Westpac Bank of Tonga v Fonua [2013] TOLC 14; LA 14 of 2013 (18 October 2013)

IN THE LAND COURT OF TONGA
NUKU'ALOFA REGISTRY

LA 14/2013

BETWEEN:

WESTPAC BANK OF TONGA
Plaintiff

AND

1. SIOSAIA H. FONUA
2. MARY PREM FONUA
Defendants

Mrs D. Stephenson for the Plaintiff
L.M. Niu SC for the Defendants

JUDGMENT

[1] On 23 July 2013 the Plaintiff bank began proceedings by writ issued out of this Court. The statement of claim pleaded that the Defendants were joint lessees of land comprised in registered lease 4837 ("the land") and were the owners of a two storey dwelling-house erected on the land.
[2] According to the Plaintiff, the Defendants mortgaged the land and the dwelling-house to the Plaintiff on 9 March 2007 and the mortgage was registered on 21 May 2009. The Plaintiff pleaded that the Defendants had failed to make the required repayments and had failed to comply with five notices of demand served on them between February 2012 and May 2013.
[3] On 14 June 2013 the Plaintiff lodged a notice with the Ministry of Lands pursuant to Section 109 of the Land Act (the Act). On about 17 June a copy of the notice was also served on the Second Defendant by personal delivery to the dwelling-house on the land. The Plaintiff says that the 14 day period provided for by the notice expired on 27 June 2013 however the Defendants have refused to vacate the land or the house and the Plaintiff has been unable to obtain possession.
[4] The writ claims (a) a declaration that the Plaintiff is entitled to possession of the land and the dwelling-house and (b) an order for vacant possession of both in favour of the Plaintiff.
[5] On 15 August 2013 the Plaintiff filed an application for orders for possession and control of the land and the dwelling-house in favour of the Plaintiff and for vacant possession against the Defendants. This application was stated to be made pursuant to Section 57 of the Personal Property Securities Act 33 of 2010 ("the PPSA"). In affidavits filed on 15 August and 19 September 2013 officers of the Plaintiff exhibited copies of the mortgage, the loans statement, summary of loan repayments, the lease, the registration notice, the notices of demand and correspondence with counsel for the Defendants.
[6] On 29 August 2013 a statement of defence was filed. The defence to the claim was that the Plaintiff had charged the Defendants interest at a rate that was unlawful with the result that the Defendants were not indebted to the Plaintiff as claimed or at all and had not defaulted.
[7] The statement of defence did not address the Plaintiff's 15 August application, however on 24 September, the date allocated for the hearing of the application, a notice of opposition was filed. Mrs Stephenson, by reference to Section 57(2)(b) of the PPSA submitted that only two questions were before the Court: the first was the existence of a security agreement, the second was at least one event of default. Since no evidence had been filed by the Defendants to dispute the Plaintiffs affidavit evidence that both of these requirements had been satisfied, there was no ground for refusing the orders sought.
[8] As will be seen from the notice of opposition, Mr Niu did not accept that these were the only matters which the Defendants could properly raise. He argued, inter alia, that:

• (i) "Collateral" as defined in Section 8 of the PPSA does not include real property;
• (ii) Section 57 does not refer to a lease or to a building or other improvement to real property by contrast with Section 58 which refers to both;
• (iii) that no statutory or regulatory provision has been made for the procedure to be followed before a "special expedited order" can be had pursuant to Section 57 from the Court granting the secured party possession or control over the collateral;
• (iv) that the PPSA does not specify which Court has jurisdiction to grant such orders;
• (v) that real property (including leases) are within the jurisdiction of the Land Court, whereas improvements to land have hitherto been held to be within the jurisdiction of the Supreme Court.

[9] On 25 September, after the application had been heard, Mr Niu filed further submissions. This method of placing argument before the Court is unusual and should be avoided. There is, as a general rule, no right to file "second thoughts." In view, however, of the novelty of the application (the first of its kind in Tonga, I believe) I allowed the second notice of opposition to be filed. This notice elicited a Plaintiff's response and that in turn led to a further reply by the Defendants. Put briefly, the Defendants claimed the right fully to argue their defence to the Section 109 - founded claim and suggested that the Section 57 application had not been pleaded in the statement of claim and therefore was not available to the Plaintiff. The Plaintiff argued that both the Land Act and the PPSA remedies were available to be pursued concurrently and, the Defendants having failed to address the only two issues required by the PPSA claim, the Plaintiff was entitled to an order for possession and control over the collateral, namely the land and the dwelling-house.
[10] Upon consideration of the arguments placed before me and following further study of the PPSA I was struck by the following features of the new legislation which give rise to concern:-

• (a) The PPSA does not define the word "Court" appearing in Section 57(a);
• (b) Section 4 states that in the event of a conflict between the PPSA "and any other enactment" the PPSA shall prevail unless specifically stated in the other enactment to the contrary;
• (c) Although Section 57(2) provides for a "special, expedited, order" no procedural provisions for applying for such an order are made in the PPSA and the PPSA does not itself authorise the making of special Rules of Court for governing this procedure.
• (d) Section 57(2)(b) appears to exclude from consideration by the Court submissions grounded in allegations of fraud or want of jurisdiction;
• (e) Section 57(2)(c) provides that an order granting possession may not be stayed by any Court pending appeal;
• (f) Collateral may, according to Section 8(1)(a)(i) be "personal property of any nature" including, presumably, leases.

[11] Taken together, these provisions of the PPSA appear to grant not only the Land Court but also the Supreme Court an unregulated mandate to make immediately effective orders for the possession of land and improvements thereto, including dwelling houses, which are incapable of being stayed pending appeal, merely upon satisfying the Court that there was in existence a security agreement (whether valid or not) and that default has occurred (whether excusable or not). To my mind, such a procedure is unfair and sits uneasily with Clauses 14, 90 and 91(1) of the Constitution. Section 58(1) appears to be in conflict with Clause 114.
[12] Further private research reveals that the PPSA is a modified version of the Australian Personal Property Securities Act 2009. Among apparent other differences between the two Acts it may be noted that:

• (a) The 2009 Act does not apply to land;
• (b) Interests in land do not include fixtures;
• (c) Orders for possession do not appear to be available in respect of property held for "personal domestic or household purposes" i.e. private dwelling houses;
• (d) The 2009 Act does not include an expedited procedure similar to that contained in Section 57.

It will of course be prominently borne in mind that Australia, unlike Tonga, does not have a Land Court with exclusive jurisdiction.
[13] Given all the above uncertainties even though the two Section 57(2)(b) criteria have clearly been met, I am not satisfied that it would be just to grant the Section 57 application which would result in the Defendants immediately being evicted from their home without any effective right of appeal. It has long been a principle of our Court system that "when a party is appealing, exercising his undoubted right of appeal, [the] Court ought to see that the appeal, if successful, is not nugatory" (Wilson v Church (No.2) [1879] UKLawRpCh 233; 1879 12 Ch. D 454, 458-9).
[14] The application is dismissed. For the avoidance of doubt, however, leave is granted, pursuant to Section 10(2) of the Court of Appeal Act, to the Plaintiff to appeal to the Court of Appeal should such a course be considered appropriate.

Result:

1. Application dismissed.

2. Defendant's costs to be taxed if not agreed.

DATED 18 October 2013
PRESIDENT

N. Tu'uholoaki
18/10/2013.