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Vea v Filipe [2010] TOLawRp 20; [2010] Tonga LR 97 (14 July 2010)

IN THE SUPREME COURT OF TONGA
Court of Appeal, Nuku'alofa

AC 27/2009

Vea

v

Filipe

Burchett, Salmon, and Moore JJ
6 July 2010; 14 July 2010

Land law – appeal against dismissal of eviction claim – appeal allowed subject to proceedings in Supreme Court

For the full facts and the decision of the Land Court, see Vea v Filipe [2009] Tonga LR 293.

In the Land Court, the appellant sought the eviction of the respondent from land leased by the appellant in Ha'apai. The land was occupied by a service station the construction and operation of which was the subject of an agreement between the parties. The judge refused to order the eviction of the respondent from the land. The appellant appealed that decision on four grounds:

(1) the first ground repeated an argument made in the Court below and rejected by the judge to the effect that because the agreement was signed on a public holiday it was void as a result of the provisions of section 3 of the Public Holidays Act. The appellant abandoned this ground early in the hearing.

(2) The second ground challenged the judge's finding that he believed the evidence of the respondent's wife as to the signing of the agreement with the inclusion of the handwritten words. This ground of appeal was withdrawn.

(3) The third ground was that the judge failed to consider the effect of the letter of 11 June 2008 and that that letter terminated the agreement between the parties.

(4) The fourth ground challenged the apparently non-finite nature of the direction preventing the appellant evicting the respondent.

Held:

1. The Court of Appeal concluded that the third ground of appeal had substance. The judge should have considered the effect of the letter of 11 June. The letter was important.

2. The court concluded that the letter brought the agreement and the partnership to an end. The letter acted as a notice of dissolution of the partnership and a repudiation of it.

3. Therefore, the appeal was allowed and the appellant was entitled to an order for eviction of the respondent from the land. It was unjust for the order to have taken effect immediately. There were separate proceedings in the Supreme Court so any order for eviction was suspended until that hearing was concluded. It was intended that it should remain open to the respondent to claim, that prior to termination, the lease had become a partnership asset so that its value would be taken into account in a division of partnership assets. The court expressed no view one way or the other.

4. Accordingly the court made an order that the respondent be evicted from the property the subject of the agreement such order to be suspended until the Supreme Court proceedings between the parties were concluded. The suspension was conditional upon the respondent paying one year's rental to 50 the Ministry of Land within 14 days of the service upon him of this judgment and order. A further one year's rental was due in August. Costs in all courts are to be as ordered by the Supreme Court at the conclusion of the proceedings there.

Counsel for the appellant : Mr Pouono
No appearance by the respondent

Judgment

This is an appeal against a judgment of Andrew J in the Land Court. The appellant sought the eviction of the respondent from land leased by the appellant in Ha'apai. The land is occupied by a service station the construction and operation of 60 which was the subject of an agreement between the parties. The judge refused to order the eviction of the respondent from the land. There are also proceedings in the Supreme Court between the parties arising from the same business venture. The respondent was not represented in this Court nor did he appear in person. We are satisfied that his counsel was properly informed of the setting down of the appeal for hearing.

Brief facts

Over a period of time the parties discussed the setting up of a service station in Ha'apai. The appellant obtained a lease of land in his name alone. That lease was registered on 27 August 2007. In November 2007 the parties executed an agreement. There were two copies of this agreement produced to the court. Both were signed by the parties. Clause 7 of the agreement provided that the respondent would provide finance for the rent or lease of land. One copy had words added in handwriting. Those words were "and the lease to be registered on the parties names". The agreement provided for the respondent to be chief executive officer and the appellant to be operational manager. The respondent was to have a 51% share of the business and the appellant 49%.The business commenced. On 11 June 2008 the respondent wrote to the appellant notifying him that he had appointed a new manager and that the appellant would no longer work or have any involvement in running the business. The appellant took the view that the letter brought the agreement to an end and he issued proceedings on 2 October 2008 seeking the eviction of the respondent from the land.

The judgment in the court below

The judge examined the circumstances surrounding the signing of the agreement. He concluded that the parties had agreed that the respondent would be a party to the lease and in those circumstances he found that the appellant was "estopped from evicting the tenant at this stage". The judge made no reference to the letter of 11 June 2008 nor did he consider the effect of that letter on the agreement between the parties.

The appeal

The appeal was brought on four grounds. The first ground repeated an argument made in the Court below and rejected by the judge to the effect that because the agreement was signed on a public holiday it was void as a result of the provisions of section 3 of the Public Holidays Act. The appellant abandoned this ground early in the hearing. The second ground challenged the judge's finding that he believed the evidence of the respondent's wife as to the signing of the agreement with the inclusion of the handwritten words. This ground of appeal was withdrawn. The third ground was that the judge failed to consider the effect of the letter of 11 June 2008 and that that letter terminated the agreement between the parties. The fourth ground challenged the apparently non-finite nature of the direction preventing the appellant evicting the respondent.

Discussion

We have concluded that the third ground of appeal has substance. The judge should have considered the effect of the letter of 11 June. The letter is important and we therefore set out the text of it in full. It is addressed to the appellant and his wife. The heading of the letter refers to the service station business. The text reads:

"I write to advise that there is a change of management to the above business. I find that you are both not competent to run this business, therefore I am notifying you both that you no longer need to work or have any involvement in running the above business as of this day 11 June 2008 until further notice.

The new assistant manager to run the above business is Salesi Mafi. I will remain as the CEO for the business.

All contacts and concerns must be forwarded to my office at (address included).

Thank you for your kind cooperation."

The agreement between the parties contemplated the eventual formation of a company structure. Both parties agreed that in the meantime the agreement created a partnership between them. As already indicated the appellant treated the letter as bringing the agreement to an end. In cross-examination it was put to the respondent that the letter had that effect. He denied that and claimed that it was a temporary move. We have concluded that the letter did indeed bring the agreement and the partnership to an end. We have concluded that the letter acts as a notice of dissolution of the partnership and a repudiation of it. Lindley on Partnership 15th Edition records at page 690 that for a notice that the partnership shall be dissolved to be effectual it must be explicit. The letter does not of course use the word dissolution but the presumption by the respondent that he can take complete control is an explicit denial of the continuing existence of the partnership. Certainly the conduct of the respondent would justify an order for dissolution had such been sought. An example of unreasonable conduct justifying such an order is where a partner wilfully commits a breach of the partnership agreement or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable for the other partner to carry on the business in partnership with him - see Halsbury's Laws of England volume 35 paragraph 178. Alternatively the letter constitutes a repudiation of the partnership. The partnership agreement expressly provided for the appellant to be the operational manager of the business. By purporting to take control of the business the respondent repudiated the arrangements contained in the agreement. There is no evidence that the appellant challenged the repudiation and indeed his proceedings are evidence that he accepted it.

We therefore conclude that the partnership and the agreement are at an end. In those circumstances any arrangement that the respondent would become a joint lessee would also be at an end subject to the possibility of it having become a partnership asset prior to termination of the partnership. We conclude therefore that the appeal should be allowed and that the appellant is entitled to an order for eviction of the respondent from the land. It would however be unjust for the order to take effect immediately. We have referred above to the separate proceedings in the Supreme Court. Any order for eviction should be suspended until that hearing is concluded. Our judgment and the finding that the agreement is at an end may necessitate an amendment to those proceedings by one or both of the parties. We intend that it should remain open to the respondent to claim, that prior to termination, the lease had become a partnership asset so that its value would be taken into account in a division of partnership assets. We express no view one way or the other on this issue.

We were also told that since the date of the letter terminating the partnership the respondent has been running his own business on the land and has not made any contribution to the rental of it during that time. The lease has been running now for almost 3 years. The appellant paid the first year's rent and we understand that the respondent may have made some contribution to that. The rent for the period August 2009 to August 2010 has not been paid. We understand it amounts to $7200. As the respondent has had the benefit of the use of the land for that period and more we consider that he should pay this rental amount. Accordingly we make an order that the respondent be evicted from the property the subject of the agreement such order to be suspended until the Supreme Court proceedings between the parties are concluded, the suspension to be conditional upon the respondent paying one year's rental to the Ministry of Land within 14 days of the service upon him of this judgment and order. A further one year's rental will be due in August of this year. Payment of that shall be as ordered on interlocutory application made to the Supreme Court. Costs in all courts are to be as ordered by the Supreme Court at the conclusion of the proceedings there.