|
|
Home
| Databases
| WorldLII
| Search
| Feedback
Court of Appeal of Tonga |
IN THE COURT OF APPEAL OF TONGA
CIVIL JURISDICTION
NUKU’ALOFA REGISTRY
AC 25 of 2023
[CV 20/2022]
BETWEEN
LESIELI NAMOA
HIROSHI TOMINAGA
- Appellants
AND
SIOSAIA MOEHAU
- Respondent
___________________________________________________________________________
JUDGMENT OF THE COURT
___________________________________________________________________________
Heath J
Counsel: Mr. W C Edwards SC for Appellants
Miss A Kafoa for Respondent
Hearing: 21 May 2024
The appeal
[1] Ms Lesieli Namoa and Mr Hiroshi Tominaga appeal against an order made by Langi J on 10 October 2023, by which she appointed a receiver “by way of equitable aid to enforcement of judgments entered ... against each” of them.[1] The appeal extends to a ruling given by the Judge on 12 October 2023.[2] On 3 May 2024, Heath J stayed the receivership order on the basis that the appeal would be heard during the May sessions of the Court of Appeal. We heard the appeal on 21 May 2024.
[2] Mr Edwards SC advanced Mr Tominaga’s appeal on the fundamental basis that no judgment had been entered against him in respect of which a receivership order could have been made. On behalf of Ms Namoa, Mr Edwards submitted that the receivership order ought not to have been made or that it was too vague in its terms. We were told that the Receivership Act 2015, on which it appears that Langi J relied, at least in part, has not yet been brought into force by notice in the Gazette.
[3] Ms Kafoa, for Mr Siosaia Moehau (Siosaia) acknowledged that the orders made in the Supreme Court may not have been made (at least in the same terms) if the Judge had been aware that the Receivership Act was not in force. She also acknowledged that no judgment had been entered against Mr Tominaga. For those reasons, the appeal will be allowed by consent. We deal with questions of costs later.[3]
[4] Although the appeal is being allowed by consent, we have concerns about the way in which the receivership application was made and the breadth of the orders made in response. In those circumstances, to assist counsel and Judges in future cases, we have decided to set out conventional principles on which the Supreme Court should act when considering whether to appoint a receiver under the equitable jurisdiction of the Court to act in aid of execution of a judgment.
The equitable jurisdiction to appoint a receiver in aid of enforcement
(a) Procedural background
[5] Siosaia obtained judgment against Ms Namoa following a defended hearing in the Supreme Court. Lord Chief Justice Whitten entered judgment on 1 December 2022.[4] The steps taken to enforce the judgment in favour of Siosaia assumed an undesirable complexity which makes it difficult to summarise relevant events succinctly. As a result, our summary of relevant events is, necessarily, both incomplete and selective. Nevertheless, we are satisfied that it is sufficient for us to explain how the relevant equitable principles should be applied in future cases.
[6] The starting point is that Mr Sione Moehau (Sione), Nuku’alofa Investment Ltd and Siosaia issued proceedings in the Supreme Court against both Ms Namoa and Mr Tominaga. The claim arose out of a series of transactions into which the parties entered in late 2018 and early 2019 for the sale and purchase of the Loumaile Lodge (the Lodge). Sione, Nuku’alofa Investment Ltd and Siosaia had brought their claim based on Ms Namoa’s and Mr Tominaga’s alleged failure to complete the terms of purchase; in particular, by paying the full amount of the purchase price. A further development occurred on 15 May 2019, when Siosaia loaned a sum of TOP$1,527,210 to Ms Namoa to enable settlement of the Lodge transaction to be completed. Ultimately, the Lord Chief Justice entered judgment in favour of Siosaia for failure to repay the loan.
[7] Initially, Mr Tominaga took no steps to defend the proceeding. On 12 June 2020, Niu J entered judgment against him by default, in the sum of TOP$1,177,210 plus interest. Subsequently, Mr Tominaga applied to set aside the default judgment. An order to that effect was made by the same Judge on 19 August 2020. That left the claims against both Ms Namoa (against whom no default judgment had been sought or entered) and Mr Tominaga to be addressed on the merits.
[8] Following the trial in the Supreme Court, the Lord Chief Justice entered judgment in favour of Siosaia against Ms Namoa in the sum of TOP$1,707,933, together with interest and costs. The Lord Chief Justice found that “[Ms] Namoa assumed responsibility for payment of the loan to Siosaia and accounting to Mr Tominaga for any funds he advanced for the completion of the purchase of the property”. The claims made by Sione and Nuku’alofa Investment Ltd were dismissed. No judgment was entered against Mr Tominaga.
[9] On 17 April 2023, Mr David Garrett SC, on behalf of Siosaia, sought an order from the Supreme Court appointing a receiver of the property of Ms Namoa in respect of the judgment debt. Although Mr Garrett was acting as counsel for Siosaia, he sought an order that he (personally) be appointed as receiver “pursuant to the Receivership Act 2015”. At this stage, the receivership application did not extend to Mr Tominaga. As previously stated, the Receivership Act was not in force at the time the application was made.
[10] After further steps had been taken, an amended application was made on 4 September 2023, in respect of both Ms Namoa and Mr Tominaga. The order was sought “by way of equitable execution to receive the proceeds and moneys receivable” in respect of both “debtors”. The application was made on the basis that Siosaia had obtained a judgment against Mr Tominaga on 12 June 2020. Counsel did not disclose to the Court that the default judgment had been set aside by Niu J on 19 August 2020; nor that the Lord Chief Justice had found in favour of Mr Tominaga in his judgment of 1 December 2022.
[11] The amended application came before Langi J on 10 October 2023. Her Honour made orders against both Ms Namoa and Mr Tominaga. She did so in reliance on what she had been told were “judgments of [the Supreme Court] against Hiroshi Tominaga dated 12 June 2020 ... and against Lesieli Namoa dated 1 December 2022”. The receivership order included appointment of Mr Garrett as receiver of property said to be owned by Ms Namoa and/or Mr Tominaga, as well as bank accounts in the name of Sakura Co Ltd and Sunlight Sakura Finance Ltd. The formal order of the Court stated that it had been made pursuant to “section 5(2) of the Supreme Court Act, Order 33 of the Supreme Court Rules and section 14 of the Receivership Act”.
[12] On 11 October 2023, Mr Edwards, for Ms Namoa, applied orally to set aside the receivership order. Mr Edwards pointed out that there was no bankruptcy law in Tonga and that counsel for Siosaia was attempting to use the receivership process to charge assets as if a bankruptcy law applied. Further, he argued that the order was too wide and that he had not received notice of the application on behalf of Ms Namoa. Although Mr Edwards is not recorded as appearing on behalf of Mr Tominaga, he also challenged the order against him. Importantly, the challenge was not on the basis that no judgment had been entered against Mr Tominaga but that the application for appointment of a receiver had not been served on him. Mr Tominaga was then resident in Japan. On 12 October 2023, Langi J dismissed the oral application, leaving her order of 10 October 2023 in place.
[13] Langi J was asked to make further orders on 14 December 2023. By that stage, Mr Garrett had resigned as receiver, in favour of Mr ‘Inoke Vala. Langi J made additional orders; again under s 5(2) of the Supreme Court Act, Order 33 of the Supreme Court Rules and s 14 of the Receivership Act. The Judge appointed Mr Vala as receiver; limited the time of his appointment to 12 months from the date of her order; gave him power to exercise “all the functions, powers and duties conferred by, and in accordance with, s 14, 17, 18, 20 and 21 of the Receivership Act and Order 33, Rule 6 of the Supreme Court Rules” and authorised him to realise the judgment debtors’ (plural) interests in two leases of an allotment situated on the corner of Taufa’ahau and Laifone Roads, Nuku’alofa, upon which the Lodge is situated. Among other things, the order was extended to other assets of Ms Namoa and Mr Tominaga and moneys in Tongan bank accounts in the names of either “Sakura Co Ltd and/or Sakura Finance Ltd”. Ms Namoa was also directed to provide a sworn statement (in English) of her assets and liabilities.
[14] The orders made on 14 December 2023, followed a hearing on 1 December 2023 at which Mr Garrett had appeared for Siosaia and Mr Edwards SC, for Ms Namoa and Mr Tominaga. In reasons for orders given on 14 December 2023, Langi J also referred to a separate application to freeze the assets of Ms Namoa while the receivership order was in force. A separate freezing order was made on 14 December 2023 in the following terms:
- [Ms Namoa], being the sole shareholder and director of Sakura Co Ltd and Sunlight Finance Ltd, ... is hereby prohibited from selling or otherwise disposing of, or disbursing, any moneys or assets of whatsoever nature held either herself, Sakura Co Ltd, or Sunlight Sakura Finance Ltd or Sakura Finance Ltd pending further Order of the Court.
[15] The receivership application came before Langi J again on 20 December 2023. The Judge declined to make any changes to the orders made on 14 December 2023 on the basis of information provided by counsel at that time.
[16] On 26 February 2024, counsel for Mr Tominaga (Mr William Edwards) applied “to delete the inclusion of Hiroshi Tominaga as a judgment debtor as no judgment had been entered against him”. Langi J made an order in those terms, thereby varying the amended order for appointment of a receiver of 14 December 2023.[5] Langi J recognised that the Lord Chief Justice had not entered judgment against Mr Tominaga on 1 December 2022.
[17] The present appeal (brought on behalf of both Ms Namoa and Mr Tominaga) challenges Langi J’s orders of 10 and 12 October 2023. It was filed before consequential orders were made by the Judge on 14 December 2023 and 26 February 2024. In respect of Mr Tominaga, the ground of challenge was the lack of any underlying judgment. On 3 May 2024, when Heath J granted a stay of the receivership order, he was unaware that Langi J had already removed Mr Tominaga from its scope. For all practical purposes, the appeal could only have proceeded against the order in respect of Ms Namoa’s property. The direction given on 26 February 2024 had already disposed of Mr Tominaga’s involvement. The effect of counsel’s agreement is that the appeal will be allowed by consent in respect of the receivership order made against Ms Namoa. No order is required in respect of Mr Tominaga as he was not, at the time the appeal was heard, subject to an order.
(b) Principles for making a receivership order
[18] We start with a general introduction to the circumstances in which a Court will make an order appointing a receiver to aid execution. In doing so, we recognise the need to fashion the jurisdiction in Tonga, which must take into account, the fact that there is no personal bankruptcy law. Laws of New Zealand, Receivers, states:[6]
There are two sources of jurisdiction in respect of Court-appointed receivers: first, the Court’s inherent equitable jurisdiction and second, miscellaneous statutory provisions.
The High Court of New Zealand has no general statutory jurisdiction to appoint a receiver. However, the Court does have an inherent jurisdiction derived from the Supreme Court Act 1860. The Senior Courts Act 2016 continues that jurisdiction and also gives the High Court all judicial jurisdiction which may be necessary to administer the laws of New Zealand. With regard to appointing receivers in particular, the jurisdiction vested in the High Court has been held to be the law as administered in the Court of Chancery in England prior to the enactment of the Supreme Court of Judicature Act 1873 (UK). This law survives in New Zealand and is unaffected by the enactment of the Supreme Court of Judicature Act 1873 (UK) and its successors.
The two broad categories of cases in which the Court will exercise its equitable jurisdiction to appoint a receiver are cases to preserve property pending litigation, and cases to facilitate equitable execution. Being an equitable jurisdiction, it will be exercised only where the applicant has no effective remedy at common law. However, the fact that a receiver can be appointed out of Court (pursuant to a debenture) does not preclude the Court from appointing a receiver in appropriate circumstances. The High Court also has jurisdiction to appoint a manager of a business where realisation of the business is necessary, or at least probable. The High Court’s inherent jurisdiction has been invoked to appoint a receiver of an incorporated society. The inherent jurisdiction of the High Court to appoint a receiver extends to the District Court and the Court of Appeal.
(Footnotes omitted)
[19] In our view, those principles are equally applicable to the jurisdiction conferred on the Supreme Court of Tonga under ss 4 and 5 of the Supreme Court Act and Order 33 of the Supreme Court Rules:
SUPREME COURT ACT
Jurisdiction.
4. The Supreme Court shall have jurisdiction in all civil cases in which the amount claimed exceeds $500 and in all criminal cases for which the maximum penalty exceeds $500 or 2 years imprisonment and in all divorce, probate and admiralty matters and in any other matter not specifically allotted to any other tribunal. (Amended by Act 23 of 1978.)
Powers.
5. The Supreme Court shall have power to issue warrants, writs, summonses and to subpoena witnesses, to exercise all the powers of the Magistrate's Court and to enforce agreements and protect property.
ORDER 33: APPOINTMENT OF RECEIVER
O.33 Rule 1. Form of application for appointment of receiver
Application for the appointment of a receiver to enforce a judgment or order shall be made by application notice supported by an affidavit:
(a) stating the name and last known address of the judgment debtor;
(b) identifying the judgment or order to be enforced and stating the amount unpaid;
(c) identifying the property in respect of which the receiver is sought to be appointed; and
(d) naming the proposed receiver.
O.33 Rule 2. Service of application
Unless the Court otherwise orders, the application notice shall be served on the judgment debtor not less than 7 days before the hearing date.
O.33 Rule 3. Court may give directions
An order for the appointment of a receiver may include such directions as the Court thinks fit for the giving of security by the person appointed.
O.33 Rule 4. Service of order
Within 7 days of the issuance from the Court of an order appointing a receiver a copy of the order shall be served by the party obtaining it on the judgment debtor and on the receiver.
O.33 Rule 5. Receiver’s remuneration
The receiver shall be allowed such remuneration as the Court may determine.
O.33 Rule 6. Receiver’s functions
(1) A receiver shall:
(a) promptly pay into Court all surplus moneys received under the order, and
(b) submit such accounts at such intervals as the Court may direct.
(2) A receiver may at any time request the Court for directions by written request stating the matters upon which directions are required.
[20] While ss 4 and 5 of the Supreme Court Act and Order 33 of the Supreme Court Rules are expressed in general terms, we are satisfied that the equitable jurisdiction of the Court to make an order appointing a receiver in aid of execution remains in force in Tonga. It is part of the inherent jurisdiction of the Supreme Court.
[21] Plainly, the fact that the Receivership Act had not been brought into force prevented the Judge from making any order pursuant to its terms. We note, however, that when that Act does come into force, it will apply both to receivers appointed under any deed or agreement and those appointed by the Court “in the exercise of a power conferred on the Court or in the exercise of its inherent jurisdiction”.[7] If confirmation were required, that definition affirms an accepted use by the Supreme Court to appoint a receiver in exercise of its inherent jurisdiction. As the Act has not come into force, the issues with which we now deal are directed to the circumstances in which any application might be made under the existing law.
[22] The most comprehensive authority on the topic is Bond Brewing Holdings Ltd v National Australia Bank Ltd.[8] With the qualification that Bond Brewing concerned an application to appoint receivers of a trading company with the intention of restricting a range of companies within a group from dealing with assets pending determination of proceedings in the Supreme Court of Victoria, the principles to which we refer apply equally in Tonga. The discussion to which we refer is taken from the judgment of the Court of Appeal of Victoria.
[23] Although much of the Court of Appeal’s judgment concerned the question whether an application ought to have been made on an ex parte basis, the Court made it clear that it was inappropriate to appoint a receiver where a less dramatic equitable remedy was available. Kaye, Murphy and Brooking JJ put the point in this way:[9]
Whatever view is taken of the effect of the Judicature Act (a question on which the Full Court has spoken: Attorney-General v Shire of Huntly [1887] VicLawRp 32; (1887) 13 VLR 66), the Court still acts on the principle that equitable relief should not be granted unless there is no adequate legal, or for that matter no adequate and less drastic equitable remedy.
(Emphasis added)
[24] The Court of Appeal also considered the role of a receiver appointed under the equitable jurisdiction in aid of enforcement in the context of insolvency legislation, whether personal or corporate. The Court said:[10]
It has been said that a receiver is not to be appointed by way of substitution for an administration in bankruptcy (Harris v Beauchamp Bros [1894] UKLawRpKQB 53; (1894) 1 QB 801 at 811) or winding up order (Bakal v Petursson (1953) 4 DLR 449).
[25] This proposition necessarily requires adaptation to the legal system of Tonga because of the absence of any personal insolvency law.[11] In Fonu v Merrill Lynch Bank and Trust Co (Cayman) Ltd,[12] the Judicial Committee of the Privy Council emphasised the flexibility of the equitable jurisdiction to meet new circumstances. In giving the judgment of the Board, Lord Collins emphasised that the jurisdiction rests on the need to further the interests of justice.[13] His Lordship specifically stated that the “jurisdiction could be exercised to apply old principles to new situations ... [with] the demands of justice [being] the overriding consideration in considering the scope of the jurisdiction”.[14] We consider that adaptation of the jurisdiction to meet the needs of a country that does not possess a collective bankruptcy regime is justified on the basis of the Privy Council’s statement of principle.
[26] There is no doubt that the jurisdiction to appoint a receiver continues to exist in a case where execution is not feasible, for one reason or another. It is necessary, in considering whether to appoint a receiver in such circumstances, to identify the reasons why other forms of enforcement action set out in Orders 29–32 and 34–36 of the Supreme Court Rules are insufficient to meet the needs of justice in any particular case. To use the words of the Court of Appeal of Victoria in Bond Brewing, “equitable relief should not be granted unless there is no adequate legal, or for that matter no adequate and less drastic equitable remedy”.[15]
[27] In the absence of a collective insolvency law, the jurisdiction to appoint a receiver may be particularly important where a group of two or more creditors wish to preserve assets of a debtor to ensure that, after their realisation, they are retained for distribution equitably among the creditors. Adapting the way in which the jurisdiction could be exercised, in circumstances where two or more creditors have commenced a receivership under the equitable jurisdiction but there is not enough to pay all, the Court could extend its ability to protect the general body of creditors by exercising an ancillary power to pro rate their claims in a manner akin to the way in which senior and junior secured creditors are treated under the equitable marshalling jurisdiction.[16]
- [28] In short:
- (a) An individual applicant for a receivership order under Order 33 should identify the reasons why no other form of enforcement order is appropriate (we refer to those enforcement actions set out in Orders 28–32 and 34–36) in order to persuade the Court that no remedy (legal or equitable) short of a receivership order is necessary to protect the interests of creditors. In cases where there is a risk of immediate dissipation of assets it may be more appropriate to seek a freezing order (under the formerly known Mareva jurisdiction) in which usual principles relating to the grant of an interim injunction (including the provision of an undertaking as to damages by the applicant creditor) will apply.
- (b) The assets that the creditor wishes to subject to the receivership process should be listed with specificity. They should refer only to assets of the debtor or debtors, and not to other entities (such as a company) in which they hold shares. A company is a distinct legal entity. The assets held by the debtor or debtors in that situation will be the shares in the company.
- (c) Because of the absence of a bankruptcy law, one ground on which a receiver could be appointed in aid of enforcement is where two or more creditors are involved and there is a need to protect the collective body of creditors, rather than to encourage a rush to obtain judgment and obtain execution on a “first past the post” basis.
[29] As to the identity of a receiver appointed by the Court, we also wish to draw attention to the appointment of Mr Garrett as the initial receiver of Ms Namoa’s property. Mr Garrett, when he made the application on behalf of Siosaia, was acting as counsel for the creditor. It is trite that a receiver stands in a fiduciary position and must act in an even-handed way. While endeavouring to obtain recovery for a creditor, he or she must also be mindful of the risk of prejudice to the debtor if (for example) property were sold at a demonstrable under-value. This point was made, by the Privy Council, in the context of a receiver of a company appointed under a debenture, in Downsview Nominees Ltd v First City Corporation Ltd.[17] In our view, the position is no different when a receiver is appointed by the Court.
[30] In our view, appointment of a person closely associated with the applicant creditor (whether solicitor, counsel, accountant or the like) creates an obvious conflict of interest which puts the appointee at risk of action on the part of the debtor should (for example) the receiver take steps to achieve a prompt return to the creditor and, for that purpose, sell at a known under-value. A common example might be the disposition of a building without appropriate marketing.
[31] We have gone to some trouble to set out the relevant principles to assist counsel in making such applications and Judges determining them. We make no criticism of Langi J who was faced with a plethora of applications and argument unsupported by authority with which she was required to deal at short notice.
Costs
[32] Mr Edwards sought costs on behalf of both Ms Namoa and Mr Tominaga on an indemnity basis. In respect of Mr Tominaga, the point taken is that the application to appoint a receiver was prosecuted in circumstances where it was known that no judgment had been entered against him. In the case of Ms Namoa, the application was based on the proposition that the Judge was wrongly persuaded to exercise jurisdiction under the Receivership Act when that statute had not come into force. Ms Kafoa submitted that costs should lie where they fall.
[33] The way in which the applications unfolded, and the degree of confusion caused by the way in which it was argued, on behalf of both Siosaia (on the one hand) and Ms Namoa and Mr Tominaga (on the other) persuades us that costs should lie where they fall. Essentially, almost 18 months has been lost in pursuing enforcement action with the ultimate outcome being the need for Siosaia and Ms Namoa to take stock of their respective positions in relation to enforcement of an unappealed final judgment of the Supreme Court. It is difficult to see what costs might have been incurred by Mr Tominaga independently from Ms Namoa.
[34] We add that although the appeal against the receivership order made by Langi J on 10 and 12 October 2024 has been granted by consent, there has been no appeal against the freezing order made on 24 February 2024.[18] That order remains in place. The fact that it was necessary for a freezing order to be obtained is another factor that weighs against an order for costs in favour of Ms Namoa.
Result
[35] For those reasons, we:
,
________________________
Harrison J
________________________
de Jersey J
________________________
Heath J
[1] Moehau v Namoa Supreme Court CV 20 of 2020, 10 October 2023.
[2] Moehau v Namoa Supreme Court CV 20 of 2020, 12 October 2023.
[3] See paras [32] and [33] below.
[4] Moehau v Tominaga Supreme Court CV 20 of 2020, 1 December 2022 Whitten LCJ. See further, para [8] below.
[5] See paras [13] and [14] above.
[6] Laws NZ, Receivers (LexisNexis, on-line version, last reviewed on 20 December 2023), at para 101.
[7] Receivership Act 2015, s 2(1), definition of “receiver”.
[8] Bond Brewing Holdings Ltd v National Australia Bank Ltd [1991] VicRp 31; (1990) 1 ACSR 445 (CA of Victoria); BC 9000844 1. Leave to appeal to the High Court of Australia was subsequently refused: (1990) ALR 50 (HCA).
[9] Bond Brewing Holdings Ltd v National Australia Bank Ltd [1991] VicRp 31; (1990) 1 ACSR 445 (CA of Victoria); BC 9000844 1 at 50.
[10] Ibid, at 44.
[11] Some corporate insolvency law is contained in Part IV of the Companies Act 1988, (Winding up).
[12] Fonu v Merrill Lynch Bank and Trust Co (Cayman) Ltd [2011] UKPC 17.
[13] Ibid, at paras 54–58.
[14] Ibid, at para 56.
[15] Bond Brewing Holdings Ltd v National Australia Bank Ltd [1991] VicRp 31; (1990) 1 ACSR 445 (CA of Victoria); BC 9000844 1 at 50, set out at para [23] above.
[16] For example, see National Bank of New Zealand Ltd v Caldesia Promotions Ltd [1996] 3 NZLR 467 (HC) at 474–477 (Elias J).
[17] Downsview Nominees Ltd v First City Corporation Ltd [1993] 1 NZLR 513 (PC).
[18] See para [14] above.
PacLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.paclii.org/to/cases/TOCA/2024/11.html