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

CV 281/2004

BETWEEN:

MR DAVID F CORBETT
PLAINTIFF

AND:

1. SI'I KAE OLA HOLDING CO LTD
2. TEVITA MISA FIFITA & SONS LTD
3. MR TEVITA MISA FIFITA
DEFENDANTS

BEFORE THE HON CHIEF JUSTICE WEBSTER

Heard at Nuku’alofa on 13 & 14 June & 24 November 2005

Counsel: Plaintiff: Mr Niu
Defendants: Mr Tu’utafaiva

RESERVED DECISION GIVEN ON 1 SEPTEMBER 2006

Preliminary

The Plaintiff, Mr David Corbett, originally claimed for breach of an implied term of sale and failure of consideration by the Defendants jointly and severally in relation to a second-hand 1992 Mitsubishi Diamante motor car C 6850 (imported from Japan) which he purchased from the 1st Defendant, Si'i Kae Ola Holding Co Ltd, on 29 July 1999 for $6,300.00. Subsequently in December 1999 the car broke down, the reason being subsequently diagnosed as a worn-out fan belt which caused the timing belt to jump out of gear, resulting in incorrect ignition timing and the inlet valves all bending, so that an engine replacement was required (which would cost less than repairing the existing damaged engine). Although the Defendants obtained and fitted a replacement engine by around 2002, a replacement computer was also required, but had not been obtained by that time; and the Plaintiff claimed that the car was being cannibalised by the Defendants. The Plaintiff claimed damages for the price of the car and the replacement parts and new tyres he had purchased for it.

The Defendants denied liability as they claimed that the car was checked and found to be working properly before it was bought by the Plaintiff, who had the opportunity to check it personally; and that it was one of the 1st Defendant's conditions of sale that cars are warranted for only 1 month from the date of sale because they are used cars imported from Japan. They said that it was found that it would be more economical for a replacement engine to be ordered from Japan, and also a replacement computer to be ordered from New Zealand, and it took time to order those parts. They said that the Plaintiff would have to pay for the costs of all the work being done to the car and the new engine and parts. They denied that there was any legal basis for the Plaintiff’s claim.

However at the trial on 13 & 14 June 2005 the 1st Defendant’s Assistant Manager (and son of the 3rd Defendant), Mr Leimoni Fifita, gave evidence that after the new computer had been installed in the car and it was running again, because they could not contact the Plaintiff they removed from it the engine and all the spare parts they needed and put the rest on the rubbish heap as they had new stock coming from Japan. The trial was adjourned at that stage for further discussions between the parties, with an order that if they could not reach any agreement written submissions were to be filed. After receiving written submissions for both parties on 12 & 26 August and 12 September, and further hearings on directions, I then heard further brief oral submissions on 24 November 2005.

Amendment of statement of claim

At that stage the Plaintiff had sought leave to amend to include an additional claim for loss of use of the car and an alternative claim of conversion. It was agreed that I should reserve my decision on that application until this final decision.

After due consideration of the whole circumstances I decided that, on the basis of the evidence I had heard it was fair to allow the Plaintiff to amend in accordance with the evidence about the disposal of the car by the Defendants. I considered that the Defendants had not been open in their Statement of Defence about the disposal of the car.

However the Plaintiff appeared to be stretching that position when his Counsel in his final submissions claimed exemplary damages which were not included in the Amended Statement of Claim.

Evidence and submissions

The Plaintiff gave evidence on his own behalf; and led evidence from Mr Viliami Kulu, Service Manager, and Mr Fakatouola Matoto, Assistant Service Manager, both of Asco Motors; and Ms Manasiu Talaiasi, formerly Supervisor of the Motor Division of Sitani Mafi Co Ltd. The Plaintiff also produced documentary exhibits and photographs.

The Defendants lead evidence from Mr Leimoni Fifita, the 1st Defendant’s Assistant Manager (and son of the 3rd Defendant). The Defendants also produced a documentary exhibit.

Submissions were made for the parties in support of their cases as described above.

Basic facts

There was little disagreement on the basic facts, except in relation to whether it had been made known to the Plaintiff that there was only a warranty for 1 month; and some disagreement on the mileage for which a timing belt would be expected to last.

On 29 July 1999, the Plaintiff purchased a second-hand 1992 Mitsubishi Diamante motor car C 6850 from the 1st Defendant for $6,300, having been given a discount from for paying cash. The car had been imported from Japan. He was given a simple receipt (Plaintiff’s Exhibit 1).

The Plaintiff said that the mileage when he bought the car was about 80,000 km; and Mr Leimoni Fifita thought it was 83,000 km (though that did not show on Defence Exhibit 1).

In relation to the alleged warranty, the Defendants produced no documentation in support of that and the receipt dated 29 July 1999 for the purchase price [Plaintiff’s Exhibit 1] only bore the narrative "Per: Purchase New Car", with no indication of any enlargement nor restriction of the Plaintiff’s rights against the 1st Defendant. There was no written contract between the parties, the only evidence about a guarantee coming from Mr Leimoni Fifita, who said that when the Defendants sold second hand cars they guaranteed only the engine for 1 month, and that he had told the Plaintiff that. He said that when the Plaintiff was in the car yard asking about the car, he told him the car would be guaranteed for 1 month for the engine and if something had happened within a month they would have replaced the engine free of charge. Mr Fifita said that he thought (but did not really know) that the girl who wrote the receipt would have explained it to the Plaintiff and it would be recorded on the receipt, but the receipt (Plaintiff’s Exhibit 1) was very brief and had nothing about that written on it. Ultimately the girl who wrote the receipt was not called by the Defendants to give evidence. The Plaintiff denied that he had been told anything about warranty by Mr Leimoni Fifita at the time he bought the car; and he was not cross-examined on that denial. Mr Fifita accepted in evidence that all second-hand cars have problems.

Initially the Plaintiff had no problem with the car except the stereo sound system, about which he complained and which the 1st Defendant replaced without charge, but which the Plaintiff found was not any better, but after a while did not pursue the matter further. The Plaintiff also replaced 2 of the tyres with new tyres for which he paid $254.00 in all.

In the last week of December 1999, the car engine suddenly stopped while the Plaintiff was driving it. He had it towed to his home and then had it towed the next day to Asco Motors. He said he went to Asco Motors rather than the Defendants because that was the garage used by his parents, and because of the problem he had had with the radio in his car he did not want to wait around. At Asco Motors it was found that the reason why the engine had suddenly stopped was because the timing belt had broken. Mr Matoto of Asco Motors advised the Plaintiff (see Plaintiff’s Exhibit 2) of that, and on 3 February 2000 the Plaintiff obtained a new timing belt and a V-ribbed belt at a cost of $321.00 (Plaintiff’s Exhibit 3). Despite installing the new belts, the engine would still not start and Asco Motors found that the probable cause was that the fan belt had been worn out, causing the timing belt to jump out of gear, so that the inlet and outlet valves of the engine had been bent when the engine was still turning after the timing belt had broken. When that happened to the timing belt, the pistons and the valves had become out of time with each other, so that the pistons hit the valves and caused the valves to bend. Asco Motors provided the Plaintiff with that information in a Field Technical Report dated 21 February 2000 (Plaintiff’s Exhibit 4).

Mr Kulu (who had been with Asco Motors for 19 years and held various trade certificates in automobile engineering) gave evidence that an engine such as this will run for 100,000 km before the timing belt has to be replaced; but he accepted that if a car had done approximately 100,000 km it would not be a surprise if the timing belt broke. Mr Matoto (who has been a mechanic since 1985 and had been with Asco Motors since 1997 and holds a diploma in automobile engineering from Fiji) gave evidence that on their computer the mileage of the Plaintiff’s car was recorded as about 90,000 km when it was brought in on 4 January 2000. He wrote the Field Technical Report for the Plaintiff.

Mr Leimoni Fifita in evidence disagreed with Mr Kulu that a car required to have the timing belt replaced at 100,000 km, as he said that some cars the Defendants imported from Japan had already done 100,000 km and still ran for another 3 years without changing the timing belt. He said that sometimes the Defendants would replace the timing belt when they did a full service.

Mr Fifita also referred to the warning light on the dashboard for the timing belt, which goes on when the timing belt is worn out (but still OK). However as that was not put to the Plaintiff in evidence, I cannot take it into account.

Mr Fifita said in evidence that the average mileage for private use in Tonga was about 15,000 km/year – so after 5 months that would correspond to the car having done around a further 6,250 km, which tallies approximately with the mileage having increased since purchase from 83,000 to 90,000 km.

In their Field Technical Report Asco Motors also recommended to the Plaintiff that the whole engine should be replaced with a second hand engine, as it would cost more to repair the engine by trying to fix the valves, and that would lower the cost.

The Plaintiff said that when he went to see the 3rd Defendant Mr Tevita Misa Fifita and asked for a replacement car, because there had been a fault in the car at the time he purchased it, Mr Fifita said No, that if a car broke down within 1 month they would replace it, but as the Plaintiff had had the car longer, all they could do was to fix it (without saying who would pay for fixing it). The Plaintiff had said that was fine, they were to go ahead and fix it; and he had arranged for Asco Motors to have the car towed to the Defendants’ workshop. The Plaintiff admitted in cross-examination that he accepted at that stage that he could not get a replacement car. The Plaintiff said that the question of who was to pay for the repair never came up at that stage, as all he was told was that the car would be repaired, and he assumed that as he believed the fault lay with the car, the Defendants should repair it without any question of him having to pay for it.

Despite repeated inquiries by the Plaintiff, he said every week or second week, over the following weeks and months for 1½ years, and assurances from the Defendants, the car was not repaired by February 2002. The replacement engine had arrived and been fitted, but the mechanic had told the Plaintiff that it needed a computer which would have to be ordered from New Zealand. In January 2002, before the Plaintiff left for Law School in Vanuatu he took several photos of the car (Plaintiff’s Exhibits p 5-7) in the Defendants’ workshop, showing it covered in dust and in pieces in a dilapidated condition. That was the last time he went to see the car. He said he had decided that, although he always believed that the repair was going to happen, he had waited so long that the computer would never arrive and the only alternative was legal proceedings to recover his money or some kind of arrangement where he could have his car back.

On 7 February 2002, the Plaintiff got his Counsel to write to the 3rd Defendant as Managing Director of the 2nd Defendant claiming from them the refund of the amount of the car ($6,300) together with the costs of the fan and timing belts ($321.08) and new tyres ($254.00) plus his Counsel's costs. Payment was demanded to be made within 14 days. On 14 February 2002, the Defendants’ Counsel Mr Tu'utafaiva replied for the Defendants disputing the Plaintiff’s claims. In particular, the Defendants stated via their Counsel that, as the car was agreed to be guaranteed for only 1 month from date of purchase, the Plaintiff should pay for costs of all the work that were being done to the car, as well as the costs of new parts which would be installed into it by the Defendants.

Sometime later, in July 2002, the Defendant was able to complete the repair of the car and it valued the car then at $6,300, the same price for which it had been purchased by the Plaintiff. Mr Leimoni Fifita was rather vague about the cost of repairing the car by replacing the engine etc, but on all the evidence I accepted that it was T$2,200.00

Mr Leimoni Fifita said that the lady in their front office had tried to contact the Plaintiff many times but he was not in Tonga, so the Defendants did not manage to contact the Plaintiff nor his legal counsel in 2002, nor in 2003, that the car was repaired or that the Plaintiff was required to pay anything towards the costs of the repairs. But equally the Plaintiff did not contact the Defendants about the car later in 2002 or during 2003 and in evidence said that if he had been asked by the Defendants to collect the car and pay for the repairs, he would not have done so as the 3rd Defendant had advised him that "We will repair the car", which he understood as meaning that he would not need to make any payment.

After the car was repaired, Mr Leimoni Fifita’s evidence was that it was worth $6,3000. In 2003, without the knowledge or consent of the Plaintiff, on the 3rd Defendant’s instructions the Defendants sold the parts of the car, that is, the engine, the bumpers, the head and tail lights, the 4 doors, the boot door, the front and rear windscreen, the 4 wheels and tyres, the shock absorbers and all the car seats; and then dumped the naked frame in the rubbish dump.

The Defendants kept all the proceeds of sale of those parts of the car, and no report or account of these sales was given to the Plaintiff.

The Plaintiff filed this action in March 2004.

Applicable law

Sale of goods

Except as otherwise provided by the Sale of Goods Act 1979 and subject to any other statutory provisions, there is no implied condition or warranty about the quality or fitness for any particular purpose of goods supplied under a contract of sale: Halsbury's Laws (4th Ed) Vol 41 Para 691.

With reference to the Plaintiff’s claim that there was an implied term in the contract for sale, regrettably no specific submissions were made by Counsel enlarging on this. However in Tu’ivai v Fifita & JSP Auto Trading Ltd [1991] Tonga LR 63, Martin ACJ said:

"There is no Sale of Goods law in Tonga – apart from the Contract Act, which is not relevant and has now been repealed. By virtue of section 3 of the Civil Law Act (Cap 25) the English Law applies subject to the qualifications in sections 4 and 5."

That was still the position at the time of the sale of the car to the Plaintiff in 1999, although, since the Civil Law (Amendment) Act 2003 came into force on 18 November 2003, the law about English statutes of general application has altered. In relation to the relevant provisions in section 14 of the UK Sale of Goods Act 1979, no other provision about implied terms on a sale has been made by or under any Act or Ordinance in force in Tonga.

Section 14 of the UK Act provides:

"14 Implied terms about quality or fitness

(1) Except as provided by this section and section 15 below and subject to any other enactment, there is no implied condition or warranty about the quality or fitness for any particular purpose of goods supplied under a contract of sale.

(2) Where the seller sells goods in the course of a business, there is an implied condition that the goods supplied under the contract are of merchantable quality, except that there is no such condition -

(a) as regards defects specifically drawn to the buyer's attention before the contract is made; or

(b) if the buyer examines the goods before the contract is made, as regards defects which that examination ought to reveal.

(3) Where the seller sells goods in the course of a business and the buyer, expressly or by implication, makes known –

(a) to the seller, or

(b) where the purchase price or part of it is payable by instalments and the goods were previously sold by a credit-broker to the seller, to that credit-broker,

any particular purpose for which the goods are being bought, there is an implied condition that the goods supplied under the contract are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely, on the skill or judgment of the seller or credit-broker.

(4) An implied condition or warranty about quality or fitness for a particular purpose may be annexed to a contract of sale by usage.

(5) The preceding provisions of this section apply to a sale by a person who in the course of a business is acting as agent for another as they apply to a sale by a principal in the course of a business, except where that other is not selling in the course of a business and either the buyer knows that fact or reasonable steps are taken to bring it to the notice of the buyer before the contract is made.

(6) Goods of any kind are of merchantable quality within the meaning of subsection (2) above if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances.
......"

In Fifita v Bailiff Officers [1999] TOCA 19, [1999] Tonga LR 158 (CA) (where the Appellant was the 3rd Defendant in this case) it was stated:

"No Tongan Sale of Goods legislation was applicable to this transaction. However, this circumstance does not appear to be significant here. At common law, whether property passes depends upon the intention of the parties [see Mitchell v Ede [1840] II Ad & El 888]. For present purposes, the rules as to the passing of property under the English Sale of Goods Acts appear to be the same as those at common law: "The intention of the Sale of Goods Act 1893 (UK) was not to change but merely to codify the existing law relating to the sale of goods". (Halsbury's Laws of England, 4th Ed, Vol 41 at p 560 [para 607]). ..."

In Tonga the Civil Law Act (Cap 25) provided at the time of sale in July 1999:

"General civil law to be applied

3. Subject to the provisions of this Act, the Court shall apply the common law of England and the rules of equity, together with statutes of general application in force in England. (Amended by Act 12 of 1983)

Extent of application

4. The common law of England and the rules of equity and the statutes of general application referred to in section 3 shall be applied by the Court –

(a) only so far as no other provision has been, or may hereafter be made by or under any Act or Ordinance in force in the Kingdom; and

(b) only so far as the circumstances of the Kingdom and of its inhabitants permit and subject to such qualifications as local circumstances render necessary.

Mode of application

5. For the purpose of facilitating the application of any law to be applied by virtue of the provisions of section 4, it shall be lawful for the Court to construe the same with such verbal alteration not affecting the substance as may be necessary to render the same applicable to the matter before the Court, and every judge or officer having or exercising functions of the like kind, or analogous to, the functions of any judge or officer referred to in any such law, shall be deemed to be within the meaning of the provisions thereof relating to such last mentioned judge or officer."

Under section 14(2) the more general implied condition is that the car is of merchantable quality, meaning under section 14(6) that it is as fit for the purpose for which cars are commonly bought as it is reasonable to expect, having regard to any description applied to it, the price (if relevant) and all other relevant circumstances. That is plainly slanted towards the fitness for purpose approach: Benjamin para 11-043. Lord Denning MR said about that definition in Cehave NV v Bremer Handelsgellschaft mbh [1975] 3 All ER 739,748-9 (CA):

Then under section 14(3) where the buyer makes it known to the seller that the car is being bought for a particular purpose, there is an implied condition that the car is reasonably fit for that purpose, which is a question of fact, in deciding which the rarity of the unsuitability should be weighed against the gravity of its consequences: Henry Kendall & Sons v William Lillico & Sons Ltd [1968] 2 All ER 444,483 (HL) per Lord Pearce. It was said in that case that the purpose of a car to drive on the road will be satisfied by almost any car so long as it will function reasonably. The seller does not promise that the goods are absolutely suitable, and a second-hand car may be reasonably fit for its purpose though it is known to require repairs when bought: Benjamin paras 11-052, 11-068-9, Bartlett, Bernstein, Crowther.

It was suggested in Bartlett v Sidney Marcus Ltd [1965] 2 All ER 753 (CA) that the 2 implied conditions come very much to the same thing, but considering the rather variable submissions for the Plaintiff, in this case the Court will require to consider the position under both subsections 14(2) and 14(3), although both appear to involve the same considerations.

Goods may be reasonably fit for a purpose despite minor defects: Halsbury Para 692 n12, 694 n6; Bristol Tramways v Fiat Motors [1910] 2 KB 831,841, [1908-10] All ER Rep 113 (CA); Millars of Falkirk v Turpie 1976 SLT (N) 66 (CS) (minor defects in a car which are not dangerous and easily remediable under guarantee do not make the car unmerchantable). The relevant time is the time of sale: Para 692 n12; Manchester Liners Ltd v Rea Ltd [1922] 2 AC 74,89, [1922] All ER Rep 605 (HL).

The time at which goods must be merchantable seems in general to be the time of sale. In order to ascertain whether they were then merchantable, however, it is necessary, as the judgment of Dixon J in Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387,418 makes clear, to assume knowledge of the defect which had not then manifested itself and ask whether there was a market for goods with that defect. (Benjamin 11-048, 11-056)

A lesser standard is exacted for second-hand goods than that applicable to new goods: thus a car bought with a reservation as to the condition of the clutch was held merchantable though the actual state of the clutch proved to have been much worse than anticipated with the result that complete replacement was required at substantial cost: Bartlett v Sidney Marcus [1965] 2 All ER 753 (CA). In the same case it was suggested that a second-hand car was merchantable if it was "in a roadworthy condition, fit to be driven along the road in safety" (p 755): but it now seems clear that while an unroadworthy car would not be merchantable (Bernstein v Pamson Motors (Golders Green) Ltd [1987] 2 All ER 220,227 (QBD)), the test is too limited. The question of whether a second-hand car was fit for the purpose of being driven on the road is a question of fact and degree, so in another case a car was held not to be reasonably fit for its purpose under section 14(3) because the engine was totally "clapped out" and needed a re-bore, though it did not fail completely for a further 2,300 miles; and it was said that while the buyer of a second-hand car should realise that defects might appear sooner or later so that minor repairs would be necessary, replacing the engine was very different from a minor repair; and the fact that the engine had seized up after only 3 weeks was evidence that, at the time of the sale, the car was not reasonably fit for the purpose of being driven on the road: Crowther v Shannon Motor Co [1975] 1 All ER 139 (CA). A Fiat sports car bought as an enthusiast's car was held unmerchantable because it had, unknown to the buyer, been submerged in water for 24 hours and written off by an insurance company; though there had been only minor mechanical problems after the buyer took delivery: Shine v General Guarantee Corp [1988] 1 All ER 911. The statutory definition gives some guidance: the fact that goods are second-hand affects the description applied to them and may give rise to "other relevant circumstances". (Benjamin 11-052)

Conversion

Conversion applies where one person has wrongfully appropriated the goods of another to his own use or to the use of another, or has wrongfully deprived the owner of the use or possession of them permanently or for a substantial or indefinite time, or has destroyed them or changed their quality: Halsbury's Laws (4th Ed) Vol 45 Para 1416. To constitute the first form of conversion there must be a positive wrongful act of dealing with the goods in a manner inconsistent with the owner's rights, and an intention in so doing to deny the owner's rights or to assert a right inconsistent with them; that inconsistency is the gist of the action: Caxton Publishing Co Ltd v Sutherland Publishing Co Ltd [1938] 4 All ER 389 (HL); Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204,229; Marshall v Dibble [1920] NZLR 497; Salmond & Heuston on the Law of Torts (19th Ed) p 108. There need not be any knowledge on the part of the person sued that the goods belong to someone else; nor need to be any positive intention to challenge the true owner's rights. The action is not one in which fraud is a necessary ingredient. (Halsbury Para 1422; Clerk & Lindsell on Torts (16th Ed) 22-10)

The tort is well described in the rhetorical question asked by Holt CJ; "What is conversion but assuming upon one’s self the property and right of disposing of another’s goods?" (Baldwin v Cole (1705) 6 Mod 212, 87 ER 964): Law of Torts in New Zealand (3rd Ed) Todd 11.3.1.

To make a person liable for conversion it must be proved that the act of conversion was committed by him or by a person from whose act he is responsible; and an employee or agent may be sued whether he has or has not authority from the employer or principal for his act: Halsbury Para 1446. Provided that a defendant voluntarily deals with another’s goods in such a way as to constitute a denial of the latter’s rights in them or an assertion of rights inconsistent with those rights, he will be liable though he acted in the utmost good faith: Clerk & Lindsell on Torts (16th Ed) 1-87.

Intentionally destroying or consuming another’s chattel or so altering its physical condition as to change its identity is treated as conversion: Fleming The Law of Torts (7th Ed) p 56.

It is not possible to categorise exhaustively all modes of conversion, for while some acts are necessarily an absolute abrogation of the plaintiff’s rights and deprive him of the whole value of his interest in the goods, there may be others where the courts retain a degree of discretion in deciding whether those acts amount to a sufficient deprivation: Clerk & Lindsell 22-11. So it is perhaps impossible to frame a definition which will cover every conceivable case: Howard E Perry Ltd v British Railways Board [1980] 2 All ER 579,583 (ChD per Sir Robert Megarry V-C).

The normal measure of damages in conversion is normally the value of the goods at the time of the conversion, together with any consequential damage flowing from the conversion which is not too remote to be recoverable in law. There is no universal rule for the assessment of damages and the plaintiff can recover no more than the loss actually sustained by him. Aggravated damages may be awarded in conversion where there are aggravating circumstances which aggravate the suffering and injury to the plaintiff, and in certain exceptional circumstances exemplary damages are available, though it is not the function of civil courts to punish: Mafo v Adams [1969] 3 All ER 1404,1410 (CA). Moreover, a person who is wrongfully deprived of goods may be entitled to damages for inconvenience or loss of enjoyment: Harris v Lombard NZ Ltd [1974] 2 NZLR 161,169-170. (Halsbury para 1454; Clerk & Lindsell on Torts (16th Ed) paras 22-88 etc; McGregor on Damages (15th Ed) paras 1298 etc & 1357 etc) 

A person who has improved the goods may be entitled on assessment of his damages to an allowance for any improvement he may have made to the goods: Halsbury para 1456.

Grounds of decision

Defendants

In the Statement of Claim the 1st Defendant Si’i Kae Ola Holding Co Ltd was described as a company duly incorporated in Tonga under the Companies Act 1912, but it was not re-registered under the Companies Act 1995. It trades under the name "Si'i Kae Ola Motor Parts" and carries on business in Nuku’alofa selling second-hand used motor vehicles imported from Japan and motor vehicle parts imported from Japan. The 1st Defendant accepted that position. The Plaintiff accepted that the 1st Defendant is still in existence despite its failure to be re-registered under the Companies Act 1995: Fukofuka v Peacock & ‘Uhila [2001] TOSC 17.

The 2nd Defendant Tevita Misa Fifita & Sons Ltd was described as a company duly incorporated in Tonga under the Companies Act 1995, having been registered with the Registrar of Companies on 31 January 2001. It also trades under the name "Si'i Kae Ola Motor Parts", as the 1st Defendant had done before, and carries on business in Nuku’alofa, carrying on the same kinds of business as the 1st Defendant did. Again the 2nd Defendant accepted that position.

The Plaintiff submitted that as the 1st and 2nd Defendants are trading under the same name and from the same office premises in Sopu, Nuku’alofa they necessary co-mingled their business, at least as far as the public was concerned. It is difficult to disagree with that submission.

I heard submissions from both sides on who were the appropriate defendants, but in the event in light of my substantive decisions that is not a matter of significance. However I was unhappy that the Statement of Defence para 5 failed to disclose a fact which must have been within the Defendants’ knowledge, ie whether or not the business property and assets and liabilities of the 1st Defendant were transferred to and taken up by the 2nd Defendant when it was incorporated on 31 January 2001.

The 3rd Defendant is a businessman, and is a Director and a shareholder of the 1st Defendant and 2nd Defendant companies. The 3rd Defendant accepted that he is a shareholder and Director of the 2nd Defendant and was a shareholder and Director of the 1st Defendant. At all material times the Plaintiff understood the 3rd Defendant to be the owner and operator of the 1st and 2nd Defendants, but the 3rd Defendant denied that.

Alleged limitation of guarantee to 1 month

The first matter to decide is whether the Defendants sold the car to the Plaintiff under a guarantee for only 1 month, as they claimed. There was no documentary evidence of that, and there was no written contract between the parties, the only evidence supporting a guarantee coming from Mr Leimoni Fifita, who said that when the Defendants sold second hand cars they guaranteed only the engine for 1 month, and that he had told the Plaintiff that. He said that if something had happened within a month they would have replaced the engine free of charge. Mr Fifita said that he thought (but did not really know) that the girl who wrote the receipt would have explained it to the Plaintiff and it would be recorded on the receipt, but the receipt (Plaintiff’s Exhibit 1) was very brief and had nothing about that written on it. The Plaintiff denied that he had been told anything about warranty by Mr Leimoni Fifita at the time he bought the car; and he was not cross-examined on that denial. 

The Plaintiff said that when he went to see the 3rd Defendant Mr Tevita Misa Fifita and asked for a replacement car, because there had been a fault in the car at the time he purchased it, Mr Fifita said No, that if a car broke down within 1 month they would replace it, but as the Plaintiff had had the car longer, all they could do was to fix it (without saying who would pay for fixing it). The Plaintiff had said that was fine, they were to go ahead and fix it; and he had arranged for Asco Motors to have the car towed to the Defendants’ workshop. The Plaintiff said that the question of who was to pay for the repair never came up at that stage, as all he was told was that the car would be repaired, and he assumed that as he believed the fault lay with the car, the Defendants should repair it without any question of him having to pay for it.

On all that evidence, particularly in the absence of any documentary evidence supporting the Defendants’ assertion of a guarantee for only 1 month, I preferred the evidence of the Plaintiff and found that the Defendants did not make it part of the contract for sale of the car to the Plaintiff that there was a warranty or guarantee only for the engine and for only 1 month.

Was the car of merchantable quality and/or reasonably fit for its particular purpose at the time of sale?

The Plaintiff’s Amended Statement of Claim dated 3 November 2005 states at para 21 that "the car was of poor quality when it was purchased from the First Defendant". In the Plaintiff’s Counsel’s written submissions dated 12 August 2005 he submitted at paras 18-26 that it was an implied term of sale of the car that it would be reasonably trouble free for a reasonable period of several years, and that the term was breached by the Defendants. But then in the Plaintiff’s Reply dated 12 September 2005 to the Defendants’ submissions, at para 6 it is stated that the engine that was in the car was of poor quality, while in para 8 it is said "Relying upon the implied term, that the car was of good quality, that is, be trouble free for a reasonable period, the Plaintiff purchased it". Then in the Plaintiff’s oral submissions his Counsel stated on 24 November 2005 "We alleged and proved a breach by the Defendants of the warranty that the car would be of reasonable quality".

Those submissions rather paraphrase the legal position about relevant implied terms, which in this respect can only arise under section 14 of the UK Sale of Goods Act 1979, as explained above.

In this case clearly the car, which was 7 years old, was bought second hand, had already done over 80,000 km, and was an old car, so the Plaintiff could not expect it to perform or last as a new car would. Disregarding the minor defect in the stereo, it had functioned reasonably until it stopped in December 1999, by which time it had done a further 6,000 or 7,000 km to take it to around 90,000 km. The questions for the Court are whether the breaking of the timing belt was a defect at all; if so, whether it was a latent defect; and whether, because it broke when it did and caused severe damage to other parts of the engine, that meant that the car was not reasonably fit for its purpose when it was sold (in distinction to being absolutely fit for its purpose).

It was clear from the evidence of the witnesses on both sides that a timing belt in a car does not last for ever, and that it will fail sooner or later, probably around the limit of its lifetime of 100,000 km, or in a wide bracket sometime between 90,000 km and 120-130,000 km. Mr Kulu accepted that it would not be a surprise if the timing belt broke if a car was approaching 100,000 km; and said that if it was not changed it was going to break any time and cause damage.

There was therefore no evidence that the breaking of the timing belt was the result of any flaw or failure, as opposed to natural wear and tear. I found that the breaking of the timing belt was within the range of probabilities of what might be expected, rather than an abnormal occurrence. It was not an expensive item, and the breaking was a minor event, which would not have been important, except for its inevitable catastrophic consequences.

I was therefore unable to find on the balance of probabilities that it had been established that the breaking of the timing belt was a defect in the car at the time it was sold. It was not so far out of the expected limit of the life of the belt that at that time it could be said to amount to or contain a lack or absence of something essential to completeness (see Words & Phrases Legally Defined & Stroud’s Judicial Dictionary). It was certainly unfortunate that the failure occurred only 5 months after the car was purchased by the Plaintiff, but that did not mean that the car was not of merchantable quality or not reasonably fit for its purpose at the time it was sold: it had run satisfactorily without anything except a minor complaint right up to that time.

The position in respect of the timing belt is not dissimilar to the position of the tyres of the car. The Plaintiff gave evidence that he had purchased 2 brand new tyres from Asco Motors about 1 or 2 months before the car stopped, costing about $300 in all, though Mr Kulu said that each tyre would cost $190-200 brand new. But the Plaintiff did not complain that the car was not of merchantable quality or not reasonably fit for its purpose because of that – he simply replaced the tyres with new ones, I inferred because he recognised that the tyres had become unusable due to wear and tear resulting from normal use and ordinary friction (again see Words & Phrases Legally Defined & Stroud’s Judicial Dictionary).

Even if I were wrong with that, I was not satisfied that, if at the time of sale the potential failure of the timing belt was a defect, it amounted to a latent defect, in the sense that even the utmost skill and judgment on the part of the seller would not have detected it. Mr Matoto gave evidence that at Asco Motors, after the car was brought in they were able to remove the timing belt cover and found that the timing belt was broken.

The facts in this case were different from those in Crowther, where the whole engine was clapped out, whereas in this case it was only the worn timing belt which was the cause of the problem.

In any event the seller’s duty was only to supply a car which was reasonably fit for the purpose, not one which was absolutely fit. I do not consider that the fact that the car broke down after 5 months due to the timing belt failure, albeit that caused severe damage to the whole engine, meant that it was not reasonably fit for its purpose when sold to the Plaintiff. That would have been the case if it had been a new car, but it was not, it was a 7-year old second-hand car bought at a second-hand price. With a car of that age and mileage there can be no guarantee (in the non-legal sense) that it will run without fault for any particular period without appropriate care and maintenance – if there had been a desire for trouble-free motoring, a complete service or overhaul could have been given to the engine, when no doubt the timing belt would have been replaced and the damage to the engine avoided.

For all these reasons I therefore find that the car was of merchantable quality and was reasonably fit for its purpose as a second-hand car at the time of its sale on 29 July 1999.

I therefore dismiss this part of the Plaintiff’s claim against all the Defendants.

Was the car converted by the Defendants?

On the candid evidence of Mr Leimoni Fifita, when the defendants used the car for spare parts and then disposed of its shell as rubbish, in terms of the applicable law set out above there was a positive wrongful act of dealing with it in a manner inconsistent with the rights of its owner, the Plaintiff, and an intention in so doing to deny the Plaintiff’s rights. What was done to the Plaintiff’s car amounted to intentionally destroying or consuming it, and so amounted to conversion.

Conversion is a tort of strict liability. As there is no requirement to establish that those responsible knew that the car belonged to someone else, nor to establish fraud, nor to show a positive intention to challenge the true owner’s rights, it is not relevant whether the Defendants or any of them unsuccessfully tried to contact the Plaintiff – though on the evidence of Mr Leimoni Fifita the efforts made were very weak and it did not appear that they were really trying to contact the Plaintiff. For example, there was no evidence of them having given the Plaintiff formal written notice to uplift the car. In any event they would be liable even if they acted in utmost good faith. But on the other hand by that time the Plaintiff had effectively washed his hands of the car, particularly when he was away in Vanuatu and he admitted he made no further effort to find out what the position was and that he would not have paid for the repairs.

Turning to which of the Defendants are liable for the conversion of the car, on Mr Leimoni Fifita’s evidence it was his father, the 3rd Defendant Mr Tevita Misa Fifita, who made the decision about disposal of the car, so he was personally responsible for its conversion. As he is a Director of each of the companies trading as Si’i Kae Ola Motor Parts, ie either or both the 1st or 2nd Defendants, either or both will be vicariously liable for his action in doing so.

The Plaintiff last saw the car in early 2002, and Mr Leimoni Fifita’s evidence was that it was disposed of around 2003, ie well after the 2nd Defendant was established and traded under the same name as the 1st Defendant from the same place. There was no evidence indicating which of these 2 companies was actually running the business of Si’i Kae Ola Motor Parts, so I concluded that they were both jointly and severally responsible for running the business and so are both jointly and severally liable for the conversion of the car, along with the 3rd Defendant.

Therefore the Plaintiff’s claim of conversion against all the Defendants is established. Their liability is joint and several.

Damages for conversion

The normal measure of damages in conversion is the value of the car at the time of conversion, which in this case will be the purchase price plus the value of subsequent improvements such as the new tyres, and in this case less an allowance for the cost of the improvements by repairs to the car done by the 1st and 2nd Defendants – as I have found that the car was reasonably fit for its purpose, the repairs will be at the expense of the Plaintiff and not of the 1st and 2nd Defendants. In addition there is any consequential damage flowing from the conversion (and hence from the date of the conversion) which is not too remote to be recoverable in law, plus damages for inconvenience and loss of enjoyment. Aggravated damages may also be awarded.

The Plaintiff claimed in his Amended Statement of Claim damages for conversion of $2,500, in addition to the value of the car, and in light of the normal measure of damages I interpret the claim for damages for conversion as a claim for aggravated damages for conversion: but despite the Defendants’ unilateral action in cannibalising and then disposing of the car, I did not consider that these amounted to circumstances which aggravated the suffering and injury to the Plaintiff, given that at that time he had lost interest in the car and was not pursuing the matter with the Defendants.

There was essentially no evidence from the Plaintiff about inconvenience and loss of enjoyment of the car from the time of the conversion in 2003, and no evidence to quantify that loss of use. He was away in Vanuatu and so would not have been using the car, and in any event showed no practical interest in the position of the car. I therefore could not award a figure of $2,000 per year for this as claimed in the Amended Statement of Claim, but will make a token award of $1,000 for inconvenience and loss of enjoyment.

The Plaintiff claimed the cost of the car:				$6,300
Plus the improvements (tyres and timing belts)		 575
								$6,875
Less cost of new engine & computer			2,200
								$4,675
Inconvenience and loss of enjoyment from 2003		 1,000

The total damages awarded are thus:					$5,675

Other claims by Plaintiff

The other heads under which the Plaintiff claimed, ie failure of consideration and breach of undertaking to repair were not made out on the evidence and are dismissed.

Costs

I see no reason why the normal basis should not apply, so I award costs as agreed or taxed to the Plaintiff against all the Defendants jointly and severally.

Delay in decision

In conclusion, I have to apologise for the length of time it has taken to produce this decision, which has partly been due to the pressure of other Court matters of a more urgent nature. But the time taken has also been the result of Counsel not making sure of the facts and analysing their cases properly in terms of the facts and their relation to the law before they raise them, so that the Court has had to spend a great deal of time doing their work for them. The lateness of the decision is the penalty which Counsel and their clients have to pay for them falling short in their preparation of the case.

1 September 2006

R M Webster
Chief Justice