Fonua v Westpac Bank of Tonga [2015] TOCA 16; AC6 of 2015 (16 September 2015)

IN THE COURT OF APPEAL OF TONGA
LAND JURISDICTION AC 6 of 2015

NUKU'ALOFA REGISTRY [LA 14 of 2013]

BETWEEN:

1. SIOSAIA FONUA
2. MARY FONUA
Appellants

AND:

WESTPAC BANK OF TONGA
Respondent

Coram: Moore J
Blanchard J
Hansen J
Tupou J

Counsel: Mr.L. Niu SC for the Appellants
Mrs.D. Stephenson for the Respondent

Date of Hearing: 8 September 2015
Date of Judgment: 16 September 2015

JUDGMENT OF THE COURT

[1] This is an appeal against a judgment of Scott J of 6 March 2015 sitting as a judge of the Land Court in an application by the respondent, Westpac Bank of Tonga (Westpac), for an order declaring it was lawfully entitled to possession of certain leasehold land and a building (or dwelling house) erected on the land and related orders. Scott J concluded that the owners of the leasehold, the appellants, were in default under a mortgage with Westpac. The judge made the orders in an application seeking summary judgment pursuant to Order 15 Rule 2 of the Supreme Court Rules 2007.

[2] It is convenient to note at the outset two aspects of both Scott J's reasons and the orders made. The first is that at paragraph [21] of his reasons, the judge found that "the conduct of the [appellants] clearly amounted to serious default" under the mortgage. This finding of mixed fact and law arose from the evidence concerning the appellants' history of payments to Westpac under the mortgage. The second matter is that the substantive orders made by Scott J were a declaration that Westpac was entitled to possession of the land the subject of the mortgage and secondly that the appellants give vacant possession of the land comprised in the lease within 28 days of the date of the judgment. No orders were made about possession of the building.

[3] The background to the proceedings before Scott J was that the appellants signed a loan agreement on 9 March 2007 and executed a mortgage in favour of Westpac. In these reasons, it is mostly unnecessary to draw repeatedly a distinction between the agreement creating contractual rights and obligations and the mortgage conferring on Westpac an interest in the land. A mortgage application form was, on the same day, executed by the appellants and on 21 May 2009 the mortgage was registered under the Land Act (Cap 132). The property the subject of the mortgage was the parcel of land comprised in registered lease 4837 expiring on 9 August 2038. From the evidence led before Scott J there appeared to be no significant dispute that payments were made by the appellants to Westpac, but those payments did not meet the contractual obligations under the mortgage. Indeed that was the substance of the finding referred to in the previous paragraph. Additionally, during the hearing of the appeal, senior counsel for the appellants accepted that they were required, under the terms of the mortgage, to make periodic payments of a specified amount and they had stopped making those payments in 2011.

[4] Section 109 of the Land Act provides:

109. (1) In the event of the mortgagee wishing to take possession of the lands mortgaged following default by the mortgagor of any of the obligations to the mortgagee set out in the mortgage deed or in any other document lodged with the Minister in terms of the next succeeding section the mortgagee shall give notification both to the mortgagor and to the Minister of his intention to take possession of the lands mortgaged and may thereafter take possession at any time after the expiry of 14 days from the date of said notification.

(2) After a mortgagee has taken possession, in terms of subsection (1) of the land mortgaged, he may either retain possession for the unexpired term of the mortgage lease or he may sublease the lands for the unexpired term of the mortgage lease or may sell the lease or sub-lease if the mortgaged land is a leasehold.

[5] The appellants argue that the expression "mortgage deed" in s.109(1) is a reference to a document in which a mortgagor mortgages, by way of mortgage lease, all his rights title and interests in the land the subject of the mortgage together with all buildings and fixed improvements thereon. This argument is founded on s 99 of the Land Act which defines "mortgage lease" as, in effect, a lease that is in the terms of Form 2 of Schedule VIII of the Land Act which says:

MORTGAGOR:........................................................................

MORTGAGEE: ........................................................................

TYPE OF HOLDING:...............................................................

LAND: .....................................................................................

In consideration of a loan or loans made or to be made by the Mortgagee to the Mortgagor not exceeding in total the sum of T$ .......................................................... (....................... pa'anga) the Mortgagor COVENANTS with the Mortgagee as set out in the Schedule AND for the purpose of securing the repayment of such loan and interest and other moneys the Mortgagor HEREBY MORTGAGES BY WAY OF A LEASE to the Mortgagee all his rights title and interests in the land above described together with all buildings and fixed improvements thereon for a period of.................. years from the date hereof.

Dated this ...................... day of .......................19.............

SIGNED by the above named)

..............................................)

as Mortgagor in the presence of:)

Correct for the purposes of the Land Act

.................................................

Mortgagee/Solicitor for the Mortgagee.

(Emphasis added)

[6] While it is not free from doubt, we proceed on the basis that a mortgage lease is necessary to effect a mortgage over leasehold land notwithstanding that this is not an express requirement in s.99 of the Land Act though, in contrast, it is an express requirement in relation to allotments (see s.100(1)(v)) and hereditary estates (see s.101(1)(iv)). The appellants emphasise that the mortgage lease concerns not only the leasehold but buildings as well. This founds the argument that the Land Court jurisdiction does extend, having regard to s.149(1)(b), to a claim seeking the enforcement of a mortgage lease covering both the leasehold and the buildings. This also founds the argument that in the present matter Scott J was incorrect in concluding, as his Honour did at paragraph [22], that sitting as the Land Court he could not deal with a claim for possession of the building and also was incorrect in saying at paragraph [23] that a dispute between a mortgagor and a mortgagee about the amount owing under the mortgage would have to be dealt with in the Supreme Court.

[7] In the present proceedings, as noted earlier, Westpac sought a declaration that it was lawfully entitled to possession of not only the leasehold but also the building. Scott J held, in effect, at paragraph [22] of his judgment that a notice under s.109 could not issue in relation to a building as it was a chattel, referring to Cowley v Tourist Services Ha'apai Ltd and Fund the Management Ltd [2001] Tonga LR 183. The order actually made related only to the leasehold. It was an order clearly within the jurisdiction of the Land Court. However the question raised by the appellants concerns the jurisdiction of the Land Court to deal not only with possession of land but also any issues concerning possession of a building erected on the land and any dispute, by way of defence or counterclaim, concerning the total amount owing under a mortgage.

[8] The s.109 notice of 13 June 2013 asserted that the appellants were indebted to Westpac in the sum of $379,202.94 which the appellants dispute. They submit that in circumstances where the amount owing is contested, it is inappropriate to give summary judgment. The appellants submit they had an arguable and bona fide defence. There should have been a trial so the amount owing under the mortgage could be determined. The appellants say that, in particular, Westpac unlawfully charged to the loan account loan administration charges ($32,000), late payment fees ($4667.50), interest charged on interest ($81,027.34) and legal fees ($31,711.62). The total of these amounts is $149,406.46. They submit that they were not "in default of the grossly inflated sum of $379,202.94".

[9] Westpac submits that all that is necessary to satisfy s.109 is that the mortgagor is in default and that the notice informs the mortgagor that the mortgagee intends to take possession of the land. We agree. That is what the section says and there is no basis for implying some further or additional requirement.

[10] As noted earlier, the trial judge made a finding of mixed fact and law that the appellants were in default and, as a matter of fact, the notice of 13 June 2013 said that Westpac intended to take possession of the land, namely lease 4837 expiring on 9 August 2038. It is not a question of whether the appellants were "in default" in relation to the payment of the total amount said by Westpac to be owing but rather whether they were in default under the mortgage. The appellants were in default under the mortgage because, as conceded by senior counsel, they were contractually obliged to make periodic payments and ceased doing so in 2011. This constituted default and the fact that the appellants were in dispute with Westpac about the total amount owing did not relieve them of the obligation to continue to make periodic payments. Different considerations might arise if the ambit of the dispute about the total amount owing involved an assertion by the mortgagor that the entire amount owing had already been paid but the mortgagee contended otherwise. However that is not the factual position arising in this case. Accordingly, the appellants were in default and, in those circumstances, the only condition precedent to taking possession was the service of a notice in conformity with s.109. In this case that condition precedent was satisfied and Westpac was entitled to possession.

[11] The appellants argue that the Land Court impermissibly separated the issue of the amount owing under the mortgage from the issue of whether Westpac should have possession. The amount owing was raised in a defence to the claim for possession and also in support of a counterclaim. The defence that the appellants were entitled to stop making periodic payments because they were in dispute with Westpac and, for that reason, were not in default, is untenable. For the reasons already explained, the appellants were in default. Thus it would have been entirely appropriate for Scott J to make an order for possession in favour of Westpac by the process of summary judgment in the absence of the appellants' counterclaim. His Honour made no formal orders in relation to the counterclaim though it is clear from paragraph [23] of his judgment referred to earlier, that he believed he had no jurisdiction to deal with the counterclaim. In our view, this conclusion is wrong. Thus it is necessary to explain why the Land Court did have jurisdiction to deal with the counterclaim and, indeed, had jurisdiction to deal with Westpac's application for a declaration concerning possession of the building. Our conclusion does not depend on the argument advanced by the appellants based on the terms of the mortgage lease prescribed by the Land Act. Rather, it depends on more fundamental notions concerning the role of courts in resolving controversies between parties to litigation.

[12] A similar question about the jurisdiction of the Federal Court of Australia arose comparatively early in the life of that court. The Federal Court, established by legislation of the Australian Parliament and not the States, had been conferred with federal jurisdiction under that legislation. The fundamental issue was whether the Federal Court could also exercise jurisdiction in relation to claims based on state law or the common law or equity when considering claims based on federal laws. The answer was yes. Though the answer turned on the construction of the Australian Constitution and the legislation establishing the Federal Court, the rationale for the answer lay in the public interest in having one court whose jurisdiction was lawfully invoked dealing with the entire legal controversy between the parties. That was so even if that controversy contained elements that the court would otherwise not have had jurisdiction to determine if those elements only were raised in proceedings.

[13] This rationale is illustrated by the following observations of Barwick CJ in Philip Morris Inc v Adam P Brown Male Fashions Ply Ltd (1981) 148 CLR 457 at 475:

"It is settled doctrine in Australia that when a court which can exercise federal jurisdiction has its jurisdiction attracted in relation to a matter, that jurisdiction extends to the resolution of the whole matter. This accrued federal jurisdiction is not limited to matters incidental to that aspect of the matter which has, in the first place, attracted federal jurisdiction. It extends, in my opinion, to the resolution of the whole matter between the parties. This accrued jurisdiction carries with it the authority to make such remedial orders as are necessary or convenient for or in consequence of that resolution. For this purpose, the court exercising federal jurisdiction may enforce rights which derive from a non-federal source. This exercise of this jurisdiction, which for want of a better term I shall call 'accrued' jurisdiction, is discretionary and not mandatory, though it will be obligatory to exercise the federal jurisdiction which has been attracted in relation to the matter."

And later at 479 – 480:

"The substantial matter between the parties was their difference as to the assertion of and attempt to protect the rights claimed to belong to the plaintiffs by reason of the trade marks or the acquired business reputation. The claim to relief under Ch. V of the Act was one endeavour to protect these rights. The claim to equitable relief for passing off was another. The former attracted federal jurisdiction: the latter, not being disparate and independent of the former, was part of the whole matter between the parties and thus within the accrued federal jurisdiction. Thus, it seems to me that the federal jurisdiction attracted by the claim for misleading and deceptive conduct extends to the resolution of the entire matter between the parties, which includes the claim for passing off, not merely as an associated claim but as part of the entirety of the matter between the parties in relation to which federal jurisdiction has been attracted." (at p604).

[14] It is desirable to repeat what the Court of Appeal recently said in Mortimer v Fe'aomoeata in AC 2 of 2015 and AC 28 of 2014,31 March 2015 at [10] and following:

The exclusion in clause 90 of the Constitution limiting the jurisdiction of the Supreme Court should not be taken to identify the boundaries of the jurisdiction of the Land Court. The Courts can have concurrent jurisdiction. That is clear from the judgment of the Court of Appeal in Niu and Ors v Tapealava AC 15 of 2012, 17 April 2013. That the jurisdiction of the Land Court is wider than the limit on jurisdiction of the Supreme Court was recognised by the Lord Chief Justice in Yuzhen Yang and another v Manoa at [24]. We agree. That being so, it is necessary to consider the ambit of the jurisdiction of the Land Court conferred by s.149(1).

It is clear, in our opinion, that the proper construction of s.149(1)(b) results in the Land Court having jurisdiction to hear and determine disputes affecting any land or any interest in land, claims affecting any land or any interest in land, or questions of title affecting any land or any interest in land. So much is clear from the language used together with the punctuation in the paragraph. The Crown argued in this appeal for a narrower construction of this paragraph effectively confining the jurisdiction it confers to disputes about title. However the language used is clear and the expression "questions of title" is but one of three classes of matters identified in the opening part of s.149(1)(b), the other two being disputes and claims. What is necessary is that each of these classes must be "affecting any land or interest in land". If that nexus or link exists then jurisdiction is conferred. If it is accepted, as it should be, that the Land Court and the Supreme Court can have concurrent jurisdiction then no violence is done to the system of administration of justice in the Kingdom or the system of land law to treat the Land Court as having a wide rather than narrow jurisdiction to the extent authorised by s.149 of the Land Act and the Act more generally. As a matter of general principle statutes conferring jurisdiction on a Court should not be narrowly construed: see, for example, The Owners of the Ship "Shin Kobe Maru" v Empire Shipping Company Inc (1994) 181 CLR 404 at 420 – 421 and Patrick Stevedores Operations No 2 Ply Ltd v Maritime Union of Australia (1998) 195 CLR 1 at [112].

[15] Thus the question becomes, in this case, whether, if the jurisdiction of the Land Court was lawfully invoked by an application for a declaration about the possession of land (as it plainly was), the Land Court could deal with other aspects of the entire controversy between the parties including the possession of the dwelling house and the determination of the amounts payable under the mortgage. The language of clause 90 of the Constitution and of s.149 of the Land Act do not, expressly or by necessary implication, restrict the nature of the controversy the Land Court can determine if the jurisdiction conferred on it is lawfully invoked. The Land Court exercises the judicial power of the Kingdom of Tonga. As observed in the quoted passage above from Mortimer, statutes conferring jurisdiction on courts should not be narrowly construed. It is obviously not in the public interest, indeed it is contrary to the public interest, for Tongan citizens, others or the Kingdom itself to be put to what is often the considerable expense and inconvenience (not to mention delay)of having to bring proceedings in more than one court to resolve all issues between parties in legal dispute. It is in the interests of the administration of justice to avoid this outcome.

[16] In our opinion, if the jurisdiction of the Land Court is lawfully invoked by a party initiating proceedings against another party, then that court has jurisdiction to resolve the entire legal controversy between those parties, at least if the legal controversy concerns land and matters incidental or related to that land. In the present case it is unnecessary to define the boundaries of the jurisdiction of the Land Court because the dispute about the possession of the dwelling and the amount owing under the mortgage were closely related to the dispute about the possession of the land. There was a clear nexus between them.

[17] Different considerations arise in relation to the Supreme Court where s.90 of the Constitution expressly limits the jurisdiction of the Supreme Court by excising from its jurisdiction cases concerning title to land. But that is not an issue arising in these proceedings.

[18] Accordingly, the Land Court should have determined the application before it by Westpac insofar as it raised issues about possession of the dwelling and should also have dealt with the counterclaim of the appellants. This conclusion is not inconsistent with the judgment of the Court of Appeal in Westpac Bank of Tonga v Fonua and Anor, 9 April 2014 in AC 6/13 as that judgment concerned an application seeking only possession of the building (see paragraph [11] of the judgment).

[19] In these circumstances it may have been inappropriate for the Land Court to have given summary judgment on Westpac's claim concerning possession of the land without also dealing with the appellants' counterclaim. We propose to remit the matter to the Land Court to deal with Westpac's claim concerning possession of the building and the appellants' counterclaim if the parties wish to pursue those matters.

[20] However, in the circumstances of this case including the protracted litigation between the parties over a number of years, it is not in the interests of justice to interfere with the order of the Land Court concerning possession of the land. In the future, it will be a matter for the trial judge to determine how, procedurally, claims of the type raised by Westpac's application and the appellants' counterclaim should be progressed. Cases may arise where a counterclaim is brought for the sole or principal purpose of delaying the mortgagee gaining possession in a clear case of default. It does not follow from these reasons that in such a situation the trial judge would necessarily have to deal, by way of order, with the entire controversy before addressing aspects of it. However procedural decisions of this type will be within the discretion the trial judge having regard to, amongst other things, the applicable rules of court.

[21] In the result, the Court orders:

1. The appeal is dismissed insofar as the appellants seek to set aside the orders made by the Land Court on 6 March 2015;
   
2. The matter is remitted to the Land Court for determination of issues outstanding in the application of Westpac Bank of Tonga and the counterclaim of the appellants.
   
3. Each party bear their own costs of the appeal
   

Moore J

Blanchard J

Hansen J

Tupou J