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Moala v Stevens [2010] TongaLawRp 22; [2010] Tonga LR 155 (27 September 2010)

IN THE SUPREME COURT OF TONGA
Supreme Court, Nuku'alofa

CV 85/2009

Moala

v

Stevens anor

Shuster, Acting CJ
5, 6, 9, 10 August 2010; 27 September 2010

Contract law – no meeting of the minds – no contract – found for defendants

The plaintiff was a mechanical engineer and owned a motor vehicle licence number J 403. The plaintiff worked full time at Shoreline Distribution Ltd and was responsible for the main power generator at 'Anana. When Shoreline Distribution Company Ltd was taken over by Tonga Power the plaintiff went to work for Tonga Power Ltd. The first defendant was the General Manager of the second defendant company and was sued in his capacity as General Manager of the second defendant company. The first defendant was instrumental in creating, and in the initial registration of the second defendant company, which was a duly incorporated company under the laws of Tonga. The company was first registered at the Registry of Companies on the 13th April, 2005 under registration number 0826. The second defendant's business was set up to produce and manufacture stock feed in the Kingdom of Tonga. The stock feed was to be produced and used locally. As the company grew the company intended to export its animal feed product overseas. The first defendant described himself in his evidence as an essential figure in the said company and was essential for his expertise in the "quality control" of animal feed product which his company produced. The plaintiff claimed against the defendants for breach of contract in that the plaintiff claimed he was promised "shares" in the defendant company, for the value of his unpaid work with the second defendant company and for allowing the company the use of his truck J 403 on commencement of the company's operations in late 2004 - early 2005. The first defendant admitted that the plaintiff carried out work on the four specified machines; however the defendants denied the value given or claimed in respect of the work carried out by the plaintiff on those machines. The first defendant specifically denied that there was any statement or any assertion made by him to the plaintiff, to indicate that his work on the machinery would be credited to any "shares in the company" on the plaintiff's behalf. The first defendant averred the work done by the plaintiff was paid for in cash and in full, by the supply of animal food product to the plaintiff for his own use.

Held:

1. The Court found that the first defendant fully funded the operation of the second defendant company and that the second defendant company never paid any dividend to shareholders of the company ostensibly because there were no profits. The Court found that there was no meeting of the minds to say that the plaintiff was ever to be given any shares in the first defendant's company. The plaintiff failed to establish that he was ever entitled to receive any shares in the company.

2. When the second defendant company was first incorporated the plaintiff offered up his truck for use by the company. The plaintiff was adequately paid by the defendant company for his truck's use by the provision of a regular supply of animal feed and money used to repair and maintain his vehicle.

3. The Court found that the plaintiff was adequately recompensed for his work on the defendant's machinery to that sum of $1,500. The plaintiff's loan debt to the defendant cancelled out his award of $1,500.

4. The Court found for the first and second defendants in this case. The case should have been mediated to a settlement once discovery of documents had been completed. Costs were awarded against the plaintiff to be taxed by the Chief Registrar if not agreed.

Counsel for the plaintiff : Mr Pouono
Counsel for the defendants : Mr Tupou

Judgment

The claim

In this case the plaintiff's claim relies entirely on an oral contract allegedly made by the plaintiff and the defendants - in late 2004 / early 2005. The plaintiff claims the terms of the oral contract were - for the plaintiff to provide a vehicle, specifically a truck, licence number J 403, and secondly for the plaintiff to use his mechanical expertise to help the first defendant set up, and, operate the second defendant's company – in the production of quality animal feed.

The plaintiff claims, that in recognition of the plaintiff's contribution to the establishment of the second defendant company, the plaintiff would be given a number of "shares" in the second defendant company.

The first defendant denies any promise of "shares" as alleged by the plaintiff. The first defendant says the use of the vehicle J 403 - was fully paid for, by the provision of and the supply of a quantity of bags of animal feed, for the plaintiffs use.

The defendant says that the work carried out by the plaintiff to repair machinery, was repaid in cash, given by the defendant to the plaintiff – and paid by way of cash or loans which loans the defendant says in evidence have - not been repaid.

The first defendant says there were no other agreements, which would give rise to any expectation of payment, given by the first defendant to the plaintiff.

At the start of the trial, the plaintiff indicated via his counsel, that he wished to rely on the contents of his sworn affidavit dated 4th August 2010 - as his primary source of evidence, as evidence in chief to the court.

The plaintiff via his Statement of Claim; claims:-

1. Judgment against the defendants to include the plaintiff as a shareholder of the second defendant holding 20% shares and profits since April, 2005 or any percentage of shares as this Court deem fit.

In the alternative

1. Judgment be given against the defendants as follow:

a. Costs of repair of J403 $5,300.00

b. Hiring cost of J403 @ $50 per day for 3 days only since 2004 – 07

$37,000

c. Fixing of the heavy duty machineries; $7500

1. Hammer mill #1

2. Hammer mill #2

3. Feed mixer

4. Cassava dryer

2. Loss of use of the vehicle $10,000

Sub – total $59,800

3. Cost of the proceedings and

4. Any other order this Court deem just.

Background history:

1. The plaintiff at the material time, was by trade / occupation a mechanical engineer and he was the owner of a motor vehicle licence number J 403. The plaintiff worked full time at Shoreline Distribution Ltd –and was responsible for the main power generator at 'Anana. When Shoreline Distribution Company Ltd was taken over by Tonga Power the plaintiff went to work for Tonga Power Ltd.

2. The first defendant at the material time was the General Manager of the second defendant company. The first defendant is sued in his capacity as General Manager of the second defendant company.

3. The first defendant was instrumental in creating, and the initial registration of the second defendant company, which was a duly incorporated company under the laws of Tonga. The company was first registered at the Registry of Companies on the 13th April, 2005 - under registration number 0826.

4. The second defendants business - was set up to produce and manufacture stock feed in the Kingdom of Tonga. The stock feed was to be produced and used locally. As the company grew the company intended to export its animal feed product - overseas.

5. The first defendant described himself in his evidence as an essential figure in the said company, more particularly he was essential for his expertise in the "quality control" of animal feed product which his company produced.

6. The plaintiffs claim against the defendants is brought under the law of contract for breach of contract - in that the plaintiff claims he was promised "shares" in the defendant company, for the value of [a] his unpaid work with the second defendant company and [b] for allowing the company the use of his truck J 403 on commencement of the company's operations in late 2004 - early 2005.

7. The trial of this matter took place on 5th, 6th, 9th and 10th August 2010 with submissions due on the 20 August 2010, reply by 27 August with judgment proposed for the 10 September 2010 - if the parties had filed their submissions within the time frames. Unfortunately Mr. Pouono was unable to comply with the Courts directive and as a result this judgment was inevitably delayed. It was further delayed on Monday 20th September by this court due to the passing of the late Chief Magistrate.

The evidence

8. The evidence revealed in 2002 the first defendant was working for a company known as Wall Smith International. At that time the first defendant was farming and harvesting fish for aquariums he was also involved in harvesting "coral" for export.

9. The plaintiff also worked part time for the same company as the first defendant, he was employed as a mechanic working on Wall Smith's company's machinery

10. In 2004 the first defendant left Wall Smith International, to begin his own new company – which was a venture involved in producing stock feed - for pigs and other animals.

11. A person by the name of Dickie Joe Avoca went into business with the first defendant as the second defendants company as the Manager - both witnesses told the court they contracted other workers to assist in the operation of their fledgling company – the other workers were all - paid employees.

12. On commencing operations the second defendant company, planted corn and maize, in and around Vaini on the various tax allotments. The corn and maize was grown specifically for the productions of stock feed by the defendants company. According to the evidence planting of corn and maize commenced towards the end of 2004 and the beginning of 2005.

13. At a point in time - the first defendant's Manager Mr. D. Avock brought the plaintiff in to this venture, and the company made use of the plaintiff's truck. During the latter part of 2004, the company used the plaintiff's truck once or twice a week for the harvest and transportation of stock feed, corn and maize.

14. According to the evidence, the plaintiff's truck was also used to transport fish products; which were transported in bins from Faua habour to Pahu - where the skin, the bones and the flesh, of fish and sharks - was rendered down, by the addition of folic acid. Eventually the rendered fish products were mixed and used as ingredients of the defendant company - animal stock feed.

15. The plaintiff told the court his truck was mainly driven by the Manager Mr. D Avock, he said other workers also drove his truck, when the plaintiff was working for the Shoreline group of companies - in his full time occupation.

16. According to the defendant - he gave evidence that the use of the plaintiff's truck by the defendant company, was fully paid for by the company supplying the plaintiff with quantities of pig animal feed on a regular weekly basis, to the plaintiff - for his own use because - the plaintiff kept his own livestock.

17. For part of 2006 and for all of 2007 – documentary evidence was produced to this court by the witness Tevita Latu [exhibit 6] that evidence reveals that each bag of pig feed retailed for $22.00. The total amount of pig feed supplied in 2006 beginning in May of that year to the plaintiff was receipted as - eighteen and a half bags of animal feed - valued at $470. The court fully accepts that evidence - as a finding of fact.

18. Evidence was also produced to the court that for the year 2007, commencing in January the total number of bags of feed supplied to the plaintiff by the defendant company - were twenty five bags, the value of animal feed equates to a payment of $770, 00. I fully accept that evidence - as a finding of fact.

19. In his evidence to the court, the company Manager Mr. D Avock said that the supply of animal food to the plaintiff began when the plaintiff's truck was first used by the defendant company; however there were no records kept initially, and the witness told the court other records have been lost. I accept the witness's evidence of the loss of documents and that a regular supply of animal feed was made to the plaintiff on a regular basis since the company commenced its operations

20. The defendants argued that the records produced to the court for 2006 and 2007 would give the court a good indication - of the quantity of animal feed supplied to the plaintiff from day one, and I accept that proposition ostensively because that evidence - was not disputed.

21. In his evidence the first defendant testified that the plaintiff never asked him for any payments - either to use or to hire his, the plaintiff's truck. The first defendant told the court the plaintiff was satisfied with the provision of pig feed from himself and his manager (Avock) on a weekly basis from the company's inception and I accept his evidence.

The age of the truck

22. The truck owned by the plaintiff, was a Nissan truck - 6 wheels licence no J 403. The court was told the vehicle was obtained by the plaintiff - around 1988 from its 190 previous owner [a man called Fifita] and the Nissan truck was part exchanged for the plaintiff's Land Rover

23. The plaintiff told the court he carried out certain repairs at the time he purchased the vehicle J 403. The plaintiff however produced no receipts for the purchase or repairs to his vehicle to this court. The court accepts the plaintiff's evidence that the vehicle was second hand when it was first purchased and that the truck was also repaired in1988

24. The court also accepts the plaintiffs truck was taken to Eua and used on the island for 2 years; and that between 1994 and 2004 the truck was used by the plaintiff's brother, while the plaintiff was away at sea. When the plaintiff returned from sea in 2004 the court was told the plaintiff retrieved his truck [from his brother] to use himself.

25. The evidence reveals that towards the end of 2004 the truck [now over 16 years old] was used by the defendant's company and was mainly driven by the witness Avock to transport corn, maize and pig feed and I fully accept that evidence.

The production of documents and receipts

26. The first defendant said in his evidence that full payments for use of the truck was made to the plaintiff - by the supply of animal feed fro the plaintiff personal use. The defendant's witnesses described in detail the provision of pig feed and also the various monetary payments which the defendants made to the plaintiff some payments were made by way of cash; others payments made by way of loans - which were paid to the plaintiff by the first defendant often via his manager.

27. There was evidence produced to the court, showing that for the year 2007 and which were produced by the witness Tevita Latu – that payments - which amounted to the sum of $1,836.80 were paid to the plaintiff. The witness Dickie Avock - also referred to various loans and payments made to the plaintiff but he also told the court that other vouchers have been lost, and that loss was also confirmed by Tevita Latu and I do accept their evidence.

28. According to the evidence various quantities of fuel were also supplied by the first defendant to the plaintiff for his truck - that evidence was accepted by counsel for the plaintiff and is not disputed.

29. The defendant's witness Dickie Avock testified that the truck was always washed out with both water and detergent before it was returned to the plaintiff. This was disputed by the plaintiff. He did admit that the plaintiff's truck was always parked in the open, not garaged - left open to the elements of nature.

30. Of particular concern to the plaintiff, was the fact that he stated fish products were transported in his truck - and he said that company staff worked on skinning the fish and this work was carried out in the back of his truck and the body of the truck was damaged - as a result of this procedure.

31. That assertion was however, contradiction by the witness the Manager Dickie Avock who testified the work was carried out on the ground – not on the truck. He told the court the bins containing the fish products made minimal contracts with the truck and its metal surface.

32. The defendant's witnesses said that all times harmful "fish" contact with the truck surface was minimal and the vehicle was always cleaned out after use. I fully accept that evidence.

33. The plaintiff's claim that when the defendant company abruptly ceased to use his truck at work; that the truck was left in a poor rusted condition and it needed repair. The plaintiff claims the company had failed to either repair and or adequately maintain his truck.

34. In his evidence to this court the plaintiff says that the truck needed a new cab, and deck at a significant cost. The defendants deny liability and they state the truck was returned in the same or similar condition as to when it first came to the company - fair wear and tear accepted.

35. In my view the plaintiff has failed to establish that any daily rate had ever been discussed for the hire of the truck J403 with any company director.

Repairs to machinery

36. The plaintiff claims that during the course of his employment with the defendant company, he carried out work on the following machines belonging to the second defendant company. First he testified he repaired two hammer mills. Second he repaired a feed mixer, and third he built from scratch - a cassava dryer all machines to be used by the fledgling company

37. The plaintiff claims he carried out this work as requested /directed by the first defendant and his work or the value of his work - should have been credited to what he terms "shares in the company" or alternatively the plaintiff claims that he should be paid for the work he was requested / directed to perform - by the first defendant and his company as per his statement of claim.

38. In his testimony the first defendant admits that the plaintiff carried out work on the four specified machines; however the defendants deny the amount of time spent working and repairing those machines and also the value given or claimed in respect of the work, carried out by the plaintiff on those machines.

39. The first defendant specifically denies that there was any statement or any assertion made by him to the plaintiff, to indicate that his work on the machinery would be credited to any "shares in the company" on the plaintiff's behalf. The first defendant avers the work done by the plaintiff was paid for in cash and also paid in full, by the supply of animal food product to the plaintiff for his own use.

40. The evidence revealed and I accept that the first machine was obtained from the warehouse of Feleti Sevele and that the hammer mills belonged to the defendants witness White. In his evidence the plaintiff claimed he spent 100 hrs working on that hammer mill - to make it work. The plaintiff told the court he charged $25 per hour – so he claims $2,500.00 as payment in shares or in cash, for his work on that machine.

41. In evidence Mr. White told the Court that the hammer mill was not working when he first acquired it. Further the hammer mill had no motor. I heard evidence a motor was supplied. I also heard evidence from Warwick White the owner of the hammer mill. Mr. White is an engineer from NZ he testified the hammer mill was working when it was taken from the Feleti premises, and that it was in the same condition when returned to White 12 - months later. I accept that evidence.

42. Mr. White testified as to his observations of the work that appears that has been done on the hammer mill and Mr. White estimated the time required to make the machine work – which he said - would be approximately 1 hour. Mr., White further testified that he bought the hammer mill for $500. In the defendant's submission they say it was unconceivable that $2500 could be claimed for a machine worth just NZ$500.

43. The second hammer mill the Manager Dickie Avock said in evidence was in better condition than the first hammer mill. Mr. White said on oath that machine would take approximately one hour to fix, and again the purchase price of that hammer mill would be NZ$500. The plaintiff claimed he carried out 80 hours of work for $2,000 – the defendants again argued - would that be correct for a hammer mill worth a mere NZ$500?

44. The plaintiff claimed he had to repair the machine and supply a new motor. The manager who worked with the plaintiff suggested it might take a total of two days work where as Mr. White told the court - it would take him 5 hours [or half a day work] and he pointed out that the remainder of the feed mixer was in the original form complete with its the original paint work and other markings.

45. Mr. White gave an estimate of NZ$1000 in relation to the value of the home produced cassava dryer which the plaintiff claimed was made from an empty container according to the evidence the plaintiff put three holes in the container, he bought a heater and a fan and racks - and the plaintiff claimed $1000 for its construction.

46. Both the first defendant and his Manager Dickie Avock - claim the cassava dryers did not work. They both said the drying process was far too slow subsequently they ceased to use the dryer, both witnesses told the court they resorted to having to dry cassava in the open air - on top of the container.

47. When the defendant and his manager contacted the plaintiff he stated the heater provided was too weak. Mr. White said in his evidence the facility was wrongly constructed – he said the facility needed more by way of air circulation - not heat. Mr. White told the court the dryer could not be used and it was eventually taken out of use and used only for storage.

48. The first defendant testified that on various occasions, he gave the plaintiff money and that on at least one occasion the transactions took place in a bar. Records of various cash transactions were produced for the year 2007.

49. Exhibit 3 is a cheque butt for $250

50. Exhibit 4 is a cheque butt for $773 for the installation of Sky TV in a house rented by the plaintiff,

51. Exhibit 5 is a cheque for $250.00

52. Exhibit 7 has 3 cheque butts for $200, $205, $200 for the rent of the plaintiff's accommodation.

53. Evidence given revealed some payments were loans - that have never been repaid. The defendants also argued no records were available to the court for the years 2005 and 2006.

54. The defendants Manager Dickie Avock said in evidence that similar cash payments were made to the plaintiff and they have not been repaid.

55. Documentary evidence reveals the company was duly incorporated on the 13 April 2005 exhibit. 2 is the Certificate of Incorporation of the Company - the second defendant in the proceedings.

56. The records show that the shareholders of the second defendants company were [1] Tom Newland, [2] Dr. Waters [3] Ralph Stevens and [4] Dickie Joe Avock

57. The court heard evidence that no capital was provided by any of the other shareholders - at any time, during the existence of the company- Mr. Ralph Stevens the first defendant in these proceedings was the sole capital provider and I accept that evidence.

58. The Court finds as a fact that the first defendant fully funded the operation of the second defendant company. The court also finds as a fact that the second defendant company never paid any dividend to shareholders of the company ostensively - because on the evidence given in court - there were no profits.

59. The Court finds as a fact that the evidence reveals the company was finally wound up in 2010 - with the loss of approximately $920,000.00 as stated in evidence by the first defendant and this assertion was never contradicted.

Site visit

60. The court decided because a picture paints a thousand words – that the court would carry out a site visit to Feleti Sevele's warehouse in Ma'ufanga - to inspect a hammer mill and the court did so on the Monday afternoon - at 2pm.

61. The court observed - a hammer mill Mr. White identified to the court an area at the bottom of the hammer mill - which may have been changed altered by the plaintiff. The court noted the welding and the fact the machine appeared to be essentially - in its original factory condition.

62. The court was told the other Hammer Mill owned by Mr. White had been given to one of the villagers. The court also looked at a feed mixer.

63. The court was informed - the manufactured cassava dryer – constructed by the plaintiff - was not available for inspections but Mr. White stated that it was only used for storage and that the container had been given to away one of the villagers and the court accepts that evidence.

Conclusion

64. The court has had the benefit of receiving from the plaintiff, his comprehensive affidavit of evidence sworn and dated 4th August 2010 on which the plaintiff relied; as a basis of his evidence in chief as - exhibit one.

65. The plaintiff was cross examined at length, by the first and second defendant's counsel and in my view the plaintiff came over as rather - an emotive witness prone to exaggeration.

66. The plaintiff produced no receipts to this court, for any work carried out on his truck or any supporting evidence to show when or where he purchased his vehicle - his truck. The plaintiff seeks to rely solely on his testamentary evidence, as a basis for his claim against the first and second defendants.

67. The court heard evidence from the witnesses for the defendant - and the court also had the advantage of visiting the Feleti Seveli premises in Ma'ufanga - to see at first hand and examine machinery similar to that referred to in this case namely - a hammer mill and a feed mixer - used in the production of animal feed.

68. The court also received into evidence; sixteen exhibits – comprising documentary evidence of cheque issued by the defendant, evidenced by the production of various cheque butts, and also "a working book" – these are exhibits 3 through to 16.

69. I have carefully considered all the facts of this case. I have to say that I believe the defendants in this case I believe - that there was no meeting of the minds to say that the plaintiff was ever to be given any shares in the first defendant's company.

70. I do believe the plaintiff may have misunderstood the evidence of the first defendant Stevens when he said to the workers - if the company makes a profit there will be an increase in money paid to the workers. A far cry from saying that - he will issue shares in the company.

71. When incorporated as a company, there were four named shareholders of the second defendant company and according to the official record - the plaintiff was not one of them. In my respectful view the plaintiff has failed to establish the fact that he was ever entitled to receive any shares in the defendant[s] company.

72. Further I find as a fact that when the second defendant company was first incorporated and the plaintiff offered up his truck for use by the company. I find as a fact that the plaintiff was adequately paid by the defendant company for his trucks use - by the provision of a regular supply of animal feed and money used to repair and maintain his second hand vehicle - which he acquired in or around 1988 approximately 16 years previously.

73. I believe the first defendant - when he said on oath – that no request for payment on a daily basis was ever made by the plaintiff to him. I accept the evidence of the first defendant and his production of exhibits 3-16 as evidence of some cash payments totalling nearly $1,900.00.

74. I then go on to consider the plaintiff's claim for repairing the various machines used on behalf of the defendants company. I think it extraordinary that all other persons were paid for their work in connection with the defendants company but not the plaintiff but there is evidence he received his consideration in kind and was also in full time employment with a reputable company Tonga Power.

75. In my view it is only right and proper that the plaintiff - be compensated for work done on the various machines used to establish the company. I feel however on hearing the evidence and on conducting a site visit - that the plaintiff has embellished his claim for the hours he claimed he worked - accordingly I consider that an award ought to be made to the plaintiff for his work on those four machines - even if one of those machines is or was purportedly – found not to have worked.

76. On that basis I award the plaintiff $1,500.00 for his work carried out on those four named machines. In view of the fact that it is apparent that the defendant has paid various amounts of cash to the plaintiff as has been evidenced by the production of various cheque butts by the defendants - I find that the plaintiff has been adequately recompensed for his work on the defendant's machinery to that sum of $1,500.00. In my view the plaintiff's loan debt to the defendant cancels out his award of $1,500.00

ACCORDINGLY

THAT SAID AND UPON HEARING ALL THE EVIDENCE AND HAVING HAD SIGHT OF ALL THE EXHIBITS IN THIS CASE

• I find for the first and second defendants in this case.

• In my respectful view this case should have been mediated to a settlement; once discovery of documents had been completed.

• Costs are awarded against the plaintiff to be taxed by the Chief Registrar - if not agreed.