Public Service Association Incorporation v Kingdom of Tonga [2018] TOSC 44; CV 48 of 2014 (5 September 2018)

IN THE SUPREME COURT OF TONGA
CIVIL JURISDICTION
NUKU’ALOFA REGISTRY

CV 48 of 2014

BETWEEN: PUBLIC SERVICE ASSOCIATION INCORPORATION

- Plaintiff

AND: SAMUELA ‘AKILISI POHIVA

- Second Plaintiff

AND: THE KINGDOM OF TONGA

- First Defendant

AND: FRIENDLY ISLANDS SATELLITE COMMUNICATIONS

- Second Defendant

To: Dr. R Harrison SC QC for the plaintiffs
Mr. ‘A Kefu SC for the first defendant
Mr. W Edwards Jr for the second defendant

Date of Ruling: 5 September 2018

JUDGMENT AS TO FORM OF DECLARATIONS AND COSTS

[1] At paragraph [207] of my ruling of 17 August 2018 I reserved my decision as to the terms of declaratory relief to be granted to the plaintiffs. I invited Counsel to submit memoranda.

[2] I have now received memoranda from Counsel. No Counsel has requested a further hearing and so I am dealing with the matter on the papers (see paragraph [207] of my earlier judgment).

[3] For the plaintiffs Dr. Harrison has in his memorandum proposed 14 declarations which he submits as closely as possible reflect the key findings and legal conclusions of the Court’s judgment.

[4] Mr. Kefu and Mr. Edwards have responded to each proposed declaration in Dr. Harrison’s memorandum and in Mr. Edward’s case proposed some alternative terms.

[5] The declaratory relief proposed by Dr. Harrison for the plaintiffs is the following:

1. The first tranche payment of USD$24.45 million in aid grant funds received by the first defendant (the Kingdom) from the People’s Republic of China on 4 September 2008 (the first tranche payment) was a “grant” and accordingly “public money” within the meaning of the Public Finance Management Act (“PFMA”);
   
2. Following its receipt by the Kingdom, USD$20,985,667 of the first tranche payment was paid to or for the benefit of the second defendant (Tongasat) pursuant to a purported agreement between the then Prime Minister of Tonga, Dr Feleti Sevele (as he then was) and Tongasat;
   
3. The payment of USD$20,985,667 of the first tranche payment to or for the benefit of Tongasat was expended in breach of section 9 of the PFMA and accordingly unlawful and invalid;
   
4. Furthermore, to the extent that the first tranche payment was expended to satisfy pre-existing liabilities of Tongasat that expenditure was in breach of section 30 of the PFMA and accordingly unlawful and invalid;
   
5. The purported agreement between the then Prime Minister and Tongasat referred to in para 2 above was both in breach of the PFMA and in excess of Dr Sevele’s lawful powers and authority as Prime Minister and accordingly unlawful and invalid;
   
6. Tongasat was not entitled to payment of the first tranche payment or any part thereof under either the Agency Agreement or the Agency Termination Agreement;
   
7. The second tranche payment of USD$25.450 million in aid grant funds received by the Kingdom from the People’s Republic of China on 9 June 2011 (the second tranche payment) was a “grant” and accordingly “public money” within the meaning of the PFMA;
   
8. Following its receipt by the Kingdom, the second tranche payment was paid in its entirety to or for the benefit of Tongasat pursuant to a purported agreement between the then Prime Minister of Tonga, Dr Feleti Sevele (as he then was) and Tongasat;
   
9. The payment of the second tranche payment in its entirety to or for the benefit of Tongasat was expended in breach of section 9 of the PFMA and accordingly unlawful and invalid;
   
10. Furthermore, to the extent that the first tranche payment was expended to satisfy pre-existing liabilities of Tongasat that expenditure was in breach of section 30 o9f the PFMA and accordingly unlawful and invalid;
    
11. The purported agreement between the then Prime Minister and Tongasat referred to in para 8 above was both in breach of the PFMA and in excess of Dr Sevele’s lawful powers and authority as Prime Minister and accordingly unlawful and invalid;
    
12. Tongasat was not entitled to payment of the second tranche payment or any part thereof under either the Agency Agreement or the Agency Termination Agreement;
    
13. The plaintiffs lack standing to pursue their restitutionary private law claims against Tongasat and those claims are dismissed;
    
14. The plaintiffs are entitled to the costs of the action against both defendants, with costs to be fixed by the Registrar if not agreed.

[6] The first defendant accepts paragraphs 1, 3, 4, 6, 7, 9, 10, 12, 13 and 14. It objects to paragraphs 2 and 8 on the basis that they do not declare any legal finding and are unnecessary. It objects also to paragraphs 5 and 11 because the unlawfulness identified is already adequately covered in other paragraphs and it is unnecessary to include the Prime Minister’s name.

[7] The second defendant agrees with paragraphs 1, 7, 13 and 14 only. It objects to paragraphs 2, 5, 8 and 11 for the same reasons advanced by the first defendant. In respect of paragraphs 3, 4, 9 and 10 it objects to them because it is said that the declarations are incorrect. It argues that paragraphs 6 and 12 are not consistent with the relief sought in the statement of claim.

[8] In respect of the first tranche payment the second defendant proposes an alternative declaration to paragraph 3, 4 and 6 as follows:

A declaration that the payment of the PRC aid grant funds from the first tranche payment to or for the benefit of the Second Defendant was a dealing with those funds (as public money according to the Public Finance Management Act) without lawful authority and/or in breach of the Public Finance Management Act and accordingly an unlawful and invalid dealing with those funds.

[9] In respect of the second tranche payment the second defendant proposes an alternative declaration to paragraphs 7, 9 and 10 as follows:

A declaration that the payment of the PRC aid grant funds from the second tranche payment to or for the benefit of the Second Defendant was a dealing with those funds (as public money according to the Public Finance Management Act) without lawful authority and/or in breach of the Public Finance Management Act and accordingly an unlawful and invalid dealing with those funds.

Some observations about declarations

[10] Before considering the parties’ respective positions I make the following observations concerning declarations which I hope will inform what follows.

[11] Zamir and Woolf in the 3^rd editf ‘The Declaraclaratory Judgment’ at 1.02 state:

A declaratory judgment is a formal statement by a court pronouncing upon the existence or non-existence of a legal stf affairs. It is to be cone contrasted with an executory, in other words coercive, judgment which can be enforced by the courts.

[12] Whilst declarations are not coercive they do have legal consequences. A declaration will, for instance, operate as a res judicata or an issue estoppel and such an order is a final order for the purposes of appeal (Aronson, Dyer & Groves in ‘Judicial Review of Administrative Action’ 3^rd Ed, Law Book Co, 2004 at page 802 referred to in French, Justice Robert ‘Declarations - Homer Simpson’s remedy – is there anything they cannot do?’ [2007] FedJSchol 24).

[13] A declaration is not however the same thing as a summary of the Court’s findings of fact and law even though it may replicate some of what is contained in the Court’s reasons for judgment.

[14] As a declaration may operate as an estoppel in later proceedings it should be specific and worded with precision. It should not refer to matters that were not finally decided or are strictly obiter dicta.

[15] I agree with these words from Warramunda Village Inc v Pryde [2001] FCA 61 at [8] that:

The remedy of a declaration of rights is ordinarily granted as final relief in a proceeding. It is intended to state the rights of the parties with respect to a particular matter with precision, and in a binding way. The remedy of a declaration is not an appropriate way of recording in summary form, conclusions reached by the Court in reasons for judgment. This is even more strongly the case when the conclusion is not one from which any right or liability necessarily flows.

Discussion

[16] The most convenient method of making sense of what is a confusing position is to deal seriatim with each of the declarations proposed by the plaintiffs and the objections raised to them.

[17] There is no disagreement with paragraph 1.

[18] Both defendants object to paragraph 2. In my view paragraph 2 adds nothing of value to paragraph 3 and 4 and is unnecessary.

[19] The second defendant objects to paragraph 3. In my view it correctly records that the payment of the entire USD$20,985,667 to or for the benefit of the second defendant was unlawful in breach of s. 9 of the Public Finance Management Act. I do not accept the second defendant’s objection.

[20] For the same reason as in [19] above, I do not accept the second defendant’s objection to paragraph 4.

[21] In respect of paragraph 5, I take the view that this adds nothing of value to paragraphs 3 and 4 and agree with the defendants’ objections.

[22] The second defendant objects to paragraph 6. Whilst I do not accept that the declaration is inconsistent with the relief sought in the statement of claim I also do not think that paragraph 6 is appropriate. Whilst in my judgment I expressed the view that neither the Agency Agreement nor the Agency Termination Agreement entitled the second defendant to payment of any part of the first (or second) tranche payment that finding was not essential to my judgment and was strictly obiter dicta (see paragraph [167] of the judgment).

[23] There is no disagreement about paragraph 7.

[24] For the same reason as I gave in relation to paragraph 2 (see [18] above) I do not accept paragraph 8.

[25] For the reasons I gave in relation to paragraph 3 (see [19] above) I do not accept the second defendant’s objection to paragraph 9.

[26] For the reasons I gave in relation to paragraph 4 (see [20] above) I do not accept the second defendant’s objection to paragraph 10.

[27] For the reasons I gave in relation to paragraph 5 (see [21] above) I do not accept paragraph 11.

[28] For the reasons I gave in relation to paragraph 6 above (see [22]) I do not accept paragraph 12.

[29] There is no disagreement in respect of paragraph 13.

[30] There is no disagreement in respect of paragraph 14.

[31] I have preferred to adopt the declarations proposed by Dr. Harrison rather than those proposed by Mr. Edwards because I consider them more precise in recording the findings in the judgment.

Cost between defendants

[32] The second defendant is seeking an indemnity from the first defendant for cost awarded against it in favour of the plaintiffs as well as its own costs of defending this action.

[33] I have not received any submissions from the first defendant in respect of that application. It may be that the first defendant was not aware that such an application was to be made. I reserve the second defendant’s application pending receipt of submissions from the first defendant, which I timetable below.

Result

[34] There shall be declarations in terms of paragraphs 1, 3, 4, 7, 9, 10, 13 and 14 of the draft judgment submitted with Dr. Harrison’s memorandum of 24 August 2018.

[35] In relation to the second defendant’s application for costs against the first defendant (including the indemnity for costs awarded to the plaintiffs) the first defendant should file any submissions within 14 days and I will then issue a ruling on that application on the papers.

O.G. Paulsen
NUKU’ALOFA: 5 September 2018 LORD CHIEF JUSTICE