PacLII Home | Databases | WorldLII | Search | Feedback

Court of Appeal of Tonga

You are here:  PacLII >> Databases >> Court of Appeal of Tonga >> 2003 >> [2003] TOCA 2

Database Search | Name Search | Recent Decisions | Noteup | LawCite | Download | Help

Manu v Tonga Development Bank [2003] TOCA 2; CA 19 2002 (25 July 2003)

IN THE COURT OF APPEAL OF TONGA
CIVIL JURISDICTION
NUKU'ALOFA REGISTRY


Appeal No. CA 19/02
Case No. C 658/2000


BETWEEN:


TU'IVATULELE MANU
Appellant


AND:


TONGA DEVELOPMENT BANK
Respondent


Coram: Burchett J
Tompkins J


Counsel: Siosifa Tu'utafaiva for appellant
Fatai Vaihu for respondent


Date of Hearing: 22 July 2003
Date of Judgment: 25 July 2003


JUDGMENT OF THE COURT


Introduction


[1] This appeal was heard by a court of two judges in accordance with an order of the Chief Justice made pursuant to rule 5 (b) and (c) and rule 4 (b) of the Court of Appeal (Constitution of Court) Rules 2003. As required, at the commencement of the hearing, this order was read in open court.

[2] The respondent, the plaintiff in the Supreme Court, claimed $6,176.99 plus interest from the appellant, the defendant in the Supreme Court, by a writ filed on 3 August 2000. The Chief Justice, in his judgment dated 30 August 2002, gave judgment for the respondent for the amount claimed plus interest. The appellant has appealed to this court against that judgment.

Background


[3] The appellant and the first defendant in the Supreme Court, Tevita Tapavalu were joint borrowers from the respondent of $4,200.00. The loan was evidenced by an agreement dated 19 May 1992. We return later to the terms of the agreement.

[4] Judgment by default of defence was entered against the first defendant on 19 February 2002. At the hearing in the Supreme Court the only issue for the court to determine was whether the claim against the appellant was outside the five year limitation period in s 16 (1) of the Supreme Court Act (Cap. 10).

[5] We take the following chronology from the judgment of the Chief Justice. Counsel accepted that it correctly sets out the principal events.

The terms of the loan agreement


[6] The agreement is partly printed and partly typed, the latter being in Tongan. That part of the agreement that sets out the term of the loan is ineptly drafted, no doubt because it is partly printed and partly typed. Mr Tu'utafaiva has provided us with the following version, which was accepted by the respondent:

Repayment of the loan and interest shall be made as follows:-


To pay $4,605.00 in January 1993.

The first payment shall be made in January 1993.

A final repayment of the balance of loan and interest then owing shall be made in January 1993.


In other words, the whole of the advance plus accrued interest was to be repaid in one lump sum in January 1993. That is consistent with the purpose of the loan which was to finance a squash crop.


[7] The other relevant term in the loan agreement is:

"And in the event of the failure of the borrower to fulfil any obligation under this agreement then the balance of the loan owing together with interest becomes payable on demand and the bank is entitled to do any or all of the following:-


(e) To take any other action available at law."

Supreme Court Act, section 16(1)


[8] This section contains the five year limitation period. It provides:

It shall not be lawful to sue any person for debt or damages after the expiration of 5 years from the date on which such liability was incurred nor to sue for property which has been in the undisputed possession of any person for more than 5 years. But if any part of such liability or claim has been paid within such time or the claim or liability has been admitted in writing within such time the 5 years shall commence to run from the time of such payment or admission and if there be any deed or document between the parties covering a period of time the 5 years shall commence to run from the expiration of such period of time.


[9] The only issue on the appeal is when was the liability for the debt evidenced by the loan agreement incurred, that is on what date was the appellant liable to pay to the respondent the amount of the debt. If that date is more than five years before the issue of the writ, the action is statute barred.

The liability for the debt


[10] Under the term of the loan agreement set out in paragraph [6], the appellant and the first defendant were liable to pay the debt in January 1993. They did not do so.

[11] On or about 5 February 2003, the respondent prepared a document called "LOAN AMENDMENT/VARIATION", [1] in the chronology. It set out a new repayment schedule that required payment by the instalments stated, with a final payment in January 1994. This document appears to be an internal memorandum that was not sent to the appellant, although the respondent wrote to the first defendant (but not the appellant) on 12 February 1993, [2] in the chronology, confirming the new arrangements and that the final payment was due in January 1994 – the day was not stated. Assuming the respondent is bound by this letter, the appellant and the first defendant became liable to pay the debt in January 1994.

[12] They did not do so. There followed the correspondence set out in the chronology. The respondent was asking for, then demanding, payment. However, there is no indication in this correspondence that the due date for payment was extended. There was produced a further Loan Amendment/Variation document dated 10 March 1995 that shows instalments, with the final payment in January 1996. However, there is no evidence that this variation was communicated to the appellant and the first defendant. On the contrary, on 11 August 1995, [8] in the chronology, the respondent wrote again a letter that the appellant signed as received and understood, submitting "final warning by the Bank in connection with the late payment of loan . . ."

[13] There followed further requests and demands for payment, culminating in the issue of the writ on 3 August 2000.

[14] The Chief Justice held that the letter of 11th August, 1995, [9] in the chronology, was a demand for payment of the debt within the meaning of the clause we have set out above. Following the decision of Lewis J in Tonga Development Bank v 'Aukamea & ors C326/94, he held that the limitation period under s 16 (1) started to run from that date in relation to the appellant. The time to sue for the debt therefore expired on 12th August, 2000, after the issue of the writ, which was within the limitation period. For that reason he held that the limitation defence failed.

[15] With respect to the Chief Justice, we do not agree that the present case is similar to the situation before Lewis J in 'Aukamea. In that case the loan agreement provided for the balance of the loan and interest to be paid in November 1990. The debtor defaulted in the payment of instalments. On 15th June, 1989 the bank wrote to the debtor demanding payment. The writ was issued on 13th April, 1994. Lewis J held that the effect of the demand was that the amount due then became payable, with the result that the writ was issued in time. He rejected the contention on behalf of the debtor that the debt became payable earlier when default in payment of instalments had occurred. The obligation to pay only arose when the Bank elected to make demand.

[16] That is not the situation in the present case. Accepting the Chief Justice's finding that the letter of 11th August, 1995 was an effective demand for the amount due, it was not a demand which created the liability to pay the amount due. That liability already existed and had existed ever since the respondent had varied the terms of the loan on 5th February, 1993 as a result of which payment of the amount due under the loan was to be made in January 1994, if the variation on 5 February were effective. If it were not, the liability had crystallised in January 1993, and the whole amount had been due since then.

[17] For completeness we should refer to the letter of 20th June, 2000 from the appellant's lawyer to the respondent offering to pay the loan back. This letter amounted to an admission of liability to pay. But it does not defeat the limitation defence because that admission was not made within five years from the appellant becoming liable to pay the debt.

Conclusion


[18] For the reasons we have set out, we are satisfied that the appellant's liability for the debt was incurred at the latest in January 1994. It follows that the writ issued on 3rd August, 2000 was out of time. The limitation defence applies.

[19] The judgment entered in the Supreme Court against the appellant is set aside. In lieu thereof there will be judgment for the appellant.

[20] The appellant is entitled to costs in the Supreme Court and in this court to be agreed or taxed.

Burchett J
Tompkins J


PacLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback
URL: http://www.paclii.org/to/cases/TOCA/2003/2.html