mr Goldsmith submitted that the second Plaintiff:


"has not in terms of its claims in the proceedings done anything wrong".


Essentially, the same argument is advanced in paragraph 28 and, in my view, must fail for the same reasons.


[17] In the same paragraph, 28, Mr Goldsmith suggested that the business licences had been issued to the Second Plaintiff "when it was apparent that the second-named Plaintiff was controlled by persons who were not Tongan subjects". This submission, as I find, is wholly inconsistent with the evidence of the Registrar of Companies, Distaquaine Tu'ihalamaka contained in her unanswered affidavit of 6 October 2014 and with the oral evidence given by her at the hearing.


[18] At this interlocutory stage it is the duty of the Court to evaluate the evidence placed before it on the application but it is not in a position to conduct a trial of the matters complained of. On the uncontradicted evidence before me I find it plain that the second Plaintiff has been trading under a business licence which would not have been issued to it had it not concealed the fact that it was actually a "Foreign investor". Whether or not a criminal offence has committed is not, in my view, the question that has to be answered in this application in this Court. I am however satisfied, on the evidence before me that the scheme of the Act, which principally is to reserve the business activities in which the Second Plaintiff was engaged for Tongan subjects or Tongan controlled companies, was evaded. The second Plaintiff wishes to claim damages for diminution of profits derived from trading in breach of the provisions of the Act. In my view such an action is an abuse of the process of the Court and RSC O.8 r8(1) (d) applies. There is no need to invoke the inherent jurisdiction of the Court.


Result: The Application succeeds. The claim of the second Plaintiff will be struck out. The Defendants are to have the costs of the application, to be taxed if not agreed.


M.D. Scott


DATED: 27 February 2015.
JUDGE



PacLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback
URL: http://www.paclii.org/to/cases/TOSC/2015/6.html