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Tupou v Energy Commission [2025] TOCA 10; AC 20 of 2024 (16 May 2025)

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

AC 20 of 2024
[CV35 of 2023]

BETWEEN

PAULA TUPOU

Appellant

AND

ENERGY COMMISSION

First Respondent

AND

MINISTER OF FINANCE

Second Respondent

Hearing:
7 May 2025

Court:
Randerson, Harrison and Morrison JJ

Appearances:
Mosese Latu for the Appellant
Tevita ‘Aho for the First Respondent
Sione Sisifa SC,Solicitor-General for the Second Respondent (given leave to withdraw)

Judgment:
16 May 2025

JUDGMENT OF THE COURT

Introduction

[1] This appeal from a judgment of Acting Lord Chief Justice Tupou raises a short but important point about the interpretation of an arbitration dispute resolution provision in an employment contract.

Background

[2] The relevant background can be stated very briefly. The appellant, Paula Tupou, was on 17 October 2017 appointed as the interim chief executive officer of the Energy Commission. His contract of employment included clause 11 as follows:

“That in the event of any dispute arising, between the Employers and the Employee as to the meaning and effect of this Contract, or otherwise arising out of the arrangements hereby made between them, same shall be referred exclusively to Arbitration in the Kingdom of Tonga (and not any Court of Law) and the parties hereto bind and oblige themselves to refer any such dispute to the amicable and final settlement of an Arbitrator mutually agreed to by them (and failing such agreement, to an arbitrator nominated and appointed by the Judicial Committee of HM Privy Council) and to accept the decision of the Arbitrator as a final and binding (sic) upon them and not subject to appeal or review in any Court of Law.”

[3] In August 2018, less than a year after his appointment, the Commission terminated Mr Tupou’s contract. In 2023 , on the eve of the expiry of the applicable limitation period, he filed this proceeding in the Supreme Court. He seeks special damages of $707,712 from the Commission for wrongful dismissal, and general damages of $50,000 from the Minister of Finance for distress and humiliation.

[4] The Commission applied for an order staying the proceeding, to enable the parties to refer their dispute to arbitration in accordance with clause 11. Mr Tupou opposed on the ground that the provision sought to oust the jurisdiction of the Court, was against public policy and was therefore void.

Supreme Court

[5] Tupou ALCJ’s succinct judgment opened by noting the primary grounds of the Commission’s application as follows:

[a] Clause 11 did not seek to oust the Court’s jurisdiction but instead identified a circumscribed set of areas to which the parties agreed to refer a defined difference for alternative dispute resolution;
[b] The minutes of the meeting whereby the parties agreed to the terms of employment did not record any objections from Mr Tupou to clause 11, and accordingly he is bound by its terms;
[c] Clause 11 invoked a power of private arbitration and was not an exercise of judicial power; therefore it neither expressly nor impliedly ousts the Court’s supervisory function;
[d] Accordingly, arbitration should be effected as a first step for Mr Tupou’s application for financial redress by discussing the issues directly with his former employer, prior to instigating this proceeding.

[6] Her Honour referred to the comprehensive judgment of Whitten LCJ in Vunipola v Tonga Rugby Union^[1]. She adopted the settled starting point that clauses attempting to remove the Court’s power to resolve disputes are generally void and against public policy. Such provisions violate the fundamental rights of parties to have recourse to the Courts to resolve justiciable disputes arising from their contracts. In particular, the Acting Lord Chief Justice noted Whitten LCJ’s observations that:

[a] An ordinary arbitration clause providing for disputes to be resolved through arbitration is not considered to oust jurisdiction, such clauses being generally enforceable as they do not preclude access to the Courts but rather provide an alternative avenue for dispute resolution. The arbitration process is often preferred for its efficiency and speed compared to Court litigation, while still allowing for judicial enforcement of awards;

[b] If a contract includes an arbitration clause, parties are generally required to attempt arbitration before resorting to the Courts. This requirement ensures that the arbitration process is followed as agreed, which is a condition precedent to legal action, and for that reason Courts usually uphold an arbitration agreement unless it is inherently uncertain or unenforceable;

[c] Parties can still approach the Courts to enforce their rights, but failing to adhere to an arbitration clause may be deemed a breach of contract. Arbitration clauses do not wholly oust the Court’s jurisdiction, and must be followed as part of a contractual arrangement.

[7] Her Honour found that clause 11 did not oust the Court’s jurisdiction but rather encapsulated the parties’ agreement to be bound by a process for resolving disputes by a form of arbitration. In her view the process and form of the dispute resolution provision was valid and effective except for the last two lines ( “..and to accept the decision of the Arbitrator as a final and binding [decision] upon them and not subject to appeal or review in any Court of Law”). On its plain reading, this part of clause 11 removed the Court’s power to review or hear an appeal from an arbitrator’s decision. It was a nullity and should be severed^[2].

[8] Tupou ACLJ was satisfied that the balance of cl 11 was enforceable. She was satisfied that this operative part did not oust the Court’s jurisdiction, and was thus not contrary to public policy or was void. Accordingly, the parties were bound by it and should be held to enforcement of their intention as expressed. Her Honour dismissed the application.

Appeal

[9] While Mr Tupou appeals against the judgment on a number of grounds, Mr Latu’s primary submission is that Tupou ALCJ erred by what he called rewriting or cherry picking clause 11. In his submission the provision plainly purported to oust the Court’s jurisdiction and could not be saved by severing the offending final section.

[10] We disagree. Provisions such as cl 11 mandating arbitration as the exclusive forum for resolving a qualifying dispute are orthodox. These parties have chosen arbitration as the appropriate mechanism for determining any disputes arising between them about the meaning and effect of the employment contract including for appointment of the arbitrator. Weight must be given to their contractual autonomy to follow that path to resolution in preference to litigation in the Supreme Court.

[11] We acknowledge that (a) this employment contract did not include any procedural mechanism for regulating the conduct of a cl 11 reference to arbitration once the condition precedent of a dispute arose; and (b) Tonga does not have a domestic arbitration statute the relevant provisions of which might have been incorporated into the contract .

[12] However, we are satisfied that it is implicit in the subject matter of this contract and the appointment provision itself that the parties empowered the arbitrator to regulate all aspects of the procedure to be adopted on an arbitral reference^[3]. In this respect we note that cl 11 is concerned with disputes arising out of a short employment contract. The subject matter is not complex. Differences are normally confined to a single issue on liability, as in this case, of whether one party’s dismissal was wrongful, with a contingent inquiry into the amount of damages. Both issues are of an essentially factual nature, and well suited to an arbitral determination,

[13] To the extent that any legal issues might arise, we note Mr Aho’s advice that Mr Tupou’s employment is governed by clauses 15 to 17 of the Employment Code of Tonga. That statutory provision will serve as part of the legal framework within which the arbitrator must act.

[14] A statement that an award or decision shall be final and binding is not objectionable unless the provision goes further and purports to exclude the Court’s supervisory jurisdiction to set aside an award on the well-recognised grounds of error of law, excess of jurisdiction and misconduct^[4]. Tupou ALCJ recognised that the concluding exclusion in cl 11of a party’s right to review or appeal an award offended that rule. She did not err in severing that part. It was not integral to the operation of cl 11. Its balance, as the Judge found, remained unaffected.^[5]

[15] We are not satisfied that the Judge erred in upholding the validity of cl 11 of the parties’ employment contract subject to the deletion of the offending words which purported to exclude the Court’s jurisdiction.

Result

[16] The appeal is dismissed

[17] Mr Tupou is to pay the Commission’s costs in this Court in an amount to be fixed by the Registrar if not agreed together with reasonable disbursements..

Randerson J

Harrison J

Morrison J

^[1] Vunipola v Tonga Rugby Union [2021] TOSC 121
^[2] Applying Fitzgerald v Masters [1956] HCA 53; [1956] 95 CLR 420, referred in Vunipola at para 79
^[3] Vunipola at para 87
^[4] Vunipola at paras 100 to 106
^[5] Vunipola at paras 78 -80