Jones Enterprises Ltd v 'Uta'atu & Associates Ltd [2018] TOSC 64; CV 38 of 2018 (6 November 2018)

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

CV 38 of 2018

BETWEEN: JONES ENTERPRISES LIMITED

- Plaintiff

AND: ‘UTA’ATU & ASSOCIATES LIMITED

- Defendant

BEFORE LORD CHIEF JUSTICE PAULSEN

Counsel: Mr. ‘A. Pouvalu for the plaintiff

Mrs. D. Stephenson for the defendant

Date of Hearing: 29 October 2018

Date of Ruling: 6 November 2018

RULING

The applications

[1] There are two applications before the Court. The first is an application by the defendant to strike out the statement of claim on the ground that the plaintiff has no arguable cause of action against it. In the second application the plaintiff seeks an order substituting ‘Christine ‘Uta’atu trading as ‘Uta’atu & Associates’ for the present defendant ‘Uta’atu & Associates Limited .

[2] Mr. Pouvalu has now conceded that the plaintiff has no claim against ‘Uta’atu & Associates’ Limited, and that it ought to be dismissed as a party to this action.

[3] In relation to the plaintiff’s application to substitute ‘Christine ‘Uta’atu (Mrs. ‘Uta’atu) as the defendant, O.9 Rule 2(b) of the Supreme Court Rules provides:

....the Court may at any stage in the proceedings of its own motion or on application, and on such terms as it thinks just

....

(b) order any person to be added as a party if that person ought to have been joined as a party or if the person’s presence is necessary or convenient to ensure that all related matters are finally determined

[4] Whilst a plaintiff is generally free to choose the person or persons against whom it will proceed, O.9 Rule 2 (b) confers a discretion whether to order the joinder of any person as party to a proceeding. It requires the Court to be satisfied that the person ought to have been joined as a party or that that person’s presence is necessary or convenient to ensure that all matters are finally determined.

[5] The plaintiff contends that Mrs. ‘Uta’atu is the correct defendant against whom its claim ought to have been brought and that her presence is both necessary and convenient to ensure all matters are finally determined.

The relevant background

[6] South Pacific Processing & Development Co., Limited (South Pacific) is an incorporated company and was put into liquidation by the Supreme Court on the application of the ANZ Bank on 27 July 2009.

[7] Mrs. ‘Uta’atu was appointed liquidator of South Pacific by the Supreme Court.

[8] Mrs. ‘Uta’atu’s appointment was publicly advertised in the Tonga Chronicle on 21 August 2009.

[9] South Pacific is the owner of five registered leases at Tu’anuku, Vava’u. As liquidator, Mrs. ‘Uta’atu advertised the leases for sale by way of public tender. The sale was by South Pacific and the completed tenders were to be returned to Mrs. ‘Uta’atu as liquidator of South Pacific.

[10] The plaintiff submitted a tender (identifying the vendor as South Pacific) to acquire the leases for TOP$25,000, along with payment of a deposit of 10% of the tender amount (TOP$2,500) on or about 27 September 2013.

[11] In a letter of 2 October 2013, Mrs. ‘Uta’atu advised the plaintiff that its tender had been successful and that another 50% of the purchase price was payable within 14 days, at which point the plaintiff was entitled to take possession of the properties subject to it signing an agreement for sale and purchase. The balance of the purchase price was payable 14 days of the plaintiff being notified that Cabinet had approved the transfer of the leases. The letter was signed by Mrs. ’Uta’atu as liquidator of South Pacific.

[12] It is not clear if the plaintiff ever signed the agreement for sale and purchase but it did pay a further 50% of the purchase price (TOP$12,500) on 18 October 2013.

[13] The present dispute arose because the plaintiff has never been able to take possession of the properties and the leases have not been transferred to it due to delays in obtaining Cabinet approval. From at least 4 May 2018, the plaintiff has expressed its intention to cancel the purchase of the leases and has demanded repayment of the TOP$15,000 that it paid as deposits.

[14] It was only on 22 October 2018 that Mrs. ‘Uta’atu advised the plaintiff that Cabinet had approved the transfer of the leases and called for payment of the balance of the purchase price.

[15] The plaintiff no longer wants the leases and requires repayment of what it has paid and damages.

The statement of claim

[16] The plaintiff’s latest pleading is an amended statement of claim of 23 August 2018. It is acknowledged in that pleading that Mrs. ‘Uta’atu is the liquidator of South Pacific, that the leases were the property of South Pacific and that the payments made by the plaintiff were paid not to Mrs. Uta’atu (or ‘Uta’atu & Associates Limited) personally but into a trust account ‘as required by the basis of the tender’.

[17] The cause of action relied upon is that in breach of the contract for the plaintiff’s purchase of the leases Mrs. ‘Uta’atu has failed to provide the plaintiff with access to the properties or transfer the leases entitling the plaintiff to repayment of its deposits and damages. I note that there is also a pleading that Mrs. “Uta’atu has failed to provide a warranty as to title of the leases which, as the leases have not been transferred to the plaintiff, cannot possibly add anything to the claim.

Discussion

[18] A liquidator is the agent of the company in liquidation and ‘the acts of, or transactions entered into by, a liquidator bind the company and not the liquidator personally’ (See Company and Securities Law in New Zealand, 2^nd Ed at 31.5, page 890 and Anglo-Moravian Hungarian Junction Railway Company [1875] UKLawRpCh 145; (1875) 1 Ch. D 130).

[19] The plaintiff’s claim is for breach of a contract it entered into with South Pacific. It follows that an action to enforce the contract (including a claim for damages) must be brought against South Pacific and not Mrs. ‘Uta’atu.

[20] Mr. Pouvalu submitted that the plaintiff is entitled to proceed against Mrs. ‘Uta’atu because South Pacific has been struck off the Register of Companies and because under s. 257(1)(a) of the Companies Act it is a liquidator who has custody and control of a company’s assets. These arguments are not sound.

[21] Contrary to Mr. Pouvalu’s submission, South Pacific is a registered company. In any event, if South Pacific had been struck off the register that would provide no justification for an action against Mrs. ‘Uta’atu personally and the appropriate course would be for the plaintiff to apply to have South Pacific restored to the register.

[22] Section 257(1)(a) simply reflects a feature of the relationship between a company and its liquidator, that it is the liquidator as agent who has control of the assets of the principal. The section does not impose any liability on a liquidator and it is the company that retains legal and beneficial title to its assets (see Levin v Ikiua [2010] 1 NZLR 215).

[23] The correct party to answer the plaintiff’s claim is South Pacific but there is no application to join South Pacific as a party and the plaintiff will need to seek the consent of the liquidator or the Court under s. 257(1)(c) of the Companies Act to bring such an action.

[24] The plaintiff’s claim against Mrs. ‘Uta’atu, as it is presently formulated, cannot succeed. In terms of O. 9 Rule 2(b) it is therefore neither necessary nor is it convenient that she be joined as a defendant. I am not prepared to make an order joining Mrs. ‘Uta’atu as a defendant at this time.

[25] It may be possible (I certainly put it no higher than a possibility) for the plaintiff to formulate a valid claim against Mrs. ‘Uta’atu. Out of an abundance of caution I am going to adjourn the plaintiff’s application on terms for it to reconsider its position in light of the matters that I have set out in this ruling.

Result

[26] The defendant shall be removed as a party to this action. The defendant is entitled to its cost to be fixed by the Registrar if not agreed.

[27] The plaintiff’s application to join Mrs. ‘Uta’atu as a defendant shall be dismissed unless by 26 November 2018 the plaintiff files a further proposed statement of claim in support of the application.

[28] In the event that the plaintiff does file a further proposed pleading its application shall be called before me again at 9am on 30 November 2018 when I shall hear further from Counsel.

O.G. Paulsen

NUKU’ALOFA: 6 November 2018. LORD CHIEF JUSTICE