IN THE SUPREME COURT OF SAMOA
HELD AT MULINUU

CP 112/07

BETWEEN:

NATIONAL BANK OF SAMOA LIMITED
a duly incorporated company having its registered office in Apia.
Plaintiff

AND:

O LE SIOSIOMAGA SOCIETY INCORPORATED (OLSSI)
an incorporated society having its registered office at
Three Corners Taufusi, Taufusi Courts, Apia Samoa.
Defendant

AND:

NONU SAMOA LIMITED
a duly incorporated company having its registered office in Apia.
First Third Party

AND:

FAASAVALU GEORGE TINIELU aka FAASAVALU TINIELU
of Vaivase-uta Businessman.
Second Third Party

Counsels: Ms L.T. Warren for the plaintiff
Ms L.V.Tamati for the defendant
Mr A.Roma for the third parties

Judgment: 14 May 2010

JUDGMENT OF NELSON J.
(third party application)

[1] The background to this matter is set out in the courts decision dated 31 July 2008 dismissing the defendants strike out motion. The defendant now applies for leave to join as third party Nonu Samoa Limited as first third party and Faasavalu George Tinielu as second third party. The grounds are stated in its application to be:

"1. The proposed third parties must indemnify the defendant should an award of damages be made against the defendant in the current proceedings;

2.	The issues arising from the current proceedings affect the third parties and are matters which will only be properly determined if the third parties are to be represented in the current proceedings;

3.	The issues relating to the subject matter of these proceedings are substantially the same as the issues arising between the defendant and the proposed third parties;

4.	No prejudice will be caused to the plaintiffs by the service of the third party notices;

5.	It would be in the interest of justice that leave be granted."

[2] The application is based on Rule 43(1) of the Supreme Court Civil Procedure Rules 1980 which provides as follows:

"43. Third-party Notice – (1) Where a defendant claims as against any person not already a party to the action (in this Part called the third party):

(a)	That he is entitled to contribution or indemnity; or

(b)	That he is entitled to any relief or remedy relating to or connected with the original subject-matter of the action and substantially the same as some relief or remedy claimed by the plaintiff; or

(c)	That any question or issue in the action should properly be determined not only as between the plaintiff and the defendant but also as between the plaintiff the defendant and the third party, or as between any or either of them; or

(d)	That any question or issue relating to or connected with the said subject matter is substantially the same as some question or issue arising between the plaintiff and the defendant, and should properly be determined as aforesaid;

the defendant may move the Court on notice for leave to issue and serve a third party notice and shall attach a copy of the proposed third party notice to the motion." 

[3] Two points are to be noted at the outset: firstly, grounds 1, 2 and 3 of the application are but a restatement of what is being sought, not a statement of the basis upon which the court can find that the defendant is entitled to contribution or indemnity or entitling the defendant to a particular relief or remedy that is related to or connected with the original proceedings or upon which the court can conclude that any question or issue in the action should be determined as between all potential parties or to find that any question or issue relating to or connected with the third party is substantially the same as that arising between the plaintiff and the defendant. To merely state the conclusions that the motion seeks is not helpful. As to ground 4 of no prejudice will be caused to the plaintiff, with respect the inclusion of a third party will clearly cause prejudice to the plaintiff as it expands the scope of the proceedings and the focus of the enquiry. This will necessarily result in a complication of the issues and increased cost, delay etc. As to ground 5 of the interests of justice, I accept that as in all applications of this nature the ultimate determinant of whether the relief sought should be granted are the interests of justice.

[4] The second point of note is that the exercise of the courts power under rule 43(1) is discretionary. See rule 43(3) which provides:

"(3) On the hearing of the application the Judge may grant or refuse leave, and, if leave is granted, shall give directions as to the time for service of the third-party notice and as to the date of hearing."

It is clear from this provision that unlike New Zealand, the issue of third party notices is not an automatic operation. See the New Zealand High Court Rules circa 2000, rule 75(1) where leave is not required unless the notices are issued out of the prescribed time. 

[5] As such the onus in my view would therefore be on the applicant to satisfy the court that there is a proper legal and factual basis upon which the third party liability can rest. Similar to motions to strike out the factual basis should be restricted to what is pleaded in the statement of claim and not extend to disputed matters of fact which are properly a matter for determination at trial. If no such factual or legal basis is demonstrated, the application ought to be refused. The defendant must show that it has a reasonable cause of action as against the third party and that such cause of action is not so tenuous that it cannot possibly succeed. As stated by Justice Speight in Karori Properties Ltd v Jelichech [1969] NZLR 698 at 703 when referring to a third party application under the previously in force New Zealand Code of Civil Procedure:

"But it is a prerequisite that there should be a right of action between defendants and the third party. For rule 95(b) of the Code says "entitled to relief", and rule 95(c) says "should properly be determined between" and rule 95(d) says "the same as some question or issue arising between." 

The question then is, is there independently of the plaintiffs rights a right of action by the defendant against the second third party?" 

Rule 95 used words similar to what is contained in this jurisdiction in rule 43(1) and required leave of the court to issue a notice. I therefore propose to approach the task applying tests similar to those applicable to a strike out motion.

[6] It has been difficult to follow the defendants application because in places it suggests that the third parties should be joined mainly because factually they were involved in this matter in one fashion or another. That may well be so but that is not necessarily a basis for joining third parties to litigation. The fact that joinder may assist the defendant in presentation of his defence is also no reason for joinder. See Daly v Ranchhod [1968] NZLR 609 where the New Zealand Court of Appeal observed:

"The kind of questions or issues which can properly be made the subject of a third party notice are fundamental ultimate issues going to the root of causes of action. It is, for instance, proper to issue a third party notice so as to bind the third party as to the quantum of damage as assessed between the plaintiff and the defendant. It is proper to seek to bind him as to the broad issue of liability as between the plaintiff and the defendant. These are trite everyday instances of the kind of questions covered by the Rule. But it is difficult to recall an instance of a third party notice being authorized the object of which was to seek to secure some sort of official narrative of events by which a third party would be bound in detail as to small allegations of fact. Such allegations of detail will not support estoppels."

[7] The only justification for joinder would be because third parties are potentially liable for some if not all of the plaintiffs claim or that the defendant is entitled to succeed as against the third parties and common issues or substantially the same issues are involved. It would thus be just and expedient to determine all matters in the one proceeding. Cooke J. as he then was pointed this out in Turpin v Direct Transport Ltd [1975] 2 NZLR 172 at 175 when he said: 

"The overriding object of the third party rules is to enable all the issues to be dealt with in one action. That concept is reinforced by the terms of R 271: "…all amendments shall be made that may be necessary for the purpose of determining the real controversy between the parties in the action. 

(Similar to our rule 32 which provides:

'32. Order joining parties - The Court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as appear to the Court to be just, order that the name of any party improperly joined, whether a plaintiff or a defendant be struck out, and that the name of any person who ought to have been joined or whose presence before the Court may be necessary to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the action, be added, whether as plaintiff or defendant provided however that no person shall be added as a plaintiff without his own consent')

It would be extremely inconvenient if the action were fought out on the basis of the present pleadings and the plaintiff recovered from the second defendant but the second defendant failed against the third party on those pleadings. Then, if the second defendant wished to pursue the implied warranty allegation against the third party, a separate action would be necessary. It is just such a complexity and multiplicity of procedure that the third party rules are designed to prevent."

[8] It seems that putting together what is in the defendants motion, the draft third party notices and the defendants submissions, the defendants claim for joinder is based on four grounds:

(i)	the argument that the first third party had agreed to guarantee all or some of the debt;

(ii)	that the first third party had agreed to underwrite some or all of the debt;

(iii)	assurances both private and public by the second third party of financial support for the Tevaka Tour;

(iv)	an agreement by the third parties to indemnify the defendant either in whole or in part in relation to the debt claimed by the plaintiff.
I propose to deal with each matter in turn.

[9] As to (i), unlike New Zealand which has the Contracts Enforcement Act 1956 there is no statute in this jurisdiction covering guarantees or the requirements of guarantees. However by virtue of articles 114 and 111(1) of the Constitution, the common law of England applies to fill any vacuum in the law of this country until such time as it is addressed by local legislation. This is very much in keeping with the spirit and intent of article 114 and 111(1) so that there exists no gap in the laws of Samoa. And since the time of the Statute of Frauds in 1677 the English common law has required guarantees or some memoranda or note thereof to be in writing and to be signed by the party against whom it is sought to be enforced. Oral guarantees cannot as a rule be enforced although they are recognized for certain limited purposes, none of which apply here. See generally Halsbury Laws of England 4th edition Volume 20 paragraph 119 et seq. There are also other requirements for a guarantee but this remains a fundamental pre-requisite deriving from the Statute of Frauds and has been since that time applied by the common law courts of England. 

[10] In the instant case there was never a contract of guarantee or other written instrument or memoranda or note thereof signed or executed by the first and/or second proposed third party and therefore no liability to them can accrue on the basis of a guarantee.

[11] As to the second ground relied on by the defendant, I am not certain whether the defendant here refers to underwriting in the sense of guaranteeing all or part of the debt or whether it means underwriting in the sense of a contract of indemnity alleged to exist as between the parties. If it is the former it fails for the reasons just given. If it is the latter it falls to be considered under (iv) below under indemnity. Certainly there is no species of contract such as an underwriting contract per se except for the purposes of insurance law or a right of action based on same as far as I am aware. Neither did counsel cite any authority supporting such a proposition. 

[12] As to the assurances as a basis for joinder this fails for a similar reason, namely there is no right of action for a contract by assurance. But it also fails because the assurances the defendant relies on are not pleaded in the statement of claim and in fact are disputed by the parties who supposedly gave them. See the affidavits of Mr Gary Vui and the 2nd third party filed in this matter. As outlined earlier, factual issues which are in dispute cannot form the basis for joinder of a third party. I also note in passing in any event that the assurances said to be given are of a general and wide nature and do not relate specifically to the debt that is at issue in these proceedings.

[13] The final argument of the defendants rests on an indemnity. This is a type of contract known to law and is distinguishable from a guarantee because a guarantee is a contract operative only on the default of the primary debtor and is a contract collateral to the primary debtor-creditor contract, whereas an indemnity is a contract whereby the promisor undertakes by way of an independent obligation to indemnify the promisee against loss. Halsburys 4th edition Volume 20 at paragraph 108 states:

"Although a contract of guarantee may be described as a contract of indemnity in the widest sense of the term yet contracts of guarantee are distinguished from contracts of indemnity ordinarily so called by the fact that a guarantee is a collateral contract to answer for the default of another person, and thus is a contract that is ancillary or subsidiary to another contract, whereas an indemnity is a contract by which the promisor undertakes an original and independent obligation."

[14] The other main distinction is that contracts of indemnity do not have to be in writing but they must otherwise fulfill the normal requirements of a contract as to consensus ad idem, consideration and suchlike. The existence of course of such a contract, its terms and the extent of the liability of the indemnifier thereunder are questions of fact for determination at a trial for such matters are to be examined and ruled upon according to the circumstances of the particular case.

[15] The issue of a possible contract of indemnity is in my view raised implicitly if not specifically by the plaintiffs statement of claim but only in respect of the first third party. There is no suggestion that the second third party personally became part of any contract of indemnity or similar arrangement with the defendant and/or the plaintiff. There is therefore no basis for joinder of the second third party to these proceedings.

[16] It is also clear from the pleadings that from this perspective, there is a commonality of issues and relief in respect of the defendants claim and it would be expedient to deal with both matters in the same proceeding.

[17] Accordingly there will be orders to issue as follows:

1.	the application to join the first third party Nonu Samoa Limited succeeds;

2.	the relevant third party notice is to be served on the first third party within 7 days hereof;

3.	the defendant and the third party are to file and serve statements of defence within 21 days hereof;

4.	these proceedings will be adjourned for mention on the court list of 14 June 2010 or the next mention list thereafter to set a hearing date;

5.	the application for leave to join the second third party is dismissed and as there was no basis upon which an application to join him could have been made, he is entitled to reasonable solicitor-client costs in respect of the application. His counsel is to submit a statement of those costs within 7 days for the courts approval.

JUSTICE NELSON