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Pacific Royal Hotel v Vakalahi [2007] TongaLawRp 6; [2007] Tonga LR 36 (14 May 2007)

[2007] Tonga LR 36

IN THE SUPREME COURT OF TONGA

Pacific Royal Hotel

v

Vakalahi anor

Supreme Court, Nuku'alofa
Laurenson J
CV 662/2006

3, 26, and 27 April 2007; 14 May 2007

Civil law – apparent agency as effective as deliberate agency – claim failed but counterclaim succeeded

An employee of the plaintiff stole a van belonging to the plaintiff and the van was damaged while in his custody. Repairs to the van were carried out by the second defendant (Siali) at a cost of $4130. The plaintiff refused to pay the repair costs alleging that they were the responsibility of the employee who had stolen the van. Siale claimed that his instructions to carry out the repair work had come from one of the plaintiff's managers, Ane 'Ali, and she had ostensible authority as agent to engage him to carry out the repair work which he did at a reasonable costs. The plaintiff sought recovery of the van from Siali and damages. Siali counterclaimed seeking the cost of the repairs.

Held:

1. Ane 'Ali had deliberately contrived a situation whereby Siali was induced into repairing the van thinking that the plaintiff would pay whereas, behind it all was another arrangement, unbeknown to Siali, that the employee who had damaged the van would pay for the repairs.

2. If a person appears to be agent for a principal and makes a contract with a third person who relies on that appearance, the principal may be estopped from denying the existence of the authority. An apparent or ostensible agency is as effective as an agency deliberately created.

3. On the facts, the court was in no doubt that Siali was entitled to conclude from the events that the plaintiff's employees appeared to be agents of the plaintiff and he relied on that appearance to make the contract he did. Accordingly, the plaintiff was estopped from denying the existence of that contract. The plaintiff failed in its claim but Siali succeeded on his counterclaim and was awarded $4130 together with interest and costs.

Case considered:

Pole v Leask [1863] 33 LJ CL 155

Counsel for plaintiff: Mr Fifita
Counsel for second defendant: Mr Fakahua
No appearance for first defendant

Judgment

Introduction

[1] On or about 15 July 2006 a Van L7222 owned by the Plaintiff (PRH) was allegedly stolen by an employee (Vakalahi) named as the First Defendant. While in his custody the van was damaged. The van was taken to the premises of the Second Defendant (Siale) (STS) where repairs were carried out at a cost of TOP$4130.

[2] PRH refused to pay this cost alleging that it was the responsibility of Vakalahi. He was unable to pay and has now disappeared. SIALE after giving formal notice through his legal advisor then set about preparing to sell the van to recover his costs.

[3] PRH then applied for an urgent interim injunction seeking to recover possession of the van and damages of $100 perday from Siale.

[4] On 28 August 2006 PRH filed a substantive proceeding against Siale and Siale Tyre Shop seeking to recover possession of the van. This Court made an order in the following terms:

1. The Chief Bailiff or his agent is hereby authorized and directed to remove van registered number L42222 form the defendants' possession and hold the same in safe custody until further order of the Court.

2. This order is to be served on the Chief Bailiff's office forthwith.

3. The applicant is to file a writ and statement of claim by 29 August 2006.

4. The applicant is to serve this order, the exparty application, and Writ and Statement of Claim on the respondents forthwith.

5. The respondents are at liberty to apply to the court at 3 days notice.

[5] The van was seized by the Bailiff on 5 September 2006.

[6] On 20 October 2006 this Court made a further order in the following terms:

1. The van L7222 is to be released by the Bailiff to the immediately upon payment of the Bailiffs reasonable costs.

2. A further directions hearing is fixed for 15 November 2006 at 9am.

[7] On 10 November 2006 this Court ordered that the Bailiffs' costs of $135 were to be paid by PRH. It did so and shortly afterwards PRH acquired possession of the van and has continued to do so until now.

PRELIMINARY PROCEDURAL MATTERS:-

[8] The order dated 20 Oct 2006. This has presented me with some difficulty:

(a) It does not state that it is subject to any further order of the Court.

(b) On its face it appears to dispose of the major claim by PRH i.e the return of the van.

(c) I note, however, that the order has the intitulment for the original interim application ie where the relief sought is only against Siale and Siale Tyre Shop. The substantive proceeding introduced VAKALAHI as first defendant.

(d) Neither counsel who were both present in Chambers on 20 October 2006 when the order was made, are now able to give me any explanation of why the order was sought or, the grounds upon which it was made. I surmise it may, have been granted to save the further accumulation of Bailiff's costs and the damages & interest claimed by PRH.

(e) I have concluded that this order was intended only as a further interim order pending resolution of the substantive proceeding for the following reasons:

(i) As noted it is intituled the same as the original interim application.

(ii) If it is not just an interim order, then it could interfere with SIALES' possible implied claim for a repairers lien. This in turn could interfere with his rights of recovery if judgment is awarded to him in the substantive proceeding.

[9] The defendant Vakalahi:

(a) He is named as First Defendant in the substantive claim. Rather surprisingly, this does not include a separate alternative claim against him for the cost of repairs.

(b) He was served with these documents on 5 September, 2006.

(c) He has taken no steps to defend this proceeding.

(d) However, Siale has counterclaimed against PRH and Vakalahi for, interalia, the cost of repairs, but, Mr. Fakahua confirms that Vakalahi was not served with the counterclaim.

(e) On the basis of these matters I conclude that Vakalahi is only possibly liable to PRH under the substantive claim by PRH. No liability can be awarded against him under the counterclaim.

[10] The second defendant Siale & The third defendant Siale Tyre Shop

These two defendants are referred to separately in both the interim & substantive proceeding. In fact, the evidence of Siale clearly established that Siale Tyre Shop is not a separate entity. I therefore ordered that in both proceedings the name of the second defendant should be amended to "Tevita Siale trading as SIALE TYRE SHOP" The entitlement to this decision has been amended accordingly.

The Issues

[11] As the hearing progressed the issues gradually because clear as follows:

(a) PRH seeks recovery of the Van from Siale and damages.

(b) PRH denies any liability to Siale for the cost of repairs because it alleges there was no contract between it and Siale for Siale to carry out those repairs.

(c) PRH had possibly reached agreement with VAKALAHI to arrange for and to pay for the repairs.

(d) PRH knew nothing about any arrangement between Vakalahi and Siale.

(e) As a subsidiary issue, it questions the reasonableness of the cost of repairs.

(f) Siale's position is quite different. He said he had no dealings with Vakalahi. All his dealings were with employees of PRH who ostensibly had authority to engage him to carry out the repair which he did at a reasonable cost.

[12] I have referred to these issues at this point in the hope that it may make the ensuring discussion somewhat easier to follow.

Plaintiff's case

[13] The only witness called on behalf of the Plaintiff was its manager Ane 'Ali. She referred to the following matters in her evidence.

(a) Vakalahi was employed by PRH. He had gone off duty at Midnight on Saturday 15 July 2006. At some point he had stolen the plaintiff's van and had then become involved in an accident about 3-4am on Sunday 16 July 2006.

(b) She first spoke to Vakalahi about 10am on Monday 17 July 2006. He had then admitted stealing and then damaging the van. He had further agreed to have to van repaired at his own cost. When the van had been repaired and costs paid he would then get his job back. He was then dismissed.

(c) She did not know where the van would be repaired and did nothing more about it until an invoice was received about 15 August 2006 from Siale. This was dated 23 July 2006 and was for $4130TOP. She then telephoned Siale requesting that the van be returned and denying liability for the repair costs.

(d) She spoke to Vakalahi who arranged for her to speak to his sister Heilala Kaufusi. She did, and was asked to accept half the amount due and the rest by installments. The witness told the sister to discuss matter with Siale because the Plaintiff was not involved.

(e) In the past, in cases where the Plaintiff required repairs to vehicles, it would provide a written work order to the repair firm.

(f) In one previous case in April 2006, repair costs for the same van had been paid to Siale by an employee of the Plaintiff even though the invoice had been addressed to Plaintiff.

(g) The estimated cost of not having the van was $100 per day. Actual records to support this have been lost when the hotel was destroyed by fire on 16 November 2006.

(h) A letter dated 15 August 2007 was received from Siale's legal adviser threatening to sell the van to recover repair costs.

(i) On 25 August 2006 the Plaintiff filed an application for an interlocutory injunction to prevent the 2nd defendant selling the van. An order was made to this effect on 28 August 2006.

[14] Vakalahi has disappeared. His sister was to be called to give evidence but she did not appear despite the matter being adjourned early on 3 April 2007 for this purpose. Nor did she appear when the hearing resumed on 26 April 2007.

[15] On 26 April 2007 I gave leave to Mr Fifita to recall Ane 'Ali to enable certain evidence given by Siale to be put to him. I will refer to this additional evidence when referring to Siales evidence.

Evidence for 2nd Defendant – Siale

[16] When opening for Siale, Mr Fakahua indicated that there would be evidence that:

(a) Siale first heard about this matter in a phone call with two people from PRH, a man and a woman. They inquired about fixing the van L7222.

(b) As a result he went to the PRH premises with an employee where he spoke to a man Maka and viewed the damaged van.

(c) Maka told him the van would be delivered to his premises.

[17] These 3 important matters had not previously been put to Ane 'Ali in cross examination. I gave leave to Mr. Fifita to recall Ane 'Ali to enable her to answer these matters. She said in evidence.

(a) Nobody had telephoned Siale to come and look at the van at the PRH premises.

(b) Siale did not come to the premises to view the van.

(c) PRH did employ a person Maka at the time as a security officer.

(d) She had no knowledge of Maka speaking to Siale at PRH. Maka had no instructions or authority to authorize Siale to carry out the repair.

[18] In evidence Siale said:-

(a) He had previously repaired the same van a short time before on the instructions of another PRH employee one Folau, who obtained a quote for 1000TOP in cash. There was no written work order. An invoice was sent to PRH for this amount.

(b) He later received payment from Folau – $500 in cash and $500 by way of a cheque from PRH. He later found out that Folau was in fact paying the entire amount. The cheque from PRH was an advance to Folau from the PRH finance company.

(c) So far as the present claim is concerned he said he was told by an employee to contact PRH because the van had been damaged again.

(d) He went to the PRH premises with an employee Hema Taufa. There they were met by Maka and other security officers. Maka asked him if he could repair the van Siale said yes.

(e) He then returned to his own premises, attended to other work and then went to work in the bush in the afternoon. On his return he found the van parked in front of his shop. He did not know the person had actually delivered it.

(f) He repaired the van this brought an invoice to Ane 'Ali on 23 July 2006 for $4130. No one contacted him about the van in the meantime.

(g) Ane 'Ali told him to take the invoice to Vakalahi. He refused to do so because he did not know Vakalahi and didn't know he was alleged to have caused the damage. He left the invoice with Ane 'Ali. She told him to speak to Vakalahi that evening when he would be on duty. Siale did so. Vakalahi asked if would accept half the amount then and the remainder on terms later. Siale refused because he had not made any arrangement with Vakalahi.

(h) Two days later Vakalahi's sister called at Siale's premises who told him then did not want him to fix the van.

(i) When payment was not received from PRH he arranged for his legal adviser to write to PRH on 15 August 2006 stating that if payment was not received within 7 days he would proceed to sell the van to recover his costs.

(j) PRH responded by applying for and obtaining the interim order for the van to be held by the Bailiff until the dispute could be resolved by the Court.

[19] Under cross examination be confirmed:

(a) On each occasion he understood he was receiving instructions from PRH employees on behalf of PRH. He trusted the employees on each occasion.

(b) When he first saw Maka, Maka was holding the repair invoice.

(c) He said the cost was reasonable. He had given no quote on the second occasion. He had not been asked for one.

[20] Sipiliano Mafi gave evidence:

(a) He had done engineering and panel work on occasions for PRH.

(b) He had never received a written work order.

(c) He would get a ring from Ane 'Ali who would authorize work. He would then go and collect the vehicle which required repair.

[21] Siale's employee Hema Taufa also gave evidence:

(a) He went with Siale to PRH to view the van L7222. They were met by Maka who asked if they would be able to fix it. They said yes. Two other men were present.

(b) Maka said they would deliver the vehicle.

(c) He and Siale then returned to the workshop. In the afternoon they went to the bush. On their return they found the van parked outside the workshop.

(d) He worked on the vehicle and was satisfied the cost of parts and labour was fair and reasonable.

[22] Siale had subpoenaed Siua Maka to give evidence. He has now left the employment of Pacific Royal Hotel and is now employed as a Taxi driver. For a start he declined to attend to give evidence and eventually Siale had to go and get him. He said in evidence.

(a) He recalled Siale and Hema Taufa coming to the PRH premises regarding the repair to the damaged van which was at those premises.

(b) Siale said something to him

(c) He told Saile the van was damaged again.

(d) Siale said we've come to have a look at it.

(e) He told Siale to "wait for the guy who had the accident to come and we will find out from him what should be done"

(f) Ane 'Ali had told him that van was to be taken away to be repaired but not where.

(g) He had not asked Siale if he could fix the van.

(h) The guy who had the accident would deliver the van and Siale was the repair it.

(i) He was not on duty this particular day but was asked by Ane 'Ali to come back before Siale arrived.

(j) He described his job as "I take care of vehicles"

(k) Two men Aleki and Tonga took the van away. Vakalahi gave them directions. He was unaware of any arrangement with Vakalahi.

(l) He was not on duty the night the van was damaged but understood Vakalahi had taken the van about midnight to deliver other PRH Staff home and that the accident had occurred after he had dropped them off.

Discussion

[23] There are quite significant differences between the evidence of Ane 'Ali on the one hand and Siale and Hema Taufa on the other, particularly, in relation to the first contact with Siale.

[24] Having heard the witness I have no hesitation in accepting the evidence of Siale and Hema Taufa. I find them to have been credible and straight forward in every respect. I did not find Ane 'Ali to be in the same category. Her evidence was not in my view credible in certain important respects. Most importantly I find that there was an initial contact between PRH and Siale's firm which originated from PRH and, more likely than not, the person involved was Ane 'Ali. It is significant that according to Maka she requested him to come back to PRH to await the arrival of Siale. This indicates to me she had prior knowledge of a request to Siale to come and view the van.

[25] The sequence of events thereafter as related by both Siale and Hema Taufa is to my mind entirely logical and credible. I have no doubt they both understood that they were to be engaged to repair the vehicle and there was nothing which occurred in the meeting with Maka which would have caused any reasonable person to consider otherwise.

The subsequent delivering of the van to Siale's premises was all that was needed to confirm Siale's engagement as the repairer.

[26] The actions of Ane 'Ali on the other hand indicate to me a deviousness which is to be regretted. If in fact she had made an arrangement with Vakalahi' that he would pay for the repair then, it was incumbent on her to make this absolutely clear to Siale at the outset. This was not done. Instead Ane 'Ali endeavoured, in my view, to contrive a situation whereby Siale was induced into repairing the van thinking that PRH would pay whereas, behind it all was another arrangement, unbeknown to Siale, that Vakalahi would pay. The intended outcome was that Siale would repair the van for PRH's benefit but without PRH having to pay for the repair because, according to Ane 'Ali, only she could enter into a contract for the repair and she had not done so.

[27] The position at common law was clearly stated by Lord Cranworth in Pole v Leask [1863] 33 LJ CL 155 at 161-162 as follows:

No one can become the agent of another person except by the will of that person. His will may be manifested in writing, or orally or simply by placing another in a situation in which according to the ordinary rules of law, or perhaps it would be more correct to say, according to the ordinary usages of mankind, that other is understood to represent and act for the person who has so placed him... This proposition, however, is not at variance with the doctrine that were one has so acted as form his conduct to lead another to believe that he has appointed someone to act as his agent, and knows that that other person is about to act on that belief, then, unless he interposes, he will in general be estopped from disputing the agency, though in fact no agency really existed... Another proposition to be kept constantly in view is, that the burden of proof is on the person dealing with anyone as an agent, through whom he seeks to charge another as principal. He must show that the agency did exist, and that the agent had the authority he assumed to exercise, or otherwise that the principal is estopped form disputing it.

[28] This principle is summarised by Stephen Todd one of the learned authors of Cheshire Fifoot & Furmstons – LAW OF CONTRACT – Seventh New Zealand Edition at p.407.

"While, therefore, a person cannot be bound as principal by a contract made without his authority, yet if the proved result of his conduct is that A appears to be his agent and makes a contract with a third person who relies on that appearance, he may be estopped from denying the existence of the authority. An apparent or ostensible agency is as effective as an agency deliberately created. Appearance and reality are one".

[29] Relating this principle to the present case:

(a) I accept that nobody with the requisite authority from Pacific Royale Hotel contracted with Siale for the repair to the van.

(b) However, the combination of the acts of the person(s) from PRH who made the initial contact with Siales firm plus the events of the meeting with Maka (holding the invoice) Plus the fact Siale had previously, a short time before, done work on the same van and finally, the delivery of the van to Siales premises, leave me in no doubt that Siale was entitled to conclude from the events that the Pacific Royale Hotel employees appeared to be agents of Pacific Royale Hotel and he relied on that appearance to make the contract he did. Accordingly I hold that Pacific Royale Hotel is now estopped from denying the existence of that contract.

Decision

[30] For the above reasons I find Siale is entitled to

(a) judgment against Pacific Royal Hotel for $4130 on the counterclaim.

(b) interest at 10% from 30 August 2006 until the date of payment.

(c) Legal fees according to scale

(d) Court fees, reasonable disbursements and to be fixed if necessary by the Registrar.

(e) Witnesses expenses

[31] If the above judgment is not met by PRH by 4:30pm on 25 May 2007 it is ordered to return the van L7222 immediately to Siale who will then be entitled to sell same to recover the amount of this judgment plus interest the costs, legal fees & witness expenses.

[33] During the hearing I awarded costs of $300 against PRH for its delays in presenting its case after it was called for hearing. Subsequent to that, Siale case was also delayed with witnesses not present. Having considered the matter in this sight and noting the full recovery by Siale I have now decided that the order for $300 should be cancelled.