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Supreme Court of Tonga |
IN THE SUPREME COURT OF TONGA
CIVIL JURISDICTION
NUKUALOFA REGISTRY
CV 65 OF 2015
BETWEEN:
LADY DOWAGER 'ESETA FUSITU'A
First Plaintiff
LADY DOWAGER TUNA FIELAKEPA
Second Plaintiff
AND:
MINISTER OF PUBLIC ENTERPRISES
for and behalf of the KINGDOM OF TONGA
Defendant
BEFORE LORD CHIEF JUSTICE PAULSEN
Counsel: Mr. W. C. Edwards for the plaintiffs
Mr. 'A. Kefu SC for the defendant
Date of Hearing : 9 March 2016
Date of Ruling : 29 March 2016
RULING
What is being alleged and sought
[1] The plaintiffs were directors of the Tonga Broadcasting Commission (TBC). On 16 October 2015 the Minister of Public Enterprises, the Hon. Poasi Tei (the Minister), terminated the plaintiffs' appointments with effect from 19 October 2015.
[2] The plaintiffs seek judicial review of the Minister's decision on the grounds that he exceeded his powers, did not observe the requirements of natural justice, acted in bad faith, failed to take into account relevant considerations and had regard to irrelevant considerations. The plaintiffs seek an order quashing the Minister's decision.
[3] There is also in the statement of claim a cause of action for wrongful dismissal but at the commencement of the hearing I was advised that the plaintiffs were not pursuing that cause of action (at least not in this proceeding) and I need not consider it further.
The facts
[4] TBC carries on business as a news broadcaster on radio and television focused primarily on broadcasts of current news and matters of national and public interest in the Kingdom of Tonga. TBC is also a public enterprise under the Public Enterprises Act 2002.
[5] Both plaintiffs had served as directors of TBC prior to their last appointments.
[6] On 16 November 2013 Cabinet approved the re-engagement of the second plaintiff as a director of TBC for a period of up to three years.
[7] On 4 May 2014 the first plaintiff was re-engaged as a director and the Chairperson of the board of TBC for a period of up to three years.
[8] In 2015 the Ministry of Public Enterprises (the Ministry) gave consideration to reforms to restructure the boards of the public enterprises in the expectation that this would improve governance, financial and non-financial performance and reduce costs. The heft of what was proposed was that the public enterprises would be categorized into sectors (Utilities, Information, Communication and Technology (ICT), Transport, Agriculture and Others) and that the public enterprises in each sector would have shared directors. The existing directors were to be removed. They would be replaced by new shared boards following a recruitment and selection process.
[9] In April 2015 a presentation on the reforms was made at a Ministers' retreat. Power point slides of the presentation were produced into evidence. They contain a rudimentary cost/benefit analysis of the reforms which included the need to provide severance packages to the existing directors. There was to be a period of further analysis and development of a policy framework. Between 1 July 2015 and 31 July 2015 the existing directors in the ICT and Utilities sectors would be advised on the reforms, consultation would occur, the new directors positions would be advertised and directors recruited so that the shared boards for the ICT and Utility sectors would be effective from 1 August 2015.
[10] Cabinet decided to implement the reforms to combine the boards in the ICT and Utilities sectors by Cabinet decision No.608 dated 12 June 2015. Cabinet's approval of the reforms pre-dated any consultation with the boards of public enterprises. A letter was circulated to all Chairpersons of public enterprises inviting them to a special meeting to discuss the Government's proposal for reform of the public enterprises but that meeting did not take place until 19 June 2015.
[11] On 1 July 2015 the Minister wrote to the first plaintiff, in her capacity as the Chairperson of the board of TBC, in the following terms:
Letter of Notification – Shared Board for the Public Enterprises (PEs) under the Utilities and Information and Communication Technology Sectors.
"I write to inform and to notify you that Government (shareholder) has approved for the Ministry of Public Enterprises to implement major reform to the existing fifteen (15) Public Enterprises in the form of shared board of directors. The Cabinet in its decision No.608 dated 12/06/2015 approved specifically to commence the implementation of the shared board from the utilities and information and communication technology sectors.
[12] The letter went on to state the rationale of the reforms and to give tentative timelines for their implementation. This included notifying and consulting with the existing directors and advertising the new positions between 1 and 31 July 2015, the appointment of new directors between 10 and 14 August 2015 and by 1 September 2015 the existing directors would be removed from office with the commencement of the term of new shared boards.
[13] On 3 July 2015 the Ministry issued a press release on the subject of the "Shared Board for the Public Enterprises (PE) under the Utilities and Information and Communication Technology Sectors" which stated:
Major reform has been approved by the government (shareholder) for the Ministry of Public Enterprise to implement shared board of directors amongst the existing fifteen (15) Public Enterprises...
The primary purpose of this major reform is to improve Public Enterprises performance and enhance good governance. The implementation will commence with the shared board from the utilities and information & communication technology sectors...
The tentative timelines for the formation process of these shared Boards is outlined below...
[14] On 16 July 2015 the Ministry placed an advertisement in the newspaper inviting applications from suitable persons to apply for appointment as a 'Public Enterprise Director'. The advertisement stated that the applicants were sought for, inter alia, the boards of the Information and Communication Technology (ICT) Sector Public Enterprises which were identified as Tonga Communication Corporation, Tonga Broadcasting Commission (TBC), Tonga Post and Fast Print Limited 'on a shared basis'. Applications were required by 10 August 2015. The advertisement was also emailed to the Chief Executive Officers of the Public Enterprises although not, it seems, to the directors.
[15] On about 20 July 2015, that is after the reforms were both publically announced and the new directors roles advertised, a meeting was held where the directors of TBC were informed of the proposed reforms and the process that was going to be undertaken to implement them. Whilst it is not altogether clear it appears that the directors were then invited to voluntarily resign their positions and told also that there would be some compensation payable for their loss of office.
[16] A complaint was made to the Commissioner for Public Relations on behalf of the board of TBC alleging that there had been no consultation with the TBC directors before the decision was made to create the shared boards and that the Ministry of Public Enterprises had acted unlawfully in advertising the positions on the board of TBC as vacant when the existing directors were currently serving. The Commissioner for Public Relations informed the then Acting Chief Executive Officer of the Ministry of Public Enterprises of the complaint by letter dated 24 July 2015.
[17] Also on 24 July 2015 Cabinet met and issued its Decision No.745 noting the Public Enterprise Ownership, Divestment and Performance Improvement Policy and requiring the Ministry of Public Enterprises to implement the reforms. That same day Cabinet also passed Decision No.746 which contained Cabinet approval of the recommendations relating to the implementation of the reforms as follows:
"Recommendations are approved, as amended, i.e.:
[18] On 27 July 2015 Mrs. Petunia Tupou, acting for the board of TBC, wrote to the Minister advising him that the directors were not inclined to accept the verbal offer that they voluntarily resign in return for a compensation payment. Mrs. Tupou noted that the directors understood that an official offer in writing was to be put to them and that they would wait for that before making any decision.
[19] The Commissioner for Public Relations processed the complaint. Correspondence was received by the Commissioner from the Deputy Chief Executive Officer for Public Enterprises in response to the complaint dated 3 August 2015, 7 August 2015 and 12 August 2015.
[20] The letter of 3 August 2015 sought a response from the Commissioner as to why it was considered that the decision of the Minister to advertise the positions for directors of public enterprises was unlawful.
[21] The letter of 7 August 2015 was more substantial and addressed the merits of the complaint. There was an acknowledgement on behalf of the Ministry that by Cabinet's decision No. 608 Cabinet had initiated the establishment of shared boards in respect of the Tonga Water Board, Waste Authority Limited, Tonga Communication Corporation and TBC.
[22] The Ministry did not accept that the advertisement seeking applicants for the boards of public enterprises implied that the positions of the existing TBC directors were vacant. The Ministry's stance was that the advertisement concerned vacant positions in the Utility and Information and Communication Technology sectors 'shared boards' only. As there were no directors then sitting on the newly implemented shared boards the Ministry contended that there could be no suggestion that the positions of existing directors were being advertised as vacant.
[23] In response to an allegation in the complaint that on 3 July 2015 the Minister had called the meeting and informed the board of TBC that they "must resign" from their positions to enable the shared boards to be introduced, the Ministry said that the Minister had asked for the co-operation of the directors by way of voluntary resignation and had offered compensation and extended invitations to the directors to apply for the shared boards.
[24] In response to the allegation that there had been no consultation with the existing directors about the reforms the Ministry appeared to accept that this was indeed the case stating:
There was no intention to establish the shared boards without consulting relevant BoDs. Regrettably, the policy was prematurely announced by a third party. The MPE currently has limited information on the above and shall provide so at the earliest convenience.
[25] On 12 August 2015 the Deputy Chief Executive Officer for Public Enterprises sent a further letter to the office of the Commissioner for Public Relations responding further to the allegation that there had been no consultation. In this letter the Ministry's position was as follows:
Please allow me to withdraw the previous comment and submit the following:
In spite of CD No.608 (Annex 1), dated 12th June 2015, it is not to mean relevant Board of Directors (BoD) were not intended to be informed nor consulted in due course. The Hon. Minister of Public Enterprises' (Minister) letter (Annex 2), dated 1st July 2015, and press release (Annex 3) simultaneously show that there was an intention to inform and consult relevant BoD on 1 July 2015 to 31 July 2015.
Despite CD No.608, the Ministry of Public Enterprises (MPE) Cabinet Submissions, 'Ownership, Divestment and Performance Improvement Policy' (Annex 4) and 'Seeking Cabinet Endorsement of the Shared Directors Implementation Plan' (Annex 5) were submitted on 21 July 2015. The responding CD No.745, "Re: Public Enterprises – Ownership, Divestment & Performance Improvement" (Annex 6), and CD No.746, "Re: Seeking Cabinet Endorsement of the Shared Directors Implementation Plan" (Annex 7), were passed on 24 July 2015, subsequent to the first recorded consultation, dated 19th of June 2015 (Annex 8), between the Minister and relevant BoD Chairpersons.
Furthermore, irrespective of CD No.608, it was not intended to undermine relevant BoD interests. As previously stated, the Minister humbly requested relevant BoD co-operation by way of voluntary resignation. Further, he has undertaken measures in offering compensation, CD No. 746(4) states, "That Cabinet to note that redundancy payments may be considered to be paid to the directors who resign as part of this process". In addition, he has encouraged relevant BoD to tender for positions in the Utility Sector Public Enterprises and, Information and Communication Technology Sector Public Enterprises shared boards."
[26] On 12 August 2015 the Minister sent letters to the board of TBC requesting that they resign from their positions as directors of TBC. The letters received by the first and second plaintiff (and I can infer the other directors) were substantially the same and noted that in order to facilitate the implementation of the public enterprise reforms the Minister was formally requesting the directors' resignations, in return for a one-off compensation payment by 4.30pm on Friday, 14 August 2015, with resignation to take effect from 1 September 2015. The Minister also encouraged the directors to apply for an advertised position on the new shared board. The letter read:
"As such, I hereby formally request and offer for your voluntary resignation from your position as a current Director of the Board of Directors of the Tonga Broadcasting Commission to be effective by 1 September 2015 upon the term and condition that a compensation payment is to be paid to you in accordance with the remaining term of your current appointment. Director with one (1) year and less than two (2) years balance to be completed will be payable of six (6) months of the annual basic Director fee/remuneration. This compensation payment will only be paid out once and it will be the only payment received from Tonga Broadcasting Commission.
You are also indeed encouraged to apply for the position of the new shared Board of Directors which is currently being advertised. Please find enclosed the appropriate position description to assist you should you wish to apply for the positions.
I sincerely hope for your favourable consideration of my request and offer, and do submit your voluntary resignation letter to me no later than 4:30pm on Friday, 14 August 2015.
Upon tendering your resignation by 14 August 2015, your resignation will not be deemed effective until 1 September 2015."
[27] On 14 August 2015 Mrs. Tupou again wrote to the Minister, this time on behalf of all of the board of TBC apart from Mr. 'Ahongalu Fusimalohi, and acknowledged receipt of the Minister's letters. She advised again that her clients were not inclined to tender their voluntary resignations. The letter was critical of the tone of the Minister's letters and of the requirement that resignations be given within 24 hours. It was also critical that the concerns, objections and dissatisfaction with the proposal for a shared board had largely been ignored whilst the reforms were publically announced and proceeding.
[28] After conducting his investigation the Commissioner for Public Relations issued his report on 27 August 2015.
[29] The Commissioner's findings included, at paragraph 3.1.1 of his report, that the request for the voluntary resignation of the directors within a fixed deadline was contrary to the spirit of the terms of their appointments, unreasonable, and, in the Commissioner's view, unlawful.
[30] At paragraph 3.1.2 of his report the Commissioner noted the lack of consultation with the directors before Cabinet made its decision to proceed with the reforms and that this was accepted by both parties. Again, at paragraph 4.2, the Commissioner recorded that the Ministry had agreed that there had been a lack of consultation. The Commissioner expressed the view, at paragraph 3.1.1, that "There is a lot of consultation needed for the smooth implementation of this reform proposal approved by Cabinet."
[31] At paragraph 4.1(b) of his report the Commissioner stated that the term of the appointments of the directors of TBC were binding "unless violation is proven under the Public Enterprises Act and endorsed by Crown Law and the Attorney General".
[32] The Commissioner's recommendations were:
"That unless individual members of the complainant agree otherwise –
(i) The individual members of the complainant:-
(a) be paid the balance of their basic salary for the remaining period of their current respective terms;
(b) receive other accrued benefits as TBC Board member;
(c) vacate their respective roles as Chairperson/Director, effective from date of settlement of (a) and (b)."
[33] At paragraph 35 of his affidavit Mr. Sione 'Akau'ola, the Chief Executive Officer for the Ministry of Public Enterprises, says that "in implementing the report of the Commissioner of Public Relations, the Ministry presented a submission to Cabinet to review the redundancy package by considering the compensation policy". If this is intended to suggest that the Ministry (or Cabinet) sought to implement the Commissioner's recommendations it is not correct. They did not do so. There is no evidence as to why the Commissioner's recommendations were not accepted by the Minister or Cabinet but it is clear that they were not.
[34] On 28 August 2015 Cabinet passed Decision No.842 and approved compensation payments based on the term of the director's appointment still remaining to directors who voluntarily resigned as follows.
That the following compensation will apply:-
"a. A Director with less than one (1) year balance to be completed = payable of three (3) months of the annual basic salary.
b. A Director with one (1) year and least than two (2) years balance to be completed = payable of six (6) months of the annual basic salary.
c. A Director with two (2) years and more to be completed = payable of full annual basic salary."
[35] On 18 September 2015 Cabinet passed Cabinet Decision No.1114. It is clause 5 which is most relevant to this case but I set out all the resolutions as follows:
"A. Recommendations 1, 2, 3, 4, 5, and 6 are approved, as amended, i.e.:
6 That Dr. Siotame Havea's term as a Director of TBC Board of Directors be terminated effective from the date he migrated abroad."
[36] The reference in clause 5 of Cabinet Decision No.1114 to two remaining directors is to the first plaintiff and second plaintiff. It appears (although the evidence did not address in any detail the individual circumstances of other TBC directors) that all the other directors of TBC apart from Dr. Havea, who had migrated, and the plaintiffs had tendered their resignations.
[37] On 25 September 2015 the Minister wrote to the plaintiffs calling upon them again to voluntarily resign. The letters were in substantially identical terms stating that such voluntary resignations would be effective from 4pm on Wednesday, 30 September 2015 and in return for their resignations they would receive compensation consistent with Cabinet Decision No.842 of 28 August 2015, consisting of six months remuneration, as well as any existing benefits that were payable as a gratuity under the TBC existing policies.
[38] In a letter sent on 27 September 2015 (but incorrectly dated 12 August 2015) the plaintiffs maintained that they would not resign and they sought from the Minister a letter confirming that their tenure would remain intact or they would seek injunctive relief.
[39] Reflecting Cabinet Decision No.1114 the Minister then gave notice to the plaintiffs in letters dated 29 September 2015 that "[b]ecause you did not accept to voluntarily resign I am considering the option of exercising sections 14(6) and 14(7) of the Public Enterprises Act...". Those sections, which I will set out later in this ruling, provide the Minister with the power to remove a director of a public enterprise from office but only in certain specified circumstances. The Minister stated that he was considering exercising his power based on five grounds, which were in general terms as follows:
"1. The poor financial performance of the TBC in recent years indicates that as a Director and the Chairlady of the TBC, you have been unable to perform your roles that are required under section 13(1) of the Public Enterprises Act. Under your leadership, the financial performance of the Tonga Broadcasting Commission has been unable to improve into a commercially viable and profitable public enterprise.
[40] The plaintiffs responded on 29 September 2015, both denying any wrongdoing and requesting further information in order to respond to the Minister's allegations. On 1 October 2015 the Minister responded to this letter, purporting to give the particulars requested. In fact, for the reasons that follow, the Minister's response substantially failed to engage with any of the plaintiffs' requests for further information of the allegations. For ease of reference, details of the plaintiffs' requests and Minister's response are set out below in relation to each of the Minister's five allegations.
[41] In relation to the first allegation made by the Minister, concerning the poor performance of TBC, the plaintiffs asked the Minister to identify what was meant by the poor financial performance of the TBC in recent years, why it was said that the plaintiffs were unable to perform their roles as required by the Public Enterprises Act and what was meant by the allegation that TBC was unable to improve into a commercially viable and profitable public enterprise. In response, the Minister simply referred the plaintiffs to TBC's Financial Statements for "the past financial Years" (without stating which years) and "[a]n example" that the revenue of TBC in 2009 was 2.4 million but in 2014 had decreased to 2 million, a decrease of 16%. The Minister stated "This is the same for all the other profitability indicators such as the Net Profit After Tax (NPAT)."
[42] In relation to the second allegation, as to concerns said to have been expressed by the Acting Auditor General following the TBC audit, the plaintiffs requested a copy of the audit report and that the Minister identify where in that report the Acting Auditor General had expressed a lack of confidence in TBC's ability to meet its financial obligations. The plaintiffs also asked for detail of the specific facts and circumstances supporting the allegations that there had been an inability by TBC to meet financial obligations without "reasonable payment/settlement agreements with its creditors" and "firm debt collection/recovery from its debtors" and "financial assistance from government". The Minister's response was limited to a direction to the plaintiffs to refer to the Independent Auditor's Report dated 30 April 2015.
[43] In relation to the third allegation, that TBC had failed to pay dividends, the plaintiffs asked the Minister to advise when and in what circumstances the Government had protested a failure by TBC to pay a dividend or had enquired as to why a dividend was not paid. The Minister somewhat cryptically responded by providing a definition of dividend and asserting that TBC's lack of profitability might explain why TBC and the Government agreed not to pay or receive a dividend. He did not identify any occasion when Government had protested a failure by TBC to pay a dividend or had enquired as to why a dividend was not paid.
[44] In response to the fourth allegation, that TBC had failed to meet the timeline requirements in the Public Enterprises Act for the submission of statutory reports, the plaintiffs asked that the Minister identify the specific occasions when it was said that there had been a failure to submit statutory reports on time and any correspondence highlighting TBC's failure to provide such reports on time. The Minister stated in response that in the last two financial years "with the exception of the Business Plan, almost all of the other reports were received after the set timeline in the Public Enterprises Act."
[45] In response to the fifth allegation, that TBC had failed to seek prior Government's GPO approval before supplying non-viable services, the plaintiffs sought particulars of what was being referred to including any notice from Government to the board highlighting any breach of the Public Enterprises Act. The Minister failed to respond at all to the plaintiffs' request for information regarding the fifth allegation.
[46] The Minister's letter of 1 October 2015 also dealt with one further issue upon which the plaintiffs placed reliance. The Minister stated:
Please note that Mr. 'Ahongalu Fusimalohi's appointment as a TBC Director will continue from today, until further notice, and after I have considered and made my decision in this matter".
[47] Mr. 'Ahongalu Fusimalohi was a member of TBC's board who had previously voluntarily resigned in accordance with the Minister's request. It appears that following his resignation he had been re-appointed to the TBC shared board. No further explanation was provided in the Minister's letter for that.
[48] On 2 October 2015 the plaintiffs wrote in response to the Minister's letter of 1 October 2015. The letter is largely a protest at the Minister's failure to properly particularise his allegations and a restatement of the plaintiffs' position. However, in relation to the fourth allegation, that statutory reports were not filed in a timely manner, the plaintiffs attached 19 separate reports or items of correspondence to support their stance that there had never been any failure to meet time line requirements.
[49] In response to the Minister's advice that Mr. Fusimalohi had been reappointed to the board of TBC the plaintiffs wrote:
Equally we are confronted with the bizarre development, as recently as 1 October 2015 where a former director of the Board, namely Ahongalu Fusimalohi, who purported to resign, and soon after 27 August when the Ombudsman's Report was published he sought to return to the TBC Board. He then resigned on 30 September indicating to the TBC Board that he had been appointed to the "...new combined Board of the TBC, Tonga Communications and Tonga Print" in the expectation that that "Super Board would meet on 1 October.
Despite this development on 1 October 2015....we were advised by you Ministry that Mr. Fusimalohi was again re-appointed to the TBC Board until further notice.
[50] It appears that after receiving the plaintiffs' letter of 2 October 2015 the Minister reported to Cabinet and by decision No.1116 dated 2 October 2015 Cabinet referred the plaintiffs' response to a Cabinet sub-committee consisting of the Minister of Public Enterprises, the Minister of Justice and the Minister of Police. In his affidavit Mr. 'Akau'ola says that the Ministry handed over the relevant correspondence to the sub-committee to review but there is before the Court no evidence as to the proceedings before the sub-committee nor is there any report that they may have made to Cabinet in evidence either. All that the evidence reveals is that on 16 October 2015 Cabinet again met and had before it for its approval a draft of a letter terminating the appointments of the plaintiffs "who have not yet resigned". The draft letter apparently contained an effective termination date for the plaintiffs' appointments of 1 October 2015 because Cabinet resolved:
That Cabinet note the effective date of termination, changing from 1st October 2015 as stated in recommendation Number (5) of Cabinet Decision No. 1114 on 18th September 2015 to 19 October 2015.
[51] The same Cabinet decision approved a recommendation to rescind recommendation 6 of Cabinet Decision No.1114 of 18 September 2015, that Dr. Havea's appointment be terminated from the date he migrated overseas, as Dr. Havea had also tendered his resignation since that Cabinet decision had been made.
[52] On that same day, that is 16 October 2015, letters were delivered to the plaintiffs from the Minister terminating their appointments on the TBC Board but stating that the Minister would still accept their resignations with the payment of compensation should the plaintiffs voluntarily resign before 4.30pm on 19 October 2015. The letters were in substantially identical terms. The letter to the first plaintiff reads:
"After careful and thorough consideration of your response to my letter of and the relevant documentations, I regret to advise that I have decided, with the consent of Cabinet, to terminate your appointment as a Director of the Board of Directors of the Tonga Broadcasting Commission, with effect from 4:30pm on Monday 19 October 2015.
The grounds for this decision is based on my determination that:
(1) under section 14(6) of the Public Enterprises Act, you have neglected your duty as a director; and
(2) under section 14(7) of the Public Enterprises Act, you failed to meet your obligations under Part V of the Public Enterprises Act.
I hold these views on the basis that whilst you were a Director of the Board of Directors of the Tonga Broadcasting Commission, you were responsible for the following:
(1) The poor financial performance of the Tonga Broadcasting Commission, with decreasing profitability in recent years and down to actual Net Losses in two of the past three financial years (Financial Years 2011/12-2013/14).
(2) The Acting Auditor General's concerns that the Tonga Broadcasting Commission could not continue to operate as a "going concern", and the Auditor's recommendation to set up reasonable settlement agreements with creditors, commence firm process of debt collection and to seek financial assistance from Government.
(3) The inability of the Tonga Broadcasting Commission to pay a dividend to Government, as required under section 21 of the Public Enterprises Act;
(4) The consistent failure of the Tonga Broadcasting Commission to provide before the statutory deadline, the reports that are required under sections 18 (business plan), 19 (half yearly reports) and 20 (annual reports) of the Public Enterprises Act; and
(5) The treatment of expenses of the Tonga Broadcasting Commission, amounting to $730,000 (approx.), to claim as a Government Policy Obligation (GPO), when clearly no such arrangement was ever directed or agreed upon by Government in accordance with section 4A of the Public Enterprises Act.
Despite this adverse decision against you, His Majesty's Cabinet also directed that, in order to demonstrate that this decision was made in good faith, with the public's interest in mind at all relevant times, I wish to inform you that if you re-consider and decide to voluntary resign before 4:30pm on Monday 19 October 2015, you will be entitled to receive the compensation package that was approved under Cabinet Decision number 842 of 28 August 2015, which consists of the equivalent of your current remuneration for six (6) months, and also any existing benefits that is payable to you as a gratuity under the Tonga Broadcasting Commission existing policies. If you do not voluntary resign by then, then no compensation package will be made available to you.
In conclusion, I sincerely hope that you will accept this decision, and that we all move forward and continue to contribute to the development of the Government and the country as a whole."
[53] The plaintiffs did not voluntarily resign, rather they filed this proceeding. They initially sought and obtained injunctive relief restraining the Minister from terminating their positions as directors of TBC until further order of the Court, but the interim orders made by Cato J were subsequently discharged by Scott J after a hearing. An appeal was filed against Scott J's ruling by the plaintiffs but rather than proceed with the appeal the parties agreed that it would be better for the substantive proceeding to be heard on an early date and that is how the matter has been progressed.
The plaintiffs' pleading
[54] The plaintiffs have pleaded three causes of action based on conventional chapter headings of judicial review (Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374 (HL) per Lord Diplock). The recognised grounds of review are not exhaustive and they overlap. Whilst the Court must base its decision on the recognised grounds of review in a case such as this, the substantive principles of judicial review can be adequately summarised in simple terms. A decision maker must act fairly and reasonably and in accordance with the law and this three-fold duty merges rather than being discrete (Sir Robin Cooke "Third Thoughts on Administrative Law" [1979] NZ Recent Law 218 and New Zealand Fishing Industry Association Inc v Minister of Agriculture and Fisheries [1988] 1 NZLR 544 (CA), 552).
Illegality
The Minister's request for resignations
[55] The first of the plaintiffs' principal arguments is that the Minister exceeded his powers under the Public Enterprises Act when he requested that the plaintiffs voluntarily resign. They argue that there is no power in the Public Enterprises Act for the Minister to request voluntary resignations from directors who have been validly appointed and that such requests amount to a constructive dismissal by analogy with employment law principles relying on Fonua v Tonga Communications Corporation Ltd [2006] Tonga LR 278.
[56] The Minister argues that that there is nothing in the Act to prohibit the Minister making a request of directors of public enterprises that they resign in pursuit of a Government Policy to make public enterprises more profitable by establishing shared boards. The Minister's counsel, also makes the point that principles of constructive dismissal have no role to play in this case where the plaintiffs never resigned in response to the request that they do so.
[57] I consider the submission that the Minister acted unlawfully when requesting the resignations of the plaintiffs is a distraction in that it fails to focus on the real issue in this case.
[58] Executive authority is derived from powers conferred by statute, prerogative powers and from a third source, being the residual freedom to do anything that does not conflict with positive law (Minister of Canterbury Earthquake Recovery v Fowler Developments Limited [2013] NZCA 588 at [75] to [85] referring to BV Harris "The 'Third Source' of Authority for Government Action" (1992) 109 LQR 626). Examples of powers that might be exercised under the authority of the residual freedom are said to include the publication of information, the entering into of contracts, and the making of ex gratia payments.
[59] In Fowler Developments, at [78] and [79], the Court of Appeal noted that the residual freedom cannot authorise acts which conflict with the legal rights and liberties of citizens or where the field is covered by statute and referred to Lord Atkinson in Attorney-General v De Keyser's Royal Hotel Ltd [1920] UKHL 1; [1920] AC 508 (HL), 539-540:
It is quite obvious that it would be useless and meaningless for the Legislature to impose restrictions and limitations upon, and to attach conditions to, the exercise by the Crown of powers conferred by a statute if the Crown was free at its pleasure to disregard those provisions, and by virtue of its prerogative do the very thing the statutes empowered it to do..
[60] The plaintiffs' submission appears to be based on the false premise that the Minister can only do what is expressly authorised by statute and no more.
[61] I do not see anything in the Act that could be said to restrict or limit or impose conditions upon the Minister's residual freedom to request the resignation of directors in circumstances where they are free to accept or reject the request or, if they wish, negotiate terms.
[62] However, that does not take matters very far in this case. Had the Minister accepted the plaintiffs' refusals to voluntarily resign and recognised their tenure for the balance of their terms it is inconceivable that any challenge would have been taken to the Minister's action. He did not do so. What is in fact being challenged is the Minister's decision to terminate the plaintiffs' appointments following their refusal to resign. The preliminary actions, by which I mean the Minister's request for resignations and the Cabinet decisions authorising the introduction of the reforms, and thereby the removal of directors from the boards, which may not be reviewable in themselves (New Zealand Maori Council v Attorney-General [1996] 3 NZLR 140, 160) only take on legal significance upon the Minister exercising the power to terminate the plaintiffs' appointments.
The Minister's decision to remove the plaintiffs
[63] The plaintiffs are on stronger ground when they argue that the Minister's decision to terminate their appointments was not based on any of the grounds set out in sections 14(6) and 14(7) of the Act. It was predicated, they say, upon their refusal to resign so that the public enterprise reforms could be introduced. The plaintiffs are advancing the argument that the Minister exercised his power for an improper purpose.
[64] Decision makers must always act within the parameters set by their empowering statute. Statutory powers are given for a purpose and their exercise must always promote that purpose. A decision maker, even one acting in good faith, abuses its statutory power by exercising it for an improper purpose (P. A. Joseph "Constitutional and Administrative Law in New Zealand", 4th Edition at 23.2.2 and page 941). Joseph at page 940 of his text says:
The Court must ascertain the scope of the power in question and ask whether the impugned decision complied with the statutory purpose, the mandatory statutory criteria, and any implied mandatory criteria as might arise from the statutory scheme or the context of the decision making. Judicial review is wholly contextual, making all of the ingredients of the case at hand relevant. The instinctual question. "Has something gone wrong?", throws light on the "controlled" subjectivity that characterises the application of administrative law principles.
[65] The Minister's case is that the decision to terminate the plaintiffs' appointments was not automatic upon their refusal to resign. The Minister's counsel argued that the decision was made under sections 14(6) and 14(7) of the Act and that a process was adopted whereby the issue of the plaintiffs' removal was referred to a Cabinet sub-committee who looked at their representations independently of the Minister before a decision was made by the Minister and Cabinet to remove them.
[66] Before considering the parties' competing contentions I turn to consider the terms of the Public Enterprises Act and also a decision maker's obligation of candour when defending its decisions.
The statutory context
[67] The long title to the Public Enterprises Act states that it is "An act to establish the objectives, rules and procedures relating to Public Enterprises". Section 4 states:
The principal objective of every public enterprise...shall be to operate as a successful business and, to this end, to be as profitable and efficient as comparable businesses that are not state owned.
[68] It will be noted that the success of a public enterprise is measured against narrow criteria. The term successful business is followed by the words 'to this end' which plainly introduce the measures of success, namely "to be as profitable and efficient as comparable businesses that are not state owned". Compare this with the more holistic approach in section 4 of the State Owned Enterprises Act (NZ). The principal objective of each state owned enterprise is also to operate as a successful business but this is measured in terms which include whether the state owned enterprise is a good employer and an organisation that exhibits a sense of social responsibility.
[69] The roles of directors are set out in section 13. Directors are required to act in good faith and in the best interests of the public enterprise. Under section 13(1)(a) directors must also ensure that the public enterprise conducts its business and all decisions of the board are made, in accordance with the principal objective.
[70] The Minister's powers to appoint and remove directors are contained in section 14. Under section 14(1) the Minister may, with the consent of Cabinet, appoint such persons as directors who in the opinion of the Minister will assist the public enterprise to achieve its principal objective under section 4. The powers of removal are in sections 14(6) and 14(7) of the Act.
[71] Section 14(6) states:
A director may be removed from office by the Minister for incompetence, incapacity, bankruptcy, neglect of duty, misconduct, or failing to assist the public enterprise to act in accordance with the principle objective.
[72] The focus of section 14(6) is upon the performance, conduct or status of '[a] director'. The preposition 'for' (which appears after the word Minister) clearly means 'because of' so that the grounds for removal are only those stated. Broadly speaking, the removal of a director must be because of an inability of the director to perform his or her duties (incompetence and incapacity), disqualification of the director from holding office (bankruptcy) or dereliction of duty (neglect of duty, misconduct or failing to assist the public enterprise to act in accordance with its principal objective). The listed grounds are not synonymous.
[73] The purpose of section 14(6) then is to provide a means of removal of a director who is no longer suitable to hold that position by reason of their unsatisfactory conduct, performance or status. It does not confer on the Minister the power to remove a director irrespective of those matters. Specifically, it does not authorise the Minister to dismiss a board, or non compliant members of a board, to advance a Government policy to establish shared boards for Public Enterprises.
[74] Section 14(7) states:
Where a public enterprise fails to comply with its obligations under Part IV and Part V, a director as a member of the board of the enterprise concerned may be removed from the board by the Minister
[75] The power to remove under section 14(7) can be exercised only for cause; in this context upon a failure by the public enterprise to comply with an obligation imposed under Part IV and Part V of the Act. As with section 14(6), it is not enough for a Minister to remove a director in the furtherance of a Government policy to establish shared boards.
[76] A Minister whose decision to remove a director is subject to challenge must identify which ground/s stated in sections 14(6) or 14(7) are relied upon and the circumstances which support the exercise of the power in the particular case. The Minister's power cannot be exercised for an ulterior purpose.
The duty of candour
[77] The Court is not bound to accept what appears on its face to be the reason for a decision. In appropriate cases the Court must go behind a decision to find the dominant or true reason for the exercise of a power (Joseph at 23.2.2 at page 944 and R v Brixton Prison Governor; Ex parte Soblen [1963] 2 QB 243 (CA)).
[78] The Court recognises that it should not trespass on the legitimate policy sphere of Ministers but in some cases, and this is one in my view, the real reasons for a decision do not appear in the decision itself but may emerge inferentially from other evidence.
[79] Less than full and candid disclosure by a decision maker may lead the Court to draw adverse inferences. Generally, of course, it should be unnecessary for the Court to draw inferences because decision makers, especially Ministers of the Crown, are expected to show candour and file affidavits which disclose all the relevant facts, the content of the decision making process that was adopted to arrive at the decision challenged and the full reasons for the decision (Tweed v Parades Commission for Northern Ireland [2007] 2 ALL ER 273, 285 at [31] per Lord Bingham).
[80] In R v Lancashire County Council; Ex parte Huddleston [1986] 2 All ER 941, Sir John Donaldson MR said at 945:
Counsel for the council submits, and I fully accept, that there has been no conscious attempt to conceal the thought processes of the chairman of the further education sub committee when he decided to reject the application for a discretionary grant. But she has two further submissions.
First, she says that it is for the applicant to make out his case for judicial review and that it is not for the respondent authority to do it for him. This, in my judgment, is only partially correct. Certainly it is for the applicant to satisfy the court of his entitlement to judicial review and it is for the respondent to resist his application, if it considers it to be unjustified. But it is a process which falls to be conducted with all the cards face upwards on the table and the vast majority of the cards will start in the authority's hands.
[81] In the same case Parker LJ at 947 said:
In the vast majority of cases authorities whose decisions are challenged will no doubt put before the court all that is necessary to enable justice to be done, for I agree that they have, or should have, a common interest with the courts in ensuring that the highest standards of administration are maintained and that, if error has occurred, it should be corrected. I agree, therefore, that when challenged they should set out fully what they did and why, so far as is necessary, fully and fairly to meet the challenge.
[82] The obligation of public authorities, and in particular the executive, to act as an exemplar litigant and provide full and candid disclosure to the Court has been recognised in decisions of the Court of England, Canada, Australia and New Zealand (Sebel Products Ltd v Commissioners of Customs and Excise [1949] 1 Ch 409, 413; SCI Operations Pty Ltd v Commonwealth of Australia (1996) 69 FCR 346, 368; Skogman v R [1984] 2 SCR 93, 109 and Solicitor-General v Miss Alice [2007] NZHC 48; [2007] 2 NZLR 783 at 796-797) and there is no reason why it should not equally be the case in Tonga.
[83] In relation to the particular position of Ministers, Joseph at page 931 of his text has this to say:
Ministers of the Crown bear a special responsibility. Although ministers may not be compelled to swear affidavits, they are expected to discharge fully their duty to the court: [T]he Crown must act, and be seen to act, as a model litigant. The Crown as executive must be an exemplar of high standards of conduct in litigation before the courts. It would be "regrettable" observed the Court of Appeal were a minister to make no affidavit. Ministerial candour is a constitutional obligation coupled with a correlative duty of judicial restraint
Why did the Minister remove the plaintiffs?
[84] I now turn to consider the reason why the plaintiffs were removed from their positions as directors of TBC. Was it, as the Minister argues, for poor performance and neglect of duty, or as the plaintiffs contend, because they would not voluntarily resign to allow for the implementation of the public enterprise reforms.
[85] The starting point is that the Minister did not make an affidavit. There is no statement from him whatsoever, apart from that contained in the letter to the plaintiffs of 16 October 2015 terminating their appointments, as to the reasons for his decision. There is also an absence of evidence about key aspects of the decision making process.
[86] There is no record of the matters which were considered by Cabinet on 18 September 2015 when it resolved that the Minister might exercise the option of terminating the plaintiffs' appointments. There is no explanation for the Minister's substantial failure to respond to the plaintiffs' requests for further particulars of the allegations made against them or confirmation that the Minister did in fact consider the plaintiffs' responses to the allegations and, if he did, his reasons for rejecting them. The statement in the Minister's letter of 16 October 2015 to the effect that he had given their responses careful and thorough consideration falls well short of satisfying me that such consideration was in fact given when the Minister has chosen not to give evidence and the letter contains no further reference to anything advanced by the plaintiffs on their own behalf. There is no evidence of the proceedings before the Cabinet sub-committee that is said to have considered the plaintiffs' responses to the Minister's allegations. The Minister has not produced any record of the Cabinet sub- committee's conclusions/recommendations. There is no evidence of the matters that Cabinet considered on 16 October 2015 when it approved the letter to be sent to the plaintiffs terminating their appointments or as to why the Minister offered the plaintiffs the further opportunity to resign and receive compensation if, as he contends, they had neglected their duty and failed to meet their obligations under Part V of the Public Enterprises Act to such an extent as to justify their summary removal. All of this casts considerable doubt over the veracity of the avowal in the Minister's letter of 16 October 2015 that the plaintiffs were being removed for performance reasons.
[87] The plaintiffs had been reappointed to the board by the Minister's predecessor in 2013 and 2014 respectively from which it can be taken that the then Minister was satisfied as to their performance as directors. In the Minister's statement of defence, at paragraph 18, it is pleaded that upon coming into office the Minister reviewed the financial performance and position of TBC and considered that the option of terminating the plaintiffs was justified because of the poor financial performance and non-compliance with the Public Enterprises Act. There is no evidence about any of that before the Court and in the absence of such evidence I cannot accept it.
[88] The evidence proves that the Government was on an intractable course to remove all the directors in the ICT and Utilities sectors. Cabinet gave its approval to the reforms by Cabinet Decision No.608 on 12 June 2015 despite an expected high level of resistance from the affected directors. The reforms were then announced (both to the Chairpersons of Public Enterprises and publically in a press release) and an advertisement placed seeking applicants for the new directors roles before there was any consultation with the existing directors. In the letter of 1 July 2015 from the Ministry of Enterprises to the first plaintiff it states that 1 September 2015 marked the "End of the term of existing directors...". This was repeated in the public advertisement of 3 July 2015.
[89] In Cabinet Decision No.746 dated 24 July 2015 Cabinet approved "...the skills based selection and appointment process for Public Enterprises directors..." and noted that redundancy payments "maybe considered to be paid to the directors who resign as part of this process." The Minister was to "provide a list of the persons he proposes to appoint as shared directors for the Utility and ICT Public Enterprises."
[90] In the Minister's letters to the plaintiffs of 12 August 2015 he formally requested that they resign but the letter is notable for the absence of any suggestion of performance issues or of any offer to engage in discussions on alternatives to the proposed reforms and he required the resignations within just two days.
[91] In Cabinet Decision No. 842 Cabinet approved compensation payments to the directors "from the restructured Public Enterprises Board of directors for ...Tonga Broadcasting Commission..." with no suggestion but that all the directors would be removed.
[92] By the time that Cabinet met on 18 September 2015 it was obvious that the plaintiffs did not intend to resign. There had been correspondence from Mrs. Petunia Tupou to the Minister on behalf of the board of TBC stating that they would not resign and the Commissioner of Public Relations had substantially found in favour of the complaint. Whilst other directors of TBC had tendered their resignations the plaintiffs had not.
[93] The real reason the plaintiffs were to be removed from the board was grounded on the plaintiffs' resistance to the reforms and refusals to resign, and is reflected in the words of Cabinet Decision No. 1114 and the Minister's own correspondence. Cabinet Decision No. 1114 states that the Minister may consider terminating the plaintiffs "base[d] on the appropriate clause in the Public Enterprises Act..." if the plaintiffs refused to resign by 1 October 2015. The Minister's letter to the plaintiffs of 29 September 2015, putting the plaintiffs on notice that the Minister was considering removing them, states "Because you did not accept to voluntarily resign...I am considering...to terminate your appointment...". The requests for the plaintiffs' resignations were sought on one ground alone; that was so the reforms could be implemented and had nothing whatsoever to do with the plaintiffs' performance as directors of TBC (see the Minister's letter to the plaintiffs of 25 September 2015).
[94] I am satisfied, and indeed it is plainly obvious in my view, that the only reason the plaintiffs were removed from office was because they would not resign to allow for the introduction of the public enterprises reforms. I have no doubt that the Minister and the Government considered their removal was necessary for the good of the country but the Minister had no power to remove the plaintiffs under section 14(6) or 14(7) on this ground. In doing so the Minister acted unlawfully requiring the Court's intervention.
Predetermination
[95] The plaintiffs also argue that the Minister's decision to remove them was not made in good faith and was predetermined. It was a decision, the plaintiffs say, predicated entirely on their refusal to resign. A decision which is predetermined, in the sense that the decision maker has a closed mind to any other result and is not amenable to persuasion, may be set aside (Lower Hutt City Council v Bank [1974] 1 NZLR 545 (CA) and Joseph at 25.5 and page 1089).
[96] In my view, there is more than sufficient evidence that the decision to remove the plaintiffs was predetermined. All of the matters in paragraphs 77-94 above are relevant but there are additional matters also. These prove a lack of any proper consideration by the Minister of either the limits on the exercise of his powers under sections 14(6) and 14(7) of the Act and of the matters raised by the plaintiffs in defence of the allegations made against them.
[97] It appears from the terms of Cabinet Decision No.1114 that it was simply assumed that the Minister could remove the plaintiffs pursuant to powers contained in the Act. There is nothing to suggest that Cabinet, or the Minister, gave any consideration to the actual terms of sections 14(6) and 14(7) of the Act (and indeed the use of the words 'appropriate clause' in Cabinet Decision No. 1114 when referring to the power of removal is highly suggestive that there was not) or to whether there was in fact any basis for regarding the performance of TBC and/or the plaintiffs as directors unsatisfactory.
[98] Having put the plaintiffs on notice in his letter of 29 September 2015 that he was considering removing them, the process the Minister then adopted was in my view flawed, unfair and perfunctory, congruous in my view with a predetermined outcome.
[99] The time frames within which the plaintiffs were to respond to the allegations were unreasonably brief, consistent with the Government's intentions that the effective date for the appointment of the shared directors was to be 1 October 2015 (Cabinet Decision No.1114 dated 18 September 2015). There was therefore little time to meaningfully engage with the plaintiffs on any genuine performance concerns.
[100] In his letter of 29 September 2015 the Minister set out five reasons for considering the removal of the plaintiffs but failed to specify which particular grounds in section 14(6) and (7) he relied upon. This is not just a matter of form but of substance. The scope of any response the plaintiffs could make to the allegations would depend substantially upon the manner in which the allegation was framed.
[101] When the plaintiffs requested particulars of the allegations the Minister's response provided almost none of the information that had been sought.
[102] In relation to the first allegation, the Minister failed to provide a satisfactory response to the plaintiffs' request for further explanation of the poor financial performance of TBC and in fact, fallaciously correlated revenue and profit. The plaintiffs could not be expected to undertake an analysis of all the financial statements of TBC and all the profitability indicators within those reports, for an unspecified number of years in order to respond to such a vague allegation. Furthermore, in framing this allegation, the Minister appears to have paid no regard to the primary objective of public enterprises, which requires profitability and efficiency to be measured, not in a vacuum, but as against comparable businesses that are not state owned.
[103] The Minister failed to give any meaningful response to the plaintiffs' request for particulars of his second and third allegations and failed to respond at all to the request for particulars of his fifth allegation.
[104] As to the fourth allegation, the Minister narrowed the scope of the allegation, but not in any meaningful way. In his letter of 29 September 2015 the Minister alleged that "TBC have [sic] failed in [sic] numerous occasions throughout the past years to meet the timeline requirements ...with the submission of TBC's statutory reports...". However, in his response to the plaintiffs' request for particulars he stated that "In the last two years, with the exception of the Business Plan, almost all of the reports were received after the set timeline in the Public Enterprises Act...". The use of the words "almost all" meant that the Minister failed to identify any specific statutory report/s that were not filed within the statutory time requirements. All that can be inferred from his response is that the Minister was referring to some unspecified reports, not including the Business Plans, and within the last two years.
[105] As I have noted earlier, there is no satisfactory evidence before the Court that the Minister or the Cabinet sub-committee did in fact consider the information provided by the plaintiffs in defence of the allegations made against them. I do not accept that Mr. Akau'ola can speak on behalf of the Minister or on behalf of the Cabinet sub-committee of which he was not a member. The significance of this failure is obvious when one considers just one of the Minister's allegations. The plaintiffs provided the Minister with 19 reports or items of correspondence to refute his fourth allegation that statutory reports were not submitted on time. The Minister does not refer to any of these documents in the letter terminating the plaintiffs' appointments except to refer to "your response ...and the relevant documentation...". In his decision to terminate the plaintiffs' appointments the Minister referred to the consistent failure of TBC to provide statutory reports, yet the Minister did not identify, in that letter or indeed at any stage, any specific report that was not provided in a timely manner. Furthermore, in the annexure to his letter of 1 October 2015 the Minister acknowledged that TBC business plans had all been provided on time yet, in contradiction of this, one of his reasons for terminating the plaintiffs' appointments was stated to be the consistent failure of TBC to provide "before the statutory deadline, the reports required under sections 18 (business plan)...".
[106] There is a further matter. In respect of two other TBC directors, Mrs. Fiu and Mr. Fusimalohi, the Minister had, upon receiving their resignations, written thanking them for their ideas and expertise "which has greatly contributed to the improvements of the Public Enterprises performance over the years...". The Minister then appointed Mr. Fusimalohi to the shared board of TBC from 1 October 2015. Both had been directors of TBC since 22 May 2014 and would share responsibility for some of the alleged failings of the board. It is incongruous that the Minister would terminate the plaintiffs for reasons of poor performance and neglect of duty while rewarding two other directors with praise, and, in the case of Mr. Fusimalohi, reappointment to the TBC board.
[107] I am satisfied that the Minister's decision to remove the plaintiffs from the board was predetermined and for that reason unlawful.
Natural justice
[108] The plaintiffs also plead that when deciding whether to remove them as directors the Minister was required to observe the requirements of natural justice but did not do so in the following respects:
[108.1] He failed to give the plaintiffs sufficient particulars of the allegations made against them.
[108.2] He did not give the plaintiffs adequate time to respond to the allegations made against them.
[108.3] He did not give the plaintiffs reasonable opportunity to be heard before making his decision and, specifically, that the plaintiffs were not aware of the appointment of a Cabinet sub-committee to consider the plaintiffs' case nor were they afforded an opportunity to appear before the sub-committee.
[109] The Minister did not argue that he did not have to observe the rules of natural justice in making his decision. He was right not to do so (Ridge v Baldwin [1963] UKHL 2; [1964] AC 40; Royal Australasian College of Surgeons v Phipps [1999] 3 NZLR 1, 16; Lloyd v McMahon [1987] UKHL 5; [1987] AC 625, 702 per Lord Bridge).
[110] The Minister argues that the plaintiffs were not denied natural justice because he provided adequate particulars of the allegations and sufficient time to respond to the allegations. It was argued that the fact that the plaintiffs were able to, and did, respond was evidence that sufficient particulars were provided by the Minister, as the plaintiffs should not have responded if it were the case that insufficient particulars of the allegations were provided. Finally, it was argued that the plaintiffs had no right to appear before the sub-committee and that in any event, the final arbiter was the Minister from whose decision there were no rights of appeal.
[111] It is fundamental that fairness requires that a person who may be adversely affected by a decision is given an opportunity to be heard. In a disciplinary context, which is what this case is concerned with, this necessarily includes specific particulars of the charges and the particular conduct that is relied upon. Without that a person accused will not have a fair opportunity to respond in their own defence (Royal Australasian College of Surgeons (supra) at 14, 16). In this case the Minister failed to provide the plaintiffs with sufficient particulars of both the charges and the conduct relied upon, for the reasons that I have already set out above.
[112] I accept that allowing sufficient time to respond to an adverse allegation is a requirement of natural justice also (Treaty Tribes Coalition, Te Runanga O Ngati Porou and Tainui Maori Trust Board v Urban Maori Authorities [1997] 1 NZLR 513) and that in a case such as this, where the plaintiffs had put the Minister on notice that they did not consider that they had sufficient information to address the allegations and there were clearly disputed questions of fact arising, the plaintiffs were entitled, as a matter of fairness, to be heard before the Minister to present their case (Osborn v Parole Board [2013] UKSC 61; [2014] AC 1115).
[113] The Minister plainly did not give the plaintiffs sufficient time to respond to his allegations. In his letter of 29 September 2015 he gave the plaintiffs until 2 October 2015 (a period of less than 3 days) in circumstances where serious allegations were being made against the plaintiffs, without supporting documents, for the very first time. That would have been unreasonable even if the Minister's allegations had been sufficiently particularised (which they were not). Upon providing his particulars on 1 October 2015 the Minister required any further submissions from the plaintiffs by 4.00pm on 2 October 2015, which was again wholly unreasonable. The Minister did not offer the plaintiffs any opportunity of a hearing at any stage either before himself or the Cabinet sub-committee.
[114] I regard as glib the arguments that if the plaintiffs did not have sufficient particulars they should not have responded and that they must have had sufficient time as they did in fact respond. The plaintiffs' correspondence to the Minister, although occasionally in bombastic and pejorative terms, could hardly have been clearer that they were responding under protest and did not consider that the requirements of fairness were being observed.
[115] However I have found that the Minister's decision to remove the plaintiffs was made for an improper purpose and was predetermined. It follows from that that the Minister's failures to observe natural justice were not material in the sense that they did not actually affect the decision making process. Had I not been of the view that the decision was unlawful on other grounds, I would have considered the Minister's breaches of natural justice both substantial and material requiring the Court's intervention.
Relevant and irrelevant factors
[116] The plaintiffs also argue that the Minister failed to take into account relevant factors and considered irrelevant factors when making his decision. In light of my findings that the Minister's decision was unlawful on other grounds it is not necessary for me to consider this further.
Relief
[117] The plaintiffs seek an order quashing the Minister's decision.
[118] The Court's power to grant relief is discretionary. In deciding whether to grant relief the Court must take into account all the circumstances of the case including any events that occur after the making of the impugned decision and any conduct of the plaintiffs, such as delay, a lack of clean hands or the availability of alternative remedies.
[119] The starting point however is that the Court should vindicate rights and when a plaintiff makes out substantial grounds for relief there must be good reason for refusing it (Air Nelson Ltd v Minister of Transport [2008] NZCA 26; [2008] NZAR 139 at [60]- [61]).
[120] Before me there is no pleading that relief should be refused on discretionary grounds, nor did the Minister advance any arguments that there were circumstances that would make it inappropriate to grant the plaintiffs the relief that they seek or would disentitle the plaintiffs to relief in the exercise of the Court's discretion.
[121] In those circumstances I can see no reason not to grant the plaintiffs their chosen remedy and I will quash the Minister's decision removing them as directors of TBC.
Result
[122] The Minister's decision of 16 October 2015 removing the plaintiffs as directors of the TBC is quashed.
[123] The plaintiffs are entitled to their costs which are to be fixed by the Registrar if not agreed.
| NUKU'ALOFA: 29 March 2016 | O.G. Paulsen LORD CHIEF JUSTICE |
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