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'Uta'Atu v Naufahu [2013] TOCA 10; Ac 16 of 2012 (17 April 2013)

IN THE COURT OF APPEAL OF TONGA
CIVIL JURISDICTION
NUKU'ALOFA REGISTRY

AC 16 of 2012
[CV 70 of 2010]

BETWEEN:

1. CHRISTINE 'UTA'ATU
2. TONGA INVESTMENTS LIMITED
Appellants

AND:

1. SANDRA NAUFAHU
2. ZUVVA COMPANY LIMITED
- Respondents

Coram : Salmon J
Handley J
Blanchard J

Counsel : Mr. S. V. Fa'otusia for the Appellants
Mr. L. Niu SC for the Respondents

Date of hearing : 9 April 2013
Date of judgment : 17 April 2013

JUDGMENT OF THE COURT

[1] The Court has before it an appeal and cross appeal from the judgment of the Lord Chief Justice of 15 June 2012 and his order for costs of 14 September 2012. His findings of fact in the action were not challenged in any way.

[2] The proceedings arose out of the removal by Mr. Peni Vea of part of a disused pipeline owned by the second plaintiff at Vuna Road Touliki, Ma'ufanga in August 2007. This was done, as the Lord Chief Justice found, with the permission of the first defendant, who was the Chief Executive Officer of the second defendant which had sold the pipeline to the second plaintiff in 1999 for TOP$5000.

[3] The issues at the trial centered on the second plaintiff's claim that part of the pipeline had been removed with the permission of the defendants; that it was a diesel pipeline, and not the disused coconut oil pipeline, and the second plaintiff had suffered damage of TOP$872,000 including TOP$132,000 paid to acquire the pipeline.

[4] The issue of authority was resolved in favour of the plaintiffs, but the Lord Chief Justice found that the damaged pipeline was the disused coconut oil pipeline, that the damage to that pipeline was worth TOP$300, and not TOP$132,000 and the second plaintiff had not suffered any consequential loss.

[5] He entered judgment for the plaintiffs for TOP$300 against the first defendant, appears, by necessary implication, to have given judgment for the second defendant, and reserved costs.
[6] On 14 September 2012 after further argument the Lord Chief Justice ordered the first defendant to pay the plaintiffs' costs of the action and of the application for costs.

[7] The defendants appealed challenging the judgment for the plaintiffs on liability on the ground that their only claim was for the damage to a diesel pipeline, and there was no claim for damage to the disused coconut oil pipeline. In their submission, the Lord Chief Justice, having found that the diesel pipeline had disappeared before August 2007, should have dismissed the action. We will refer to this as the pleading point. It is not clear why the second defendant appealed, or that it had the standing to do so.

[8] The defendants also challenged the Judge's order for costs. The Lord Chief Justice held that the plaintiffs had succeeded in the action, and there was no reason for displacing the usual rule that costs should follow the event.

[9] The defendants' appeal provoked a cross appeal by the plaintiffs who sought judgment for TOP$300 and costs against the second defendant.

[10] Mr. Niu for the appellants took the Court through the plaintiffs' statement of claim and established that their only claim was for damage to the diesel pipeline, and there was no claim for the damage to the disused coconut oil pipeline, although it was mentioned. The defendants' case throughout was that it was the coconut oil pipeline that had been damaged.

[11] The plaintiffs did not seek leave to amend, and the Lord Chief Justice did not act to direct an amendment. However the parties litigated the question whether the diesel or coconut oil pipeline had been damaged.

[12] The position in such a case in Tonga, and elsewhere in the common law world, is that the Court is entitled, and indeed bound to give judgment on the issues litigated. In Prasad v Morris Hedstrom (Tonga) Ltd (No. 2) [1993] Tonga LR 69, 73 the Court of Appeal said:

"...if despite inadequate pleadings, an issue is clearly raised and is understood by the opposing party to be raised and then dealt with, it should not be excluded because of technicality of pleadings."

[13] This decision was applied by Ford J in Fa'aoa v Tonga Development Bank [2002] Tonga LR 317,327. We have no hesitation in following these decisions, and we reject the pleading point.

[14] The Lord Chief Justice gave judgment for TOP$300, not only in favour of the corporate plaintiff which was the legal owner of the coconut oil pipeline, but also in favour of the first plaintiff who sued as its managing director and shareholder. There was no appeal against the judgment in favour of the first plaintiff but although nothing really turns on it, it should not be allowed to stand.

[15] A shareholder, even a sole shareholder, has no proprietary interest in the assets of a company, nor does its managing director. Since the first plaintiff had no proprietary interest in the pipeline she did not suffer a direct or personal loss when the pipeline was damaged.

[16] Any loss she suffered was purely economic, and was a derivative or reflective loss as a result of her shares being reduced in value by the company's loss. This derivative loss did not give the first plaintiff a cause of action against the defendants: Prudential Assurance Co. Ltd. v Newman Industries Ltd (No.2) [1982] Ch 204,223-4 CA, Johnson v Gore Wood & Co. [2002] 2 AC 1.

[17] The judgment in favour of the first plaintiff must be set aside.

[18] We deal next with the plaintiffs' cross appeal. The Lord Chief Justice gave judgment for the plaintiffs for TOP$300 against the chief executive officer of the second defendant whose acts and omissions gave rise to the tort. In fact she was the only one implicated on behalf of the second defendant.

[19] The liability of a servant or agent who commits a tort in the course of his or her employment does not exclude vicarious liability on the part of his or her employer; indeed it attracts it: Wah Tat Bank Ltd v Chan [1975] AC 507, 514-5; Standard Chartered Bank Ltd v Pakistan National Shipping Corporation [2003] 1 AC 959. The first and second defendants were joint tortfeasors.

[20] The cross appeal therefore succeeds and judgment for TOP$300 will be entered against the second defendant.