Osa v Samoa Breweries Ltd [2018] WSCA 10 (25 October 2018)

IN THE COURT OF APPEAL OF Samoa
Osa & Ors v Samoa Breweries Ltd [2018] WSCA 10

Case name:	Osa & Ors v Samoa Breweries Ltd
Citation:	[2018] WSCA 10
Decision date:	25 October 2018
Parties:	LOLI OSA, LOUISA AH KUOI & MAGELE FITI (Appellants) and SAMOA BREWERIES LIMITED (Respondent)
Hearing date(s):	17 October 2018
File number(s):	CA07/18
Jurisdiction:	CIVIL
Place of delivery:	Court of Appeal of Samoa, Mulinuu
Judge(s):	Honourable Chief Justice Sapolu Honourable Justice Fisher Honourable Justice Harrison
On appeal from:	Supreme Court of Samoa, Mulinuu
Order:	The appeal is dismissed. The appellants are ordered to the pay the respondents costs of SAT$5000 together with reasonable disbursements.
Representation:	Alex Su’a for the Appellant Charlie Vaai for the Respondent
Catchwords:	Production distribution agreement – submitted false invoices – obtained wrongful financial benefits – conspiracy to defraud – claim for damages – judgment appealed – dishonesty – tort of deceit
Words and phrases:	employees convicted of being parties to conspiracy
Legislation cited:
Cases cited:	Amaltal Corporation Ltd v Maruha Corporation Ltd [2007] 1NZLR 68 (CA); Samoa Breweries Ltd v Osa [2018] WSSC36 (13 March 2018).
Summary of decision:

IN THE COURT OF APPEAL OF SAMOA
HELD AT MULINUU

CA07/18

BETWEEN:

LOLI OSA, LOUISA AH KUOI & MAGELE FITI
Appellants

A N D:

SAMOA BREWERIES LIMITED
Respondent

Coram: Honourable Chief Justice Sapolu
Honourable Justice Fisher
Honourable Justice Harrison

Hearing: Wednesday 17October 2018

Counsel: Alex Su’a for the Appellant
Charlie Vaai for the Respondent

Judgment: Thursday 25 October 2018

JUDGMENT OF THE COURT

Introduction

1. Samoa Breweries Ltd (SBL) manufactures and distributes beer, soft drinks, ice and related products. In May 2009 the company entered into a production distribution agreement with Queen Maggie Transport (QMT), a trading entity owned by Loli Osa and Luisa Ah Kuoi, giving QMT exclusive selling and marketing rights for SBL’s products in Savaii. SBL supplied its products on terms of extended credit. QMT was entitled to a set-off or counter credit for the invoiced value of empty bottles, containers or crates of SBL products which it returned to the brewery.
2. In 2012 SBL noticed anomalies in QMT’s invoices submitted on claims for counter credits on returns. Magele Fiti, who is the son of Mr. Osa and Ms. Ah Kuoi and who was employed in a senior management position at QMT, had signed most of the invoices. As a result of an internal investigation SBL concluded that QMT or its employees had regularly submitted false invoices to obtain wrongful financial benefits. The company complained to the police, leading to Mr. Fiti’s conviction on five counts of conspiracy to defraud SBL in early 2012. At least four SBL employees were convicted of being parties to the same conspiracy.
3. SBL issued proceedings in the Supreme Court against Mr. Osa, Ms. Ah Kuoi and Mr. Fiti as defendants. Following trial Justice Tuala-Warren entered judgment for SBL against all defendants for damages of SAT$778,000.^[1]The defendants now appeal.

Distribution Agreement

4. The distribution agreement allowed QMT to obtain a counter credit on its current account by submitting what was known as a Delivery Invoice certifying the number of empties being returned by truck on a particular consignment. On delivery QMT’s driver physically handed the invoice to a SBL security officer at the gates to its premises. The security officer was required to count the number of empty crates and bottles to verify QMT’s invoice and prepare a separate checklist of the time of arrival and quantities of returned products.
5. The next step was for the QMT driver to drive the truck to SBL’s reception. There a receiving officer would independently recount the empties and check the quantities being returned. A Returned Empties Note would then be generated. The receiving officer would also calculate the value of the consignment before SBL’s finance division counter credited the value to QMT’s account.
6. It should be noted at this juncture that the former SBL employees convicted of being parties to Mr. Fiti’s fraud were security officers, receiving officers and finance administrators who were responsible for performing various of the company’s internal functions when processing the returned empties. Mr. Fiti plainly required their collusion to carry out his dishonest scheme.

Supreme Court

7. SBL’s evidence at trial was largely uncontested. Its witnesses confirmed that between June to December 2010 QMT returned an excess of 43,000 crates of empty bottles over crates actually supplied by SBL during the same period (70,000 crates of product received as opposed to 113,000 crates of empties returned). Between June and December 2011 an excess of 120,000 crates of empties over deliveries was returned. Between January and April 2012, the excess was 52,000 crates. On this basis QMT was returning every single bottle delivered plus a substantial excess. Or in simple terms, bottles out did not reconcile with bottles in, at a time when, first, SBL was experiencing a serious shortage of empty bottles in its factory and, second, the standard industry rate of return of empties by distributors was about 40% of deliveries.
8. QMT submitted a total of 752 invoices to SBL for 431,122 returned crates of empty product in the two and half year duration of the agreement. About 24% of these invoices were either missing a signature when copied or were not signed by Mr. Fiti. However, he personally signed the remaining 569 invoices certifying returns of 330, 282 crates of returned product to a total value of SAT$2,245,917.00. In calculating its loss, SBL allowed the defendants a 100% return rate offset of SAT$1,467,908.00. The Judge rightly described this concession as generous. SBL amended its claim at trial downwards to the difference of SAT$778,009.00 (SAT$2,245,917.00 -SAT$1,467,908.00).
9. SBL led evidence from Kilisitina Kasiano. She was a former SBL employee in the finance section who was paid by former security officers for participating in the fraud. One day in November 2011 she saw an empty QMT truck enter the SBL compound and the driver submit invoices claiming for three full loads of returned empties. Ms. Kasiano also observed a fellow employee in the finance section receiving cash from security guards on other occasions when QMT trucks came into the brewery.
10. At trial the defendants sought to attribute the excessive returns to QMT’s collection of SBL product which consumers and retail outlets had physically taken to Savaii themselves. The Judge rejected this explanation.^[2] It was inherently implausible that consumers themselves would take such large numbers of SBL’s products to Savaii from Upolu and elsewhere when the brewer’s distributor was conveniently located in Salelologa.
11. Mr. Fiti’s evidence was principally directed to an unsuccessful attempt to answer SBL’s allegation that Mr. Osa and Ms. Ah Kuoi were vicariously liable for the loss caused by his fraud. He also denied falsifying any of the invoices except those that were the subject of the five charges on which he was convicted. It should be noted that the primary evidence on which the prosecution relied to prove his fraud in early 2012 was security footage which was not available for any earlier period. The Judge, who had the special benefit of presiding at trial and hearing the witnesses, dismissed Mr. Fiti’s evidence as “extremely implausible, unbelievable and evasive.”^[3]
12. We note that a number of the defences raised at trial are no longer in issue. In particular, there is no challenge to the Judge’s findings of (a) SBL’s proof of four of the five elements of the tort of deceit; and(b) Mr. Osa and Ms. Ah Kuoi’s vicarious liability for Mr. Fiti’s fraudulent acts. The appellants also accept liability to the extent of SAT$26,097.00 being the amount for which Mr. Fiti was convicted of defrauding SBL in early 2012.

Decision

13. By reference to the facts of this case the Judge correctly identified the five elements required to establish the tort of deceit as whether: (a) Mr. Fiti made false representations in the invoices which he signed for QMT’s submission to SBL; (b) Mr. Fiti knew the representations were false; (c) Mr. Fiti intended that SBL should act in reliance on them; (d) SBL did act in reliance; (e) the company suffered a loss as a consequence.^[4]
14. Mr. Su’a does not challenge the Judge’s primary factual finding on the first element that Mr. Fiti made false representations in the invoices he signed for QMT. His challenge is limited to the Judge’s finding that the second element of fraudulent knowledge was factually proved. The Judge’s affirmative findings on the last three elements logically followed her affirmative findings on the first two.
15. The primary ground of appeal was described as the Judge’s error in finding liability by relying on propensity evidence of Mr. Fiti’s admitted fraud in 2012 without corroboration. In oral argument Mr. Su’a for the appellants expanded that ground to a submission that it was not open to the Judge to infer from the facts which she found proved to infer that Mr. Fiti knew the representations made in the invoices he signed were in fact false.
16. We reject Mr. Su’a’s latter submission. In our judgment the inference of fraud drawn by the Judge from the primary facts was the logical and inevitable consequence of the appellants’ proper acceptance of proof of the first element of falsity. A table produced at trial showed that QMT’s claims for empties substantially exceeded deliveries in almost every month over a two and a half year period. Mr. Fiti signed the great majority. Also, there was Ms. Kasiano’s evidence of SBL employees’ participation in a dishonest scheme which was triggered when QMT trucks entered the brewery.
17. The Judge’s conclusion of sustained falsity had to follow once she rejected QMT’s explanation for the surplus. On its own, and without taking account of Mr. Fiti’s admitted fraud on five occasions in early 2012, this pattern of falsity leads necessarily to the inference that as the representor Mr. Fiti must have known the 569 false invoices which he signed were untrue. The scale, duration and nature of his misrepresentations does not allow for any other possibility. And the weight of this evidence excludes any scope for advancing a plausible explanation of honest mistake.
18. Mr. Su’a protested that SBL had not led any direct evidence of Mr. Fiti’s fraud when signing MQT’s false returns in 2010 and 2011. However, without admissions, direct evidence of a person’s dishonest state of mind is rarely available. Its existence must instead be established by the orthodox judicial method of drawing inferences from proved facts. That was the approach adopted by the Judge in this case.
19. As noted, Mr. Su’a submitted that the Judge gave improper weight to Mr. Fiti’s 2012 convictions when signing the five fraudulent invoices. He says the Judge’s adoption of this evidence as of a propensity nature was an insufficient foundation for inferring fraud for the entire preceding period. He qualified this submission by volunteering that Mr. Fiti’s convictions could arguably justify a finding of fraud extending back to mid-2011 but no further. He did not explain how or why a division might be justified by selecting what may seem to be an arbitrary cut-off date some six months prior to Mr. Fiti’s admitted dishonesty.
20. In our judgment this reasoning is flawed by its apparent premise that the convictions are the only relevant evidence of Mr. Fiti’s dishonesty. It necessarily excludes any consideration of the other probative evidence. As explained, the Judge was entitled to take into account all the established facts when evaluating whether Mr. Fiti acted fraudulently throughout. Whether the evidence of Mr. Fiti’s fraud is described as being of a propensity nature or otherwise, it simply added to the weight of the remaining evidence of his fraud which, we repeat, was sufficient of itself to justify the Judge’s findings.
21. Mr. Su’a’s submission also introduces an incongruity into the appellants’ main defence. It presupposes that either in January 2012 or another date in mid-2011Mr. Fiti’s emerged as the sole cause of QMT’s excessive returns, in an instant superseding its preceding explanation which attributed the large surpluses to extra bottles of empty SBL product taken to Savaii by consumers or sold there by other distributors. This substantive inconsistency in QMT’s defence illustrates its inherent implausibility, and serves to reinforce the strength of the Judge’s findings.
22. We are satisfied that the Judge correctly found that SBL had established its claim for damages to the civil standard of proof on the balance of probabilities.

Result

23. The appeal is dismissed.
24. The appellants are ordered to the pay the respondents costs of SAT$5000 together with reasonable disbursements.

HONOURABLE CHIEF JUSTICE SAPOLU
HONOURABLE JUSTICE FISHER
HONOURABLE JUSTICE HARRISON

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^[1]Samoa Breweries Ltd v Osa [2018] WSSC36 (13 March 2018).
^[2] Supra n 1 at [72].
^[3]Supra n 1 at [73].
^[4]Supra n 1 at [70]., applying Amaltal Corporation Ltd v Maruha Corporation Ltd [2007] 1NZLR 68 (CA) at [46] – [54].